This Week in Cannabis Investing July 19th

It was another very active week in the cannabis sector. In the U.S., Congress continues its hearings aimed at legalizing cannabis in the U.S. at the national level. Parallel to this, the FDA is signaling it’s ready to move toward opening up the CBD market in the U.S. nationally. The Seed Investor shared some thoughts on both of those big stories.

In Canada, more companies were reporting earnings. On the back of strong earnings from an extraction leader, we looked at where investors might find the most value in this niche.

For investors wondering when pot stocks will begin their next run, we offered something for you. At the end of the week, The Seed Investor took a look at “a tried-and-tested bottom indicator.” In relation to this, we also looked at interesting moves in the share prices of a couple of the bigger names in Canadian cannabis (no, not CannTrust).

Monday, the week began with a flurry of industry news. Aurora Cannabis announced two outdoor growing licenses. Atlantic Canada pot giant, Organigram reported its third quarter results. Harvest One reported a new cannabis supply agreement. Aleafia Health had its outdoor cultivation license expanded up to 1.1 million sq. ft. Columbia Care announced trading on the OTCQX Market. Auxly Cannabis reported the opening of its flagship retail cannabis store for the province of Saskatchewan.

The Seed Investor also pointed to a discouraging trend in the Canadian cannabis industry. Since adult use cannabis has been legalized, access to medicinal cannabis for Canadians has actually gotten significantly worse.

Tuesday there was lots more industry news. Canopy Rivers reported 4th quarter/fiscal 2019 financial results. TILT Holdings signed a term sheet for up to US$125 million in funding. Tetra Bio-Pharma announced its Hemp Energy drink was hitting store shelves in over 500 Quebec grocery and convenience stores. Canadian extraction leader, Valens GroWorks reported some impressive numbers in its Q2 results. Canada’s other extraction leader, MediPharm Labs put out a corporate update. Rapid Dose Therapeutics announced a US$2.1 million distribution agreement.

As Canadian companies are reporting results, The Seed Investor was looking at Canada’s Fastest-Growing Cannabis Leader. The province of Alberta boasts some impressive growth numbers in its cannabis retailing.

Wednesday, the big industry news definitely came from the U.S. Curaleaf Holdings acquired Grassroots, cementing its position as the world’s largest cannabis company by total revenues. Supreme Cannabis announced the acquisition of Truverra. Harvest One announced a supply agreement with GenCanna Global. Khiron Life Sciences received Colombia approval for 17 new cannabis strains. Choom Holdings reported the acquisition of a 19.9% interest in Coastal Green.

The Seed Investor was busy on both sides of the border. In the U.S., we noted how Curaleaf has already produced a genuine pot billionaire. We also examined a cash-rich private company in the U.S. and its “notable leadership”.

In Canada, we compared MediPharm Labs (CAN: LABS / US: MEDIF) and Valens GroWorks (CAN: VGW / US: VGWCF). It was our humble opinion that while both companies offered plenty of upside, MediPharm might be the best current value. [Editor’s note: MediPharm closed up 13.31% on Friday, up over 20% since the TSI article was written.]

Thursday was another full day for industry news. Choom Holdings reported the opening of its latest Alberta retail cannabis store. Aurora Cannabis announced it was the contract winner to supply medicinal cannabis to Italy. Origin House reported preliminary revenue of $21 million for Q2. Sunniva announced the receipt of a CAD$1 million deposit for its asset sale. MediPharm announced conditional approval to graduate to the TSX. Koios Beverage Corp reported test-batch production for its CBD-infused beverage. Neptune Wellness announced closing a US$41 million private placement. Flower One announced a deal with Deuces 22 to introduce its product line to Nevada. Blueberries Medical provided a major corporate update.

The Seed Investor also sounded a note of caution in the current push in Congress to legalize cannabis in the U.S. nationally. We pointed to three Republican Senators who could sink legalization – and how this could play to the advantage of Donald Trump.

Friday was a slower news day. 1933 Industries announced approval to commence cultivation operations at its new Las Vegas facility. Columbia Care reported a new US$25 million share repurchase program.

The Seed Investor reported on FDA hearings to open up CBD commerce in the U.S. Critical here is whether the FDA continues to treat CBD (and regulate it) as “a drug”.

Then the Seed Investor pulled out its magnifying glass. We looked at the recent decision of Flowr Corp (CAN: FLWR / US: FLWPF) to withdraw an equity offering. Is the strong positive market reaction to this news sending a message to cannabis investors?

Last (but certainly not least), The Seed Investor noted we are nearing previous bottoms in the Canadian Marijuana Stock Index. The last time this happened, the Index soared by 65%. It may be too soon to call “a bottom” (mid-summer). But now is the time for investors to start tweaking their cannabis portfolios for what could be an explosive fall.

DISCLOSURE: Choom Holdings is a client of The Seed Investor.