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.
This week, Q2 will end. At this point, the New Cannabis Ventures Global Cannabis Stock Index, which closed at an all-time low on Friday, is down 10.5% so far this quarter and will likely post its 9th consecutive quarterly decline. Since the streak of quarterly declines began on 3/31/21, the cannabis sector has dropped 88.2%, while the S&P 500 has returned 13.4%.
We have been cautious on the cannabis sector this year, and we continue to believe that the recovery won’t be quick. Again, the two big issues that we think could help turn around the sector include the ability of American cannabis companies to potentially trade on a higher exchange rather than the OTC and the elimination of the onerous taxation of 280E. We aren’t sure when either of these will change. Until then, volumes remain very low, and there are several regulatory issues as well. Additionally, there are limited dividends, and mergers are few and far between. Our caution has been warranted.
While the near-term catalysts remain elusive, valuations seem very attractive for the most part. We have been sharing some better ideas for investors to consider and some worse ones to avoid. Despite the tremendous decline in prices, there are still some stocks where we can’t yet justify their prices, like Canopy Growth.
The presence of industry headwinds shouldn’t discourage long-term investors, but all investors need to appreciate that the turnaround in prices is likely to take a while to happen.
New Cannabis Ventures publishes curated articles as well as exclusive news. Here is some of the most interesting business content from this week:
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Alan & Joel