Canadian Cannabis Producer Stocks Rise 0.8% in March

After a massive 17.7% decline in February, the Canadian Cannabis LP Index recovered just some of the losses in March, rallying 0.8% after having been up more than 13% earlier in the month:

The LPs rallied in the first half of the month, peaking on March 19th at 1093.18, up 13.5%, but the detailing of proposed packaging rules released by Health Canada that day weighed on the sector, as they were viewed as overly strict. Another factor was the scare created by CBC on the morning of March 22, when the newspaper suggested that C-45, the bill to legalize, might be voted down by the Canadian Senate. Finally, weakness in the broader equity markets in late March was likely a contributing factor as well.

The index, which included all 28 publicly-traded licensed producers at the beginning of March, is equal-weighted and rebalanced monthly. Each of the members is also included in a sub-index, with six in the Canadian Cannabis LP Tier 1 Index, fourteen in the Canadian Cannabis LP Tier 2 Index and eight in the Canadian Cannabis LP Tier 3 Index during March.

Tier 1

Tier 1, which includes the LPs that are generating sales of at least C$4 million per quarter, fell 2.1% after having declined 10.7% in February and is down 2.3% year-to-date. This group included Aphria (TSX: APH) (OTC: APHQF), Aurora Cannabis (TSX: ACB) (OTC: ACBFF), CanniMed Therapeutics (TSX: CMED) (OTC: CMMDF), CannTrust (CSE: TRST) (OTC: CNTTF), Canopy Growth (TSX: WEED) (OTC: TWMJF) and MedReleaf (TSX: LEAF) (OTC: MEDFF). Within the group, Canopy Growth was the clear winner, rising 23.1%. CanniMed was the only other LP to post a gain, while Aphria, down 13.2%, was the worst performer for the second consecutive month and is down 38.6% year-to-date.

Tier 2

Tier 2, which includes the remaining LPs that are generating sales, produced the lowest returns, declining 2.5% after having declined 21.2% in February and is down 5.0% year-to-date. Newstrike Resources (TSXV: HIP) (OTC: NWKRF), up 40.7%, was the strongest performer. Cronos Group (TSXV: CRON) (NASDAQ: CRON), which was the group’s big winner in February, gaining 31% after its uplisting to the NASDAQ, lost 26.6% in March after it priced a C$100 million equity offering. Three other members of Tier 2 lost more than 10%, while two gained more than 10%.

Tier 3

Tier 3, which includes the LPs that are licensed to cultivate but not yet approved to sell, rose 6.6% after having declined 18.9% in February and is up 5.8% year-to-date. TerrAscend (CSE: TER) (OTC: TRSSF), which was the only member to post a gain in February, led the way in March, rising 59.2% after receiving approval from Health Canada to begin selling dried cannabis.

The returns for the overall sector varied greatly, with three stocks rising more than 20% while two fell in excess of 20%:

For April, the overall index will have one deletion, CanniMed Therapeutics, which has been 96% acquired by Aurora Cannabis. As a result, Tier 1 will now include just 5 companies. Three new names will be added, all into Tier 3: Aleafia Health (TSXV: ALEF) (OTC: CAMDF), Namaste Technologies (CSE: N) (OTC: NXTTF) and RavenQuest BioMed (CSE: RQB) (OTC: RVVQF). Additionally, TerrAscend is now included in Tier 2.

In the next monthly review, we will summarize the performance 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.

Exclusive article by Alan Brochstein, CFA
Alan Brochstein, CFA
Based in Houston, Alan leverages his experience as founder of online community 420 Investor, the first and still largest due diligence platform focused on the publicly-traded stocks in the cannabis industry. With his extensive network in the cannabis community, Alan continues to find new ways to connect the industry and facilitate its sustainable growth. At New Cannabis Ventures, he is responsible for content development and strategic alliances. Before shifting his focus to the cannabis industry in early 2013, Alan, who began his career on Wall Street in 1986, worked as an independent research analyst following over two decades in research and portfolio management. A prolific writer, with over 650 articles published since 2007 at Seeking Alpha, where he has 70,000 followers, Alan is a frequent speaker at industry conferences and a frequent source to the media, including the NY Times, the Wall Street Journal, Fox Business, and Bloomberg TV. Contact Alan: Twitter | Facebook | LinkedIn | Email

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