After sinking 43.8% in Q4, the Canadian Cannabis LP Index extended its January rally, rising 4.2% in February to 997.94:
The index, up 41.6% to begin 2019, is still down substantially from the all-time closing high of 1289.57 on October 15th. It has increased 57.9% since bottoming on December 21st :
The biggest story of the month was the first financial reports to include substantial consumer sales from leading producers Aurora Cannabis (TSX: ACB) (NYSE: ACB) and Canopy Growth (TSX: WEED) (NYSE: CGC). CEO terminations were also on the rise, with both FSD Pharma (CSE: HUGE) (OTC: FSDDF) and Namaste Technologies (TSXV: N) (OTC: NXTTF) announcing the changes abruptly.
The index, which included 45 publicly-traded licensed producers that traded in Canada at the end of December, with equal weighting, is rebalanced monthly. Each of the members is also included in a sub-index, with four in the Canadian Cannabis LP Tier 1 Index five in the Canadian Cannabis LP Tier 2 Index and 36 in the Canadian Cannabis LP Tier 3 Index during the month.
Tier 1, which included the LPs that are generating sales of at least C$10 million per quarter (in 2018, we used C$4 million as the hurdle), rose 10.0% in January, giving it a year-to-date gain of 68.4% after declining 7.7% in 2018. This group included Aphria (TSX: APHA) (NYSE: APHA), Aurora Cannabis, CannTrust (TSX: TRST) (OTC: CNTTF), Canopy Growth and Organigram (TSXV: OGI) (OTC: OGRMF) . Within the group, Aprhia and CannTrust posted gains of about 19%, while Canopy Growth was the worst performer, declining 3.2%.
Tier 2, which included the remaining LPs that generate quarterly sales between C$2.5 million and C$10 million, fell 1.5%, leaving it up 57.0% to begin 2019 after declining 35.0% in 2018. This group included Cronos Group (TSX: CRON) (NASDAQ: CRON), HEXO Corp (TSX: HEXO) (NYSE American: HEXO), Newstrike Brands (TSXV: HIP) (OTC: NWKRF), and Supreme Cannabis (TSX: FIRE) (OTC: SPRWF). Cronos Group rose 10.7%, while Newstrike fell 15.1%.
Tier 3, which included the 36 LPs that generate quarterly sales less than C$2.5 million, rose 4.0%, leaving its year-to-date gain at 36.0% after declining 26.4% in 2018. The best performers in the group were Heritage Cannabis (CSE: CANN) (OTC: HERTF), MediPharm Labs (TSXV: LABS) (OTC: MLCPF) and 48North (TSXV: NRTH) (OTC: NCNNF), all of which gained more than 50%. Heritage, relatively unknown, became more visible after completing a recent capital raise, making several announcements regarding its operations and additions to its management team. MediPharm Labs announced a very large contract during the month to provide extraction services to a large LP. 48North reported strong revenue growth with positive operating cash flow in late February and also signed a supply agreement with Quebec, the first LP to do so with outdoor grown cannabis. 16 of the 17 worst performers for the month were part of Tier 3.
The returns for the overall sector varied greatly, with six names gaining more than 20%, while five declined by more than 20%:
For March, the overall index had four additions, including MPX International (CSE: MPXI), Neptune Wellness Solutions (TSX: NEPT) (NASDAQ: NEPT), Radient Technologies (TSXV: RTI) (OTC: RDDTF) and Terranueva (CSE: TEQ) joining, all in Tier 3. Readers should be aware that Tilray, with no Canadian listing, is not eligible for inclusion in the index, which is denominated in Canadian dollars.
In the next monthly review, we will summarize the performance for March and discuss any additions or deletions. Be sure to bookmark the pages to stay current on LP stock price movements within the day or from day-to-day.
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