For the second consecutive month, Canadian cannabis producers moved modestly higher on average after a sharp decline in April, with the Canadian Cannabis LP Index increasing 0.9% to 875.23:
After rallying to begin the year, the index has now declined 12.9% thus far in 2018, with most of that coming in Q2, with the index declining 9.8% after the sharp April decline. Some of the most exciting developments in June were the passage of the Cannabis Act (C-45), which legalized cannabis for adult access, the large capital raises from Canopy Growth (TSX: WEED) (NYSE: CGC) and Aphria (TSX: APH) (OTC: APHQF) and the Aurora Cannabis (TSX: ACB) (OTC: ACBFF) secured credit facility with BMO, the Aurora Cannabis acquisition of Anandia Labs for C$115 million and the NASDAQ IPO filing for Tilray.
The index, which included all 33 publicly-traded licensed producers at the beginning of June, is equal-weighted and rebalanced monthly. Each of the members is also included in a sub-index, with five in the Canadian Cannabis LP Tier 1 Index, eighteen in the Canadian Cannabis LP Tier 2 Index and ten in the Canadian Cannabis LP Tier 3 Index during June.
Tier 1, which includes the LPs that are generating sales of at least C$4 million per quarter, rallied 4.5% after a 15.5% gain in May and is now up 11.4% year-to-date. This group included Aphria, Aurora Cannabis, CannTrust (CSE: TRST) (OTC: CNTTF), Canopy Growth and MedReleaf (TSX: LEAF) (OTC: MEDFF). Within the group, Aurora, which lagged its peers in May, was the leader in June, rallying 14.4% compared to returns of -6.7% to 7.0% for the others.
Tier 2, which includes the remaining LPs that are permitted to generate sales, fell 0.6%, its fifth consecutive monthly decline, and is down 12.4% year-to-date. Green Organic Dutchman (TSX: TGOD) (OTC: TGODF) was the clear winner with its 14.3% gain, but several other companies were able to post positive returns. Emblem (TSXV: EMC) (OTC: EMMBF) and Newstrike (TSXV: HIP) (OTC: NWKRF) posted double-digit declines.
Tier 3, which includes the LPs that are licensed to cultivate but not yet approved to sell, rose 1.8% but is the weakest performer in 2018, down 17.3% year-to-date. FSD Pharma (CSE: HUGE) (OTC: FSSDF) and Aleafia (TSXV: ALEF) (OTC: ALEAF) both rose more than 32%, while Benchmark Botanics (CSE: BBT) (OTC: BHHKF) fell more than 24%.
The returns for the overall sector varied greatly, with four stocks rising more than 10% while seven fell in excess of 10%:
For July, the overall index will have three additions, including 48North (TSXV: NRTH) (OTC: NCNNF) and James E. Wagner Cultivation (TSXV: JWCA) (OTC: JWCAF), which have been added to Tier 2, and MPX Bioceutical (CSE: MPX) (OTC: MPXEF), which has been added to Tier 3.
In the next monthly review, we will summarize the performance for July 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.