Canadian licensed producers finally broke a twelve-month streak of monthly declines during April, with the Canadian Cannabis LP Index rising 7.6% to 265.65, slightly lagging the S&P/TSX Composite, which rose 10.5%:
Over the past year, the index has declined 75.5%:
The index remains substantially below the all-time closing high of 1314.33 in September 2018, just ahead of Canadian legalization. In March, it posted a new 52-week closing low of 196.10, a level not seen since late 2016, and it closed 35.5% above that level. The index has declined 32.5% from its close of 393.78 at the end of 2019:
The index, which included 32 publicly-traded licensed producers that traded in Canada at the end of March, with equal weighting, is rebalanced monthly. Each of the members is also included in a sub-index, with 9 in the Canadian Cannabis LP Tier 1 Index, 9 in the Canadian Cannabis LP Tier 2 Index and 14 in the Canadian Cannabis LP Tier 3 Index during the month. Please note that at the end of 2019 we began excluding companies with a price below C$0.20 unless they generate quarterly industry revenue in excess of C$1 million. There are currently almost two dozen publicly traded LPs that fail to qualify.
Tier 1, which included the LPs that are generating cannabis-related sales of at least C$10 million per quarter (in 2018, we used C$4 million as the hurdle), declined during the month, falling 5.7% to 371.95, which followed a 2019 decline of 38.5%, when it ended the year at 642.23. Tier 1 has declined 42.1% so far this year. This group included Aphria (TSX: APHA) (NYSE: APHA), Aurora Cannabis (TSX: ACB) (NYSE: ACB), Canopy Growth (TSX: WEED) (NYSE: CGC), Cronos Group (TSX: CRON) (NASDAQ: CRON), HEXO Corp (TSX: HEXO) (NYSE American: HEXO), MediPharm Labs (TSX: LABS) (OTC: MEDIF), Organigram (TSXV: OGI) (NASDAQ: OGI), Radient Technologies (TSXV: RTI) (OTC: RDDTF) and Valens Company (TSXV: VGW) (CSE: VGWCF). HEXO, Organigram and Aurora Cananbis all declined by more than 19%, while MediPharm Labs and Aphria were the only double-digit gainers.
Tier 2, which included the LPs that generate cannabis-related quarterly sales between C$2.5 million and C$10 million, posted a positive return but lagged the overall market, rising 1.4% to 410.58. In 2019, it lost 44.3% in 2019 after closing at 569.54 and is down 27.9% in 2020. This group included Aleafia Health (TSX: ALEF) (OTC: ALEAF), Delta 9 (TSXV: DN) (OTC: VNRDF), Emerald Health (TSXV: EMH) (OTC: EMHTF), Heritage Cannabis (CSE: CANN) (OTC: HERTF), Supreme Cannabis (TSX: FIRE) (OTC: SPRWF), TerrAscend (CSE: TER) (OTC: TRSSF), VIVO Cannabis (TSX: VIVO) (OTC: VVCIF), WeedMD (TSXV: WMD) (OTC: WDDMF) and Zenabis Global (TSX: ZENA) (OTC: ZBISF). Aleafia and TerrAscend posted double-digit gains, while Zenabis, Emerald Health and WeedMD posted double-digit declines.
Tier 3, which included the 14 qualifying LPs that generate cannabis-related quarterly sales less than C$2.5 million, soared 20.1% as it closed at 70.06. It ended at 96.76 in 2019, declining 45.0%, and is down 27.6% in 2020. Indiva (TSXV: NDVA) (OTC: NDVAF), Neptune (TSX: NEPT) (NASDAQ: NEPT and GTEC Cannabis (TSXV: GTEC) (OTC: GGTTF) all rallied by more than 50%, while just one name fell by more than 20%.
The returns for the overall sector varied greatly, with 12 names posting double-digit gains, while 11 declined by more than 10%, with the entire group posting a median return of 2.5%, well below the 7.6% average return:
For May, the overall index will have 35 constituents, as we have added CannTab (CSE: PILL) (OTC:CTABF), Rapid Dose Therapeutics (CSE: DOSE) (OTC) (RDTCF ) and RMMI (CSE: RMMI), all of which join Tier 3. Additionally, Cronos Group has moved from Tier 1 to Tier 2 and TerrAscend from Tier 2 to Tier 3, while Zenabis has moved to Tier 2 from Tier 1.
In the next monthly review, we will summarize the performance for May 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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