Canadian Cannabis Producers Post Strong Gains in October

Despite a flood of supply this month, Canadian LP stock performance stands out so far in October as investors have retreated somewhat from the overall sector. The Cannabis Stock Index, which includes cannabis stocks from Australia, Canada and the United States, has declined 7.9%, but the average LP has increased 7.6% (in Canadian dollars). Here is the performance in October to date for each of the 23 publicly-traded LPs:

The majority of the 23 publicly-traded LPs weren’t trading at the end of 2016, but, for those that were, the returns have been healthy, averaging 13.7%:

Returning to the recent performance, the market can be broken into three different segments based on the stage of development of the company, including market leaders, revenue generators and those approved to grow but not yet sell.

Market Leaders

Six LPs have generated enough revenue to be counted among the leaders, as denoted on our Revenue Tracker, including (in order of sales) Canopy Growth (TSX: WEED) (OTC: TWMJF), MedReleaf  (TSX: LEAF) (OTC: MEDFF), Aphria (TSX: APH) (OTC: APHQF), Aurora Cannabis (TSX: ACB) (OTC: ACBFF), CanniMed Therapeutics (TSX: CMED) (OTC: CMMDF) and CannTrust (CSE: TRST) (OTC: CNTTF). The average return of 14.5% is substantially above the 7.6% overall average return for the sector, but the performance among this group hasn’t been uniform in October, as LEAF and TRST, both relatively new issues, have posted all-time highs and the highest gains, while APH and ACB, both of which have sold shares this month, have posted the lowest returns. APH was also impacted by the potential threat of delisting from the TSX due to its U.S. operations.

ACB, LEAF and WEED will all be reporting quarterly results in the next two weeks. LEAF has scheduled a call for Monday, November 13. TRST recently pre-announced its Q3 results that are due by the end of November.

Revenue Generators

The second tier of stocks includes ABcann Global (TSXV: ABCN) (OTC: ABCCF), Cronos Group (TSXV: MJN) (OTC: PRMCF), Emblem (TSXV: EMC) (OTC: EMMBF), Emerald Health (TSXV: EMH) (OTC: EMHTF), Harvest One (TSXV: HVST) (OTC: HRVOF), Hydropothecary (TSXV: THCX) (OTC: HYYDF), Maricann (CSE: MARI) (OTC: MRRCF), Organigram (TSXV: OGI) (OTC: OGRMF), Supreme Pharma (TSXV: FIRE) (OTC: SPRWF), THC Biomed (CSE: THC) (OTC: THCBF) and WeedMD (TSXV: WMD) (OTC: WDDMF). This group has averaged gains of just 2.8% in October, with six of the eleven posting losses. EMC, FIRE, MARI, MJN and WMD have all raised capital in October.

Approved to Grow Only

The final tier includes Beleave (CSE: BE) (OTC: BLEVF), Canada House Wellness (CSE: CHV) (OTC: SARSF), DOJA Cannabis (CSE: DOJA) (OTC: DJACF), Invictus MD Strategies (TSXV: IMH) (OTC: IVITF), Newstrike Resources (TSXV: HIP) (OTC: NWKRF) and TerrAscend (CSE: TER). This group has rallied 9.5% in October, with only one decliner.

2017 has been a strong year for the Canadian LP sector, which has generally extended big gains from 2016. Despite some turbulence in the markets over the past few weeks as concerns have arisen regarding the involvement of one LP in U.S. cannabis operations and, more importantly, supply of shares, most stocks are showing gains in October, especially for the larger LPs in terms of market cap and revenues, continuing a rally for the sector that began in early June.

For any readers following the Canadian cannabis industry, we offer a resource page to help stay on top of it. Additionally, New Cannabis Ventures will be conducting a webinar with Bruce Linton, CEO of Canopy Growth, on Thursday at 1PM ET. Registration is free, and those who do so will receive a recording of the event when it concludes.


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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