After a 54.9% gain in Q1, the Canadian Cannabis LP Index has declined 46% over the past two quarters, with the index declining in September by 16.2% to 589.06:
The index remains substantially below the all-time closing high of 1314.33 on September 25th a year ago, just ahead of Canadian legalization. It closed the month at a new 52-week low, a level not seen since late 2017, and ended the month down 16.4% year-to-date:
The index, which included 49 publicly-traded licensed producers that traded in Canada at the end of August, with equal weighting, is rebalanced monthly. Each of the members is also included in a sub-index, with 8 in the Canadian Cannabis LP Tier 1 Index, 7 in the Canadian Cannabis LP Tier 2 Index and 34 in the Canadian Cannabis LP Tier 3 Index during the month.
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), fell 17.2%, leaving the year-to-date loss at -19.4% after declining 7.7% in 2018. This group included Aphria (TSX: APHA) (NYSE: APHA), Aurora Cannabis (TSX: ACB) (NYSE: ACB), CannTrust (TSX: TRST) (NYSE: CTST), 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) and Organigram (TSXV: OGI) (NASDAQ: OGI). HEXO Corp, which dropped 2.2%, and Canopy Growth, which declined 3.5%, were the best performers, while CannTrust, which lost 35.2%, was the worst.
Tier 2, which included the LPs that generate cannabis-related quarterly sales between C$2.5 million and C$10 million, fell 17.5%, leaving it down 0.2% to begin 2019 after declining 35.0% in 2018. This group included Delta 9 (TSXV: DN) (OTC: VNRDF), Supreme Cannabis (TSX: FIRE) (OTC: SPRWF), TerrAscend (CSE: TER) (OTC: TRSSF), Valens GroWorks (TSXV: VGW) (CSE: VGWCF), VIVO Cannabis (TSXV: VIVO) (OTC: VVCIF), WeedMD (TSXV: WMD) (OTC: WDDMF) and Zenabis Global (TSX: ZENA) (OTC: ZBISF). The group’s returns were tightly clustered between -10.4% and -23.1%.
Tier 3, which included the 34 LPs that generate cannabis-related quarterly sales less than C$2.5 million, declined 15.7%, leaving its year-to-date loss at -17.7% after declining 26.4% in 2018. All 4 of the companies in the entire sector that showed gains in the month were members of Tier 3 during August as were the 5 worst performers. Double-digit gainers included Pure Global Cannabis (TSXV: PURE) (OTC: PRCNF) and MPX International (CSE: MPXI) (OTC: MPXOF). Canada House Wellness (CSE: CHV) (OTC: SARSF), MJardin Group (CSE: MJAR) (OTC: MJARF), Green Organic Dutchman (TSX: TGOD) (OTC: TGODF), Beleave (CSE: BE) (OTC: BLEVF) and Heritage Cannabis (CSE: CANN) (OTC: HERTF) all declined more than 36%.
The returns for the overall sector varied greatly, with 4 names posting positive returns, while 23 declined by more than 20%, for a median return of -18.5%:
For October, the overall index will have 48 constituents, as CannTrust (TSX: TRST) (NYSE: CTST) had its license suspended by Health Canada and has been removed from the index. Supreme Cannabis has moved from Tier 2 to Tier 1, and Emerald Health (TSXV: EMH) (OTC: EMHTF) has joined Tier 2. Readers should be aware that Sundial Growers (NASDAQ: SNDL) and Tilray (NASDAQ: TLRY), with no Canadian listings, is not eligible for inclusion in the index, which is denominated in Canadian dollars. Note that the cut-off date for making changes to the index was 9/26.
In the next monthly review, we will summarize the performance for October 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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