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.
Three months ago, just ahead of the introduction of the New Cannabis Ventures Ancillary Cannabis Index, we discussed how investors were starting to better appreciate ancillary stocks. Ancillary companies provide goods and services that enable companies that grow, process or sell cannabis to operate. We detailed several attributes that make the sub-sector attractive, including not being subject to 280E, the possibility to be traded on higher exchanges and the ability to scale across multiple states relative to cannabis companies restrained by a lack of interstate commerce.
While the index has declined modestly since we introduced it at the end of March, falling 5.3%, it has outpaced the overall market as measured by the Global Cannabis Stock Index, which has declined 7.8% thus far this quarter.
Each quarter, the professionally managed Global Cannabis Stock Index is rebalanced, and we just completed that exercise this week, with the rebalancing taking place at the close of business on June 30th. For a more extensive review of the upcoming changes to the Global Cannabis Stock Index, we encourage readers of this newsletter to join us at our premium subscription service 420 Investor.
The index will include 44 names, with 13 from the ancillary sub-sector, making it, along with MSOs, the largest sub-sector, with each at 29.5% of the index. Joining the index will be four relatively new names from this sub-sector, including AFC Gamma, Forian, iPower and WM Technology.
The index has changed dramatically over the past year in terms of composition, which is based on trading volumes and minimum price levels. Here are the weightings at 6/30 compared to a year ago, with the ancillary weighting increasing from 21.6% to 29.5%:
The gain in the number of ancillary companies, along with the increases in the number of MSOs and international companies, has come at the expense of Canadian LPs and CBD companies. Of the 13 names in the index after it is rebalanced, 6 have debuted in trading over the past six months.
We continue to believe investors are well-served to pay attention to the ancillary sub-sector, especially as it has joined the MSOs as the largest part of the index. In addition to the advantages relative to direct operators that we have previously described, ancillary companies allow investors to participate in the growth of the industry without having to pick the best operators. From our perspective, ancillary companies offer the liquidity of Canadian LPs with the growth prospects of the American cannabis industry.
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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:
- Exclusive: Canadian Cannabis Sales Increase 74% in April to $309.7 Million
- Cannabis Mortgage REIT Raises $56.4 Million Selling Shares at $20.50
- Exclusive: How Dama Financial Is Offering the Cannabis Industry Comprehensive Financial Services
- Exclusive: Michigan Cannabis Sales Dip 3% in May as Prices Plunge
- Private MSO PharmaCann Borrows $85 Million at 12% for 4 Years
- Exclusive: This Cannabis Operator Plans to Dominate the Michigan Market Before Becoming an MSO
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Alan & Joel