You’re reading a copy of this week’s edition of the New Cannabis Ventures weekly newsletter, which we have been publishing since October 2015. The newsletter includes unique insight to help our readers stay ahead of the curve as well as links to the week’s most important news.
Cannabis stocks had a great January, and they extended to new recent highs in February. The New Cannabis Ventures Global Cannabis Stock Index is up 14.1% in 2023, well ahead of the S&P 500’s gain of 7.7%.
We reviewed the index performance for January this week, and, as we had discussed a couple of weeks ago, not all stocks are rallying. Looking at the year-to-date action through Friday, there are three double-digit decliners and seven stocks that are up more than 25%:
Village Farms, the worst performer, actually rallied a lot this past week. It fell from an equity offering the week before. The other two big decliners are leading multi-state operators. The winners are filled with ancillary names, a sub-sector we have called out favorably.
Although we are thrilled with how January started, we have a number of concerns with the market action thus far. First, we remain concerned about the overall stock market. A move lower would, in our view, weigh heavily on investors if it pulled back.
Four weeks ago, we warned that there are two issues with the cannabis sector that are bothering us, the low trading volumes and the redemptions at AdvisorShares Pure US Cannabis ETF. Both of these remain of concern to us. Trading volumes remain very light, and the ETF continues to see redemptions, though this week was stable:
Since mid-December, the number of shares has declined by 12.8%. If the redemptions continue, the ETF could be forced to sell into a low-volume market. We have been worried that the ETF has such high concentration. Four weeks ago, we reported that it had 80% in the top 5 holdings. Now, after some redemptions of these largest names as well as lower prices, it is 78%, which is still way too high in our view.
We remain bullish longer-term, but we are concerned with how the market has advanced on such low volume thus far in 2023. We aren’t expecting another September or December, but we suggest that our readers be patient and invest defensively.
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New Cannabis Ventures publishes curated articles as well as exclusive news. Here is some of the most interesting business content from this week:
The new year is looking better for cannabis stocks with the Global Cannabis Stock Index rising 10.1% in January to 10.69 after what was akin to a freefall in 2022. The four strongest names in January all increased by more than 31%. They were Hexo Corp., ScottsMirace-Gro, GrowGeneration and Canopy Growth. The four weakest fell by more than 11% and were Village Farms, Columbia Care, Innovative Industrial Properties and Trulieve.
The American Cannabis Operator Index also rose, though not as much. In January, it was up 6.3% to 5.14 after a 40.8% decline in December. Jushi Holdings, Columbia Care, Trulieve and Curaleaf all fell by double digits, while Planet 13 Holdings, Glass House Brands and TerrAscend all were up more than 20%. In February, the index will drop to 12 members from 16. The Ancillary Cannabis Index rose 15.5% to 17.34. Four stocks in that index surged – ScottsMiracle-Gro, GrowGeneration, WM Technology and Hydrofarm. That index will add two members in February. The Canadian Cannabis LP Index kicked off 2023 strong, up 19.4% in January to 86.64 after falling 62.8% in 2022. The Tier 1 Index surged 23.9% in January to 109.24; the Tier 2 Index gained 7.5% in January; and the Tier 3 Index rose 26.1% in January to 22.27.
High Tide revenue increased sequentially by 14% in Q4 to C$108.2 million. The company said its bricks-and-mortar locations generated same-store sales growth of 50% year-over-year and 9% sequentially in the fourth fiscal quarter of 2022.
ScottsMiracle-Gro said continued pressure on the cannabis industry saw sales from its Hawthorn unit decrease 31% to $131.5 million, compared with $190.6 million during the same period a year ago. “While Hawthorne continues to manage through a challenging market, we are committed to returning the business to profitability by the end of this fiscal year. Overall, we are in a stable place and are well prepared to execute on our full-year plan,” the company stated in a news release.
LeafLink has raised $100 million in Series D financing, which the company said would assist in the expansion of its suite of offerings for its wholesale cannabis platform. The company also announced several changes to its leadership: Co-Founder and CEO Ryan G. Smith is now executive chairman, while President and COO Artie Minson has been appointed president and CEO. Karan Gupta has joined as Chief Technology Officer, while Co-Founder and Chief Technology Officer Zach Silverman moves into a senior advisor role.
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Alan & Joel
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