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You’re reading 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. We post this and all of the newsletters on our website here.
Friends,
Near the end of Q1, we shared a warning about the Canadian LP market, which had soared after the Legislative Review of the Cannabis Act. The New Cannabis Ventures Canadian Cannabis LP Index rallied the day we ran the newsletter, dropped and then rallied back in early April. It is now down more than 11% since the close on 3/22:
The index is up more than 12% so far in 2024. It set an all-time low at the end of February when one of its members moved much lower, and it has rallied more than 25% since then. It is actually up a bit from when we warned about the move in Canadian LPs. This week, Canada approved its budget, and there was no revision to the cannabis taxation as some had hoped.
Since 3/21, the day before we ran the newsletter, the largest companies in that index by market cap, all of which trade above $1, and two other large LPs have shown mixed performance:
We have warned about Canopy Growth before, and I have no position in my model portfolio at 420 Investor. This week, the company announced that its shareholders approved the issuance of exchangeable shares, and the company yesterday announced that Constellation Brands had converted its debt and all of its shares into them. Of course, NASDAQ still has not given the company the greenlight to close their pending mergers. The stock remains very expensive.
Aurora Cannabis rejoined the NCV Global Cannabis Stock Index after it reverse-split. The company has a pending merger in Australia. I am interested in this company, but it is not on my Focus List. From what I understand, the all-stock deal has resulted in a profit for the shareholders of MedReleaf Australia.
Village Farms has also rallied. I own this in my model portfolio and find the stock to be cheap at just 63% of tangible book value. It has a very manageable amount of debt that is not due in the short-term.
I don’t follow SNDL closely, but I like Cronos Group’s valuation. I don’t have a position at this time, but it does trade below tangible book value.
Tilray Brands has collapsed since it reported its fiscal Q3 earlier this month. Even at the lower price, the stock still seems quite expensive. Ahead of its Q1 report, we focused on that company in this newsletter, pointing out that it was pulling back. It is down a lot since then, but it hasn’t yet done what we still think it will do: make a new all-time low.
Doing the worst of these 7 LP stocks has been Organigram, which is now my largest position in my model portfolio. I had no position ahead of their surprise stock offering in late March, and this is why it pulled back initially. The post-financials move of Tilray Brands added to the negative price action. The stock trades at 90% of its tangible book value. The company has no debt and a lot of cash, and British American Tobacco is a big investor in it. A week ago, I shared a year-end target with my subscribers based on 15X projected adjusted EBITDA. If Organigram hits my target, which is below the 52-week high, it would return an impressive 45%.
Canadian LP stocks have rallied since our warning four weeks ago, but they have pulled back from their highs earlier this month. We continue to be concerned about Canopy Growth and Tilray, but we see some names in this sub-sector of the cannabis market as offering value. The Canadian market is maturing, and the taxation didn’t change. The federally legal companies do have areas outside of Canada where they can and do focus. Cannabis investors should be careful with Canada but should not ignore it.
New Cannabis Ventures publishes curated articles as well as exclusive news. Here is some of the most important content from this week:
Exclusives
Florida Medical Cannabis Patient Growth Slows Again
Illinois Cannabis Sales Pick Up But Remain Slow
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View the Public Cannabis Company Revenue & Income Tracker, which ranks the top revenue producing cannabis stocks.
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Sincerely,
Alan
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