Canadian Cannabis Producer Stocks Suffer Double-Digit Decline in April

Canadian cannabis producers renewed their decline in April following a pause in March, when the Canadian Cannabis LP Index had rallied 0.8%, declining 11.2% to 861.96:

After rallying to begin the year, the index has now declined 14.2% thus far in 2018. The intraday lows on both April 4th and April 10th were close to 800, and the index bounced above that level in late April. News flow was light in April for the sector, with finalized allotments from Quebec provided on April 11th. Health Canada issued 13 new licenses, bringing the total to 104. Hiku Brands (CSE: HIKU) (OTC: DJACF) announced an all-stock deal to acquire WeedMD (TSXV: WMD) (OTC: WDDMF).

The index, which included all 30 publicly-traded licensed producers at the beginning of April, is equal-weighted and rebalanced monthly. Each of the members is also included in a sub-index, with five in the Canadian Cannabis LP Tier 1 Index, fifteen in the Canadian Cannabis LP Tier 2 Index and ten in the Canadian Cannabis LP Tier 3 Index during April.

Tier 1

Tier 1, which includes the LPs that are generating sales of at least C$4 million per quarter, fell 5.5%, its third consecutive monthly decline, and is down 7.7% year-to-date. This group included Aphria (TSX: APH) (OTC: APHQF), Aurora Cannabis (TSX: ACB) (OTC: ACBFF), CannTrust (CSE: TRST) (OTC: CNTTF), Canopy Growth (TSX: WEED) (OTC: TWMJF) and MedReleaf (TSX: LEAF) (OTC: MEDFF). Within the group, MedReleaf was the clear winner, rising 20.2%, while its peers all fell more than 10%.

Tier 2

Tier 2, which includes the remaining LPs that are generating sales, fell 6.2%, its third consecutive monthly decline, and is down 10.9% year-to-date. WeedMD was the clear winner following the announcement of its pending acquisition, but four other companies were able to post positive returns. Three other members of Tier 2 lost more than 10%, while two gained more than 10%. TerrAscend (CSE: TER) (OTC: TRSSF) and Delta Nine (TSXV: NINE) (OTC: VRNDF) were both down more than 20%.

Tier 3

Tier 3, which includes the LPs that are licensed to cultivate but not yet approved to sell, fell 20.2%, substantially more than the other tiers, and is down 15.5% year-to-date. No member of this group posted a positive return, while four of the ten companies fell by more than 30%.

The returns for the overall sector varied greatly, with two stocks rising more than 10% while five fell in excess of 30%:

For May, the overall index will have one addition, BlissCo (CSE: BLIS) (OTC: HSTRF), which recently received its license from Health Canada and will be added to Tier 3.

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.

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Exclusive article by Alan Brochstein, CFA
Alan Brochstein, CFA
Based in Houston, Alan leverages his experience as founder of online communities 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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