You’re reading this week’s edition of the New Cannabis Ventures weekly newsletter, which we have been publishing since October 2015. The newsletter includes unique insight to help our readers stay ahead of the curve as well as links to the week’s most important news. We no longer send these by email as we did in the past, but we post this and all of the newsletters on our website here.
Friends,
Cannabis stocks exploded higher on Monday. Despite the sharp advance that day, they ended September down slightly after soaring in August and July. Year-to-date, though, the Global Cannabis Stock Index is up 11.6%. After 4 straight annual declines, it is nice to see the index higher with just one quarter to go.
The index is rebalanced quarterly. Looking at the index as of year-end, it would be up 5.1% year-to-date without rebalancing. Three stocks that are no longer in the index have each declined by more than 50%, while the best performer in the index currently was not in the index at year-end.
Looking at the 28 stocks currently in the index, the average return has been 21.8%, with a median return of 14.3%. Here is that list, with stocks moving more than 30% highlighted:
The top 5 returning cannabis stocks currently in the index are not attractive to me right now. I have rated SNDL and VFF Sell at Seeking Alpha, and rate CURLF and TCNNF as Strong Sell there. Those two MSOs are the two largest positions in MSOS and have benefitted from large increases in the ETF’s exposure. For those who like large MSOs, #3, GTBIF, which is down year-to-date as of 9/30, seems a lot more attractive to me. I ended the month with model portfolio exposure of nearly 6%.
I liked VFF a lot early in the year and shared my positive outlook in this newsletter. I think that their move away from produce was brilliant, but the stock seems overdone to me. The company has no listing at this time beyond the NASDAQ, and it is trying to get a medical cannabis license in Texas. It could structure itself like CGC or SNDL to avoid being delisted if it wins and operates the unit. SNDL is very diversified and has a decent balance sheet, but their MSO exposure in the U.S. is in questionable companies. While MSOS has bought a lot of CURLF and TCNNF, it has added new positions in both SNDL and VFF. Hmm.
The stock action that I have discussed has been driven a lot by potential rescheduling of cannabis. Again, it remains to be seen if 280E taxation will be going away. This would be very helpful for the U.S. MSOs if that were the case, but there are several stocks in the Global Cannabis Stock Index that are doing well but have no U.S. operations. This rally is making it more expensive to enter the U.S. market through an acquisition.
My model portfolio at 420 Investor holds just one of the stocks up more than 30%. There are currently eight names in the portfolio, and one is not in the index. Of the other six that are in the index but up less than 30%, 4 are down and 2 are up. I have over 19% cash.
Cannabis stocks are up in 2025, but they are down a ton since 2021 and facing risks. The stocks overall are not up as much as the S&P 500 or the Russell 2000 at this time despite the surge this week. I hope that cannabis is rescheduled and that 280E taxation is wiped out, but this may not be the case. Buyers of cannabis stocks should be aware of what might happen if 280E taxation remains.
Sincerely,
Alan
New Cannabis Ventures publishes curated articles as well as exclusive news. Here is what we published this past week:
Exclusives
Cannabis Stocks Almost Extended the 2025 Rally in September
Capital Raises
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