MSO Strength Drives American Cannabis Operator Index 16% Higher in August

Adding to a 29% gain in Q2 followed by a 27% advance in July, the American Cannabis Operator Index continued to recover from its Q1 decline, increasing 16.2% to 40.12:

The index, which launched at the end of October 2018 with a value of 100, reached a closing high of 124.16 a week later before declining to 70.64 in late December 2018. It then rallied as high as 119.53 in early April 2019 before selling off over the balance of the year, ending 2019 at 43.27. The index has now dropped 7.3% in 2020. After posting an all-time closing low on March 18th at 14.50, the index has now bounced by 176.7%:

During August, the index included 17 companies, including 14 multi-state operators (MSOs) and 3 focused solely on CBD extracted from industrial hemp. 12 companies posted double-digit percentage gains, with four gaining more than 35%. Strength across the board for MSOs drove the strong performance, though two managed small losses, while all 3 CBD operators declined:

The four best performing stocks included TerrAscend (CSE: TER) (OTC: TRSSF), AYR Strategies (CSE: AYR.A) (OTC: AYRSF), Trulieve (CSE: TRUL) (OTC: TCNNF) and Vireo Health (CSE: VREO) (OTC: VREOF). TerrAscend, one of the strongest performers in July and now up 121% in 2020, pre-announced strong revenue at its Investor Day early in the month and then beat expectations for adjusted EBITDA when it reported later in the month. The company provided full-year guidance for sales of at least C$192 million and adjusted EBITDA of at least C$45 million. AYR Strategies also reported its Q2, which was burdened by temporary closures in both Massachusetts and Nevada. Still, the company was able to report continued profitability. What drove the stock, though, was likely the announcement of the $57 million pending acquisition of CannTech, which will get them into their third state, Pennsylvania. Additionally, the company announced that it will soon reveal another two acquisitions that will expand the footprint to five states. Trulieve’s Q2 was well ahead of expectations, and the company raised its guidance for 2020 to sales of $465-485 million and adjusted EBITDA of $205-225 million. Rumors of acquisition talks also likely influenced the stock’s rise. Trulieve is up more than 92% in 2020. Vireo Health, which was one of the weakest names in July, rebounded after closing the sale of its Pennsylvania production assets and updating investors on its capital spending plans with the proceeds. The company is investing in its core operations in Arizona, Maryland, Minnesota and New York

The four worst performing stocks included cbdMD (NYSE American: YCBD), Acreage Holdings (CSE: ACRG) (OTC: ACRGF), CV Sciences (OTC: CVSI) and Charlotte’s Web (TSX: CWEB)(OTC: CWBHF). While cbdMD was the strongest performer in July, both Charlotte’s Web and CV Sciences were among the weakest stocks in July as well as  in June.  Both CV Sciences and cbdMD reported quarterly financials during the quarter, with CV Sciences below expectations but cbdMD stronger on the back of a strong performance in e-commerce. The CBD space remains highly competitive as participants await regulatory clarity from the FDA. Acreage also reported better-than-expected Q2 financials during the month but tracked Canopy Growth, its potential acquirer.

For September, the number of names in the index will remain at 17.

In the next monthly review, we will summarize the performance for September and discuss any additions or deletions. Be sure to bookmark the page to stay current on American cannabis operators stock price movements within the day or from day-to-day.

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Exclusive article by Alan Brochstein, CFA
Alan Brochstein, CFA
Based in Houston, Alan leverages his experience as founder of online communities 420 Investor, the first and still largest due diligence platform focused on the publicly-traded stocks in the cannabis industry. With his extensive network in the cannabis community, Alan continues to find new ways to connect the industry and facilitate its sustainable growth. At New Cannabis Ventures, he is responsible for content development and strategic alliances. Before shifting his focus to the cannabis industry in early 2013, Alan, who began his career on Wall Street in 1986, worked as an independent research analyst following over two decades in research and portfolio management. A prolific writer, with over 650 articles published since 2007 at Seeking Alpha, where he has 70,000 followers, Alan is a frequent speaker at industry conferences and a frequent source to the media, including the NY Times, the Wall Street Journal, Fox Business, and Bloomberg TV. Contact Alan: Twitter | Facebook | LinkedIn | Email

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