Are promises made really promises kept, for President Donald Trump?
No one really knows, so cannabis equity investors remain depressed.
They can’t get any bullish signals from the administration on rescheduling, which Trump promised.
But there is a way to deal with this uncertainty as a cannabis investor. Shift your focus to getting paid to wait. I’ll explain why, and how, below.
First, the background here is that moving cannabis to Schedule III from Schedule I under the Controlled Substances Act would be a big deal for cannabis companies. It would create a much-needed and very large tax windfall. Currently, cannabis companies get the short end of the stick from the Internal Revenue Service (IRS). IRS rule 280E blocks them from deducting operating expenses.
It’s not clear how long cannabis companies can survive with this huge handicap, at least not without large equity investor dilution. A big problem for them is that there’s a large wall of debt scheduled to mature in 2026 for publicly traded cannabis companies. It is valued at $2.6 billion.
When that time comes, it’ll be a lender’s market.
So, the best thing to do now is own the lenders. This is my “get paid to wait” strategy in cannabis. I’ve suggested Advanced Flower Capital (AFCG) and Chicago Atlantic Real Estate Finance (REFI) for years. They remain buys because a lot of their value to investors comes from their rich yields. They offer nice dividend yields of 15.6% and 11.7% respectively. I introduce a new cannabis lender below.
But first, here are the two main reasons why it will be a lender’s market in the cannabis sector, which will favor our cannabis lenders paying rich yields.
1) Refinancing in 2026 will be a life-or-death matter for many cannabis companies. They’ll have to roll over their debt because they do not produce enough cash flow to pay it off. They will be taking what they can get. The terms won’t be great. Our lenders will call the shots.
2) There’s an equally large $2.6 billion wall of debt maturing in 2026 among private cannabis companies that will need to get refunded. That creates more competition for funding, which also gives our lenders an edge.
Get Paid to Wait
Put all this together, and you can see why it is so important that Trump does not sell cannabis investors down the river by betraying his “promises made, promises kept” mantra on rescheduling. But cannabis sector experts have growing doubts about Trump. This explains why cannabis companies are trading at, or near, all-time lows.
After all, with each new cabinet appointment comes a flurry of archeological digs that find anti-cannabis quotes from appointees. Probably the most jarring is the anti-cannabis stance of Terry Cole, the designee to head the Drug Enforcement Agency (DEA).
He matters because, oddly, the DEA is the lead advocate in rescheduling, even though it is obviously biased against such a change. The cannabis community is not taking this challenge lying down. Doctors for Drug Policy Reform has filed a petition asking a federal court to order the DEA to do a better job of selecting a balanced assortment of witnesses in any rescheduling hearings. Courts tend to defer to agencies. So, cannabis investors might not get that much relief.
Cannabis Lenders
Given all the uncertainty swirling in the cannabis sector, part of any cannabis investor strategy has to be “get paid to wait” by owning cannabis lenders.
Cannabis lenders have created a clever way around the prohibition against bankers serving cannabis companies. They borrow money from banks and turn around and lend it at much higher rates to cannabis companies. This gives banks a piece of the action, despite rules against them lending to cannabis companies. It’s kind of like a legal version of “money laundering.”
Our cannabis lenders are sober lenders who, so far, have stayed out of trouble. They know how to assess cannabis markets and cannabis company cash flows. They secure loans against assets (typically real estate or retail sales licenses). They take the safest, top slot in the capital stack. So far, their sober approach to lending to cannabis companies has produced a good record on defaults. I expect that to continue.
True, the stocks of cannabis shadow lenders won’t jump as much as the top-tier, multi-state operators in our main cannabis portfolio if rescheduling happens. But their shares will bounce. Meanwhile, you get paid to wait. And it could be a long wait. One cannabis lender executive recently predicted rescheduling will be a 2026 event.
Here is a new “get paid to wait” cannabis lender to consider.
Chicago Atlantic BDC (LIEN)
This is a cannabis sector lender closely linked to one I already suggest and own, called Chicago Atlantic Real Estate Finance (REFI). The new one, Chicago Atlantic BDC, is a business development company (BDC). BDCs are not taxed at the corporate level. This allows them to pay higher yields, but the yield income is taxed as ordinary income. For most people, that tax rate is higher than the tax rate on dividends. One way around this is to own BDCs in tax-protected accounts.
Chicago Atlantic BDC leverages the same expertise that has created a decent track record at its affiliate, our Chicago Atlantic Real Estate Finance.
Chicago Atlantic BDC recently secured a $100 million senior secured revolving credit facility from a bank. Chicago Atlantic is paying the Secured Overnight Financing Rate (SOFR) rate of 4.3% plus 3%, for a total of 7.3% on the debt. But Chicago Atlantic BDC earns a 17.2% weighted-average yield on its debt investments. In other words, it will theoretically collect the 10% spread. Chicago Atlantic BDC offers a 10.9% yield.
“With no current debt outstanding, the credit facility provides us with significant liquidity and the flexibility to grow the company’s portfolio as we seek to capitalize on the robust lending opportunities in the originations pipeline,” says co-chief investment officer Scott Gordon.
Here are some highlights of Chicago Atlantic BDC’s cannabis loan book. All loans are senior secured loans. No positions are classified as non-accrual. About 79% of the portfolio is floating-rate loans. Among its borrowers, the net debt to EBITDA ratio is a comfortable 1.6. The weighted average interest coverage is 4.1. The median revenue and EBITDA of borrowers are $85 million and $19 million per year.
The bottom line: Though it is a year off, the $5.2 billion wall of expiring debt in the cannabis sector coming due in 2026 will benefit Chicago Atlantic BDC and our other two “get paid to wait” cannabis lenders.
What to Do Now
Cannabis investors remain uncertain about when reform like rescheduling will happen. It is not possible to predict this with any accuracy. So, patience is required. So, it makes sense to make the wait easier with a “get paid to wait” strategy, which emphasizes cannabis sector lenders that pay rich yields. They will still post some capital appreciation if reform progresses.
Our Cabot Cannabis Insider portfolio now has three of these. They are: Advanced Flower Capital (AFCG), Chicago Atlantic Real Estate Finance (REFI) and Chicago Atlantic BDC (LIEN). They pay yields of 15.6%, 11.7% and 10.9%. respectively.
In dividend investing, yields like these are often considered “too high” and a sign they cannot last. At least as of the most recent updates, it does not appear these dividends will be cut. All have recently affirmed their dividend payouts.
Otherwise, continue to hold or average down in our main portfolio names. The best time to buy stocks is when they are widely hated, but plausible catalysts lie on the horizon. That is clearly the case with cannabis stocks now. But this is also the hardest time to buy stocks. That resistance may also be a signal to buy. As a general rule, some of your best stock purchase decisions will be the ones that are the hardest to make.
Consider taking both trading positions and multiyear positions in portfolio names now, or averaging down. I am personally averaging down in the current weakness.
Portfolio names are: Ayr Wellness (AYRWF), Cresco Labs (CRLBF), Curaleaf (CURLF), Cronos (CRON), AdvisorShares Pure U.S. Cannabis (MSOS), AdvisorShares MSOS 2X Daily (MSOX), ETFMG Alternative Harvest (MJ), Green Thumb (GTBIF), Organigram (OGI), Tilray Brands (TLRY), Trulieve (TCNNF) and Verano (VRNOF). For simplicity, consider getting exposure via MSOS or the leveraged version, MSOX.
Cannabis News from Around the World
Part of my core thesis for being bullish on cannabis stocks is that there continues to be tremendous cultural momentum toward cannabis reform around the world. I’m convinced institutional investors will not ignore cannabis stocks forever.
We see evidence of this powerful cultural momentum in the changes in laws to legalize cannabis, big tobacco investments in the space, robust cannabis sales growth in states that legalize, increased cultural acceptance in the form of relaxed drug testing standards in sports leagues and the workplace, and poll results that show a growing majority of people support legalization regardless of age and party affiliation.
These trends tell us cannabis stocks are a strong contrarian buy that will turn very profitable for patient investors with a medium-term horizon. The sector is so volatile, it is easy to get shaken out of names by heightened emotional reaction to drawdowns. So, it is important to catalogue evidence of this cultural momentum. That is the purpose of this section of Cabot Cannabis Investor.
Federal-Level News
* President Donald Trump has nominated another senior cabinet official with anti-cannabis views, West Virginia senator Mike Stuart (R). If approved, Stuart would serve as the top attorney at the U.S. Department of Health and Human Services (HHS). Stuart has described cannabis as a dangerous “gateway drug” that leads to greater misuse of opioids.
In his role at HHS, Stuart would presumably weigh in on rescheduling. President Joe Biden’s HHS recommended rescheduling cannabis, but his administration failed to get the change through. In a recent interview, HHS Secretary Robert F. Kennedy Jr. says he is “worried about” the normalization of high-potency cannabis, which he thinks can have “really catastrophic impacts” on users. Kennedy supported legalization as a presidential candidate.
* Sen. John Fetterman (D-PA) is urging people to sign his online petition supporting the legalization of recreational-use cannabis. The petition says, “Legal weed means more revenue, jobs, justice, and freedom.”
* House Budget Committee chair Rep. Jodey Arrington (R-TX) has filed a bill that would block cannabis companies from taking federal tax deductions even if cannabis is rescheduled. Moving cannabis to Schedule III from Schedule I would neutralize IRS code 280E, which prevents cannabis companies from deducing certain expenses against sales. In what would be a serious blow to cannabis companies, Arrington’s bill would effectively maintain 280E, even if cannabis were down-scheduled.
* A cannabis grow facility and store operator in Maine has asked the U.S. Supreme Court to draw the line on federal prosecution of cannabis businesses operating legally under state law. The operator wants the court to weigh in on whether the U.S. Department of Justice (DOJ) violated federal law by charging him under the federal Controlled Substances Act (CSA).
At issue is federal legislation called the Rohrabacher–Farr amendment. This blocks the DOJ from spending money in ways that prevent states from implementing laws authorizing the distribution of medical cannabis. The amendment has been attached to spending bills since 2014.
Lower courts have ruled both ways. So, the Maine cannabis grow facility and store operator, Lucas Sirois, has asked the Supreme Court to clarify the law. The DOJ charged Sirois with operating a medical cannabis store in Maine. The catch is that he may have violated state law by operating a collective for cannabis vendors, which is prohibited under state law.
State-Level News
* Pennsylvania Gov. Josh Shapiro (D) has once again included taxes on recreational-use cannabis sales as a source of revenue in his annual budget proposal – implying legalization is imminent. The $51.1 billion proposed budget, which asks for the legalization of rec-use sales, would take effect July 1, 2025.
So far, Republicans have resisted legalization. Sen. Appropriations Chairman Scott Martin (R) says the legalization proposal will go nowhere. But pressure is mounting since the state loses so much tax revenue to neighboring states that have legalized rec-use sales. A recent survey found that a majority of voters support reform, including Republicans. About 62% of Democrats and 53% of Republicans support the change. Reform advocate Sen. Sharif Street (D) predicts legalization will happen this year.
* A recent Florida poll shows voters strongly support the legalization of recreational-use cannabis. The University of North Florida (UNF) survey found 67% of Florida voters back legalization, including 82% of Democrats, and 55% of Republicans. But another recent survey from the Florida Chamber of Commerce found that only 53% of voters support rec-use legalization.
A legalization referendum last year garnered only 55% approval, short of the required 60% to become law. Cannabis advocates plan to get a similar referendum on the ballot in 2026.
* About 71% of North Carolina voters support the legalization of medical cannabis. Voters across parties and demographics support the change, except for people over the age of 80. The poll found that 62.3% of Republicans said they support medical cannabis legalization, and 78.3% of Democrats support the change. The survey was conducted by Meredith Poll. Last summer the state Senate approved a bill that would legalize medical cannabis, but it failed in the House.
* Wisconsin Gov. Tony Evers (D) has once again included a proposal to legalize cannabis in his budget request. The budget proposal says the state should “legalize, regulate, and tax the sale of marijuana for recreational use, much like Wisconsin already does with alcohol.” Both recreational and medical use remain illegal in the state. The state’s Republican-controlled legislature has rejected legalization.
* The Oklahoma Senate Committee on Public Safety recently approved a bill that says applicants for handgun licenses would not be disqualified because they have a medical cannabis license. Carrying or using a gun while under the influence of cannabis would remain illegal. Federal law bars cannabis users from owning firearms, but federal courts are chipping away at this prohibition.
* A proposed referendum in Oregon would give voters the chance to legalize cannabis cafes. The cafes would be allowed to serve food and drinks, but not alcohol. Oregon voters approved rec-use legalization via a 2014 referendum.
* New Hampshire’s House of Representatives recently approved a Republican-sponsored bill that would legalize cannabis. The bill stops short of setting up a licensed commercial market. New Hampshire Gov. Kelly Ayotte (R) has said she would veto the bill. A recent poll found that 65% of residents support legalization.
* Hawaii’s Senate Health and Human Services (HHS) Committee and Senate Judiciary Committee recently approved a bill to legalize recreational-use cannabis. The state’s House of Representatives earlier this year voted to delay a similar bill, pushing consideration until the next legislative session.
International News
* Retail Canadian cannabis sales rose 10% in December to a record C$499.7 million compared to the prior month, says Statistics Canada. December sales were up 11.4% compared to a year ago. Sales were up because of a higher store count and because lower prices brought in buyers from the illegal market. Alberta and Quebec posted the largest gains, sequentially, while sales in British Columbia fell slightly.
* Costa Rica has approved regulations that will allow medical-use cannabis sales by prescription in pharmacies. Costa Rica approved medical-use sales in 2022. Costa Rica will be a relatively small market. But the development is part of a growing global trend towards legalizing cannabis.
* A legislative committee in Switzerland has approval for a plan to legalize recreational cannabis use. The change confirms a growing global trend towards legalization. The proposal would allow for-profit commercial cultivation, but bar for-profit retail sales, which would be handled by a state monopoly.
Medical News
* Patients who use the cannabinoids THCV and CBD lose more weight, and lower their blood pressure and cholesterol, according to a recent study published in the journal Cannabis. THCV, a cousin of THC, is psychoactive but not in low doses.
Portfolio Company News
Ayr Wellness (AYRWF)
Ayr Wellness recently opened two dispensaries in Niles, OH, and Miami, FL. The first is a bet on continued sales growth in a state that recently approved rec-use sales by referendum last year. Ayr says it plans to open four more stores in Ohio this year.
The Florida store opening is a long-term bet that Florida will legalize rec-use sales, given that cannabis advocates want to put the matter to voters in another referendum in 2026. This is the first cannabis store inside Miami city limits. Ayr also closed a Key West store. Polls continue to show enough voters support legalization of recreational use sales, even though the 2024 rec-use legalization referendum failed to get the requisite 60% approval. It missed by five percentage points. Meanwhile, Florida has a robust medical-use market.
Trulieve Cannabis (TCNNF)
Trulieve recently opened new stores in Columbus, Ohio, and Franklin County, Florida. The first is a bet on continued sales growth in a state that recently approved rec-use sales by referendum last year. Peer Ayr says it plans to open four more stores in Ohio this year. The Florida store opening is a long-term bet that Florida will go rec-use, given that cannabis advocates want to put the matter to voters in another referendum in 2026.
Verano Holdings (VRNOF)
Verano recently opened a MÜV store North Miami Beach. It is the company’s 80th store in Florida. Cannabis advocates plan to submit another referendum legalizing rec-use sales for the 2026 elections. Verano has 153 dispensaries nationwide.
Cannabis Plus Insider Portfolio News
Advanced Flower Capital (AFCG)
Advanced Flower Capital recently closed on a $15 million senior secured credit facility to Story of Ohio, an Ohio subsidiary of Story Companies, which is a privately held multi-state operator of cannabis cultivation and retail facilities. Story intends to use the proceeds from the loan to acquire and build out dispensaries in Ohio.
“We are pleased to support Story as it continues to expand its operations in Ohio,” said Advanced Flower Capital CEO Daniel Neville. “Story is one of the top private multi-state cannabis operators, led by a team of serial entrepreneurs who have consistently executed in a volatile cannabis market. We are excited to continue to support Story’s expansion.” The first-lien loan is secured by Story’s cannabis licenses and real estate it owns in Ohio and Georgia.
Advanced Flower Capital offers a 15.85% yield.
Sector Performance
Our Cabot Cannabis Plus Insider Portfolio is doing very well. But our plant-touching Cabot Cannabis Investor portfolio is trailing.
Our Cabot Cannabis Plus Insider Portfolio invests in cannabis-related names that do not touch the plant, where insiders are buying. It is up 52% since I launched it on March 29, 2023, through February 25, compared to a 22.5% gain for Russell 2000 index and a 29.4% loss for New Cannabis Ventures Global Cannabis Stock Index the over the same time.
The portfolio is well positioned to outperform because investments in AFC Gamma (AFCG), Chicago Atlantic Real Estate Finance (REFI) and Chicago Atlantic BDC (LIEN) pay yields of 16.28%, 12.36% and 10.9%. respectively. The dividends were recently confirmed even though they look suspiciously high. We will also see capital appreciation in these names if sector catalysts hit.
Because our plant-touching cannabis portfolio is leveraged, it lags in severe sector downturns. That is the case now. Our Cabot Cannabis Investor portfolio cannabis portfolio was down 18.3% this year as of the February 25 close. The decline was worse than the 12.8% loss for the New Cannabis Ventures Global Cannabis Stock Index.
Our plant-touching portfolio is leveraged because of the large position in AdvisorShares MSOS 2X Daily (MSOX). It is a top-five position. The leverage hurts us when the sector is weak. Likewise, it helps capture more upside as we see progress on rescheduling cannabis and progress towards approval of recreational use in more large states like Pennsylvania.
When we get a significant sector rally, I will roll back leverage by trimming MSOX in favor of cannabis stocks or the AdvisorShares Pure U.S. Cannabis (MSOS) ETF. If you are a highly active trader, it would make sense to deleverage into rallies in the same manner along the way, and then hope for a pullback to re-lever.
Portfolio
Stock | Shares | Current Value | Portfolio Weighting | 2/25/25 |
Ayr Wellness (AYRWF) | 1,692 | $609 | 1.00% | $0.36 |
Cresco Labs (CRLBF) | 9,180 | $7,711 | 12.80% | $0.84 |
Curaleaf (CURLF) | 5,698 | $7,464 | 12.40% | $1.31 |
Cronos (CRON) | 1,683 | $3,181 | 5.30% | $1.89 |
AdvisorShares Plus US Cannabis (MSOS) | 1,058 | $3,322 | 5.50% | $3.14 |
AdvisorShares MSOS 2X Daily (MSOX) | 304 | $1,772 | 2.90% | $5.83 |
ETFMG Alternative Harvest (MJ) | 125 | $2,878 | 4.80% | $23.02 |
Green Thumb Ind. (GTBIF) | 3,355 | $22,613 | 37.60% | $6.74 |
Organigram (OGI) | 4,834 | $5,656 | 9.40% | $1.17 |
Tilray Brands (TLRY) | 2,071 | $1,740 | 2.90% | $0.84 |
Trulieve (TCNNF) | 695 | $2,862 | 4.80% | $4.12 |
Verano (VRNOF) | 351 | $305 | 0.50% | $0.87 |
Cash | $0 | 0.00% | ||
Total | $60,113 |
Canna Plus Insider Portfolio
Company | Ticker | Date Added | Price Bought | 2.25.25 Price | Total Return* | Current Yield | Current Status |
Chicago Atlantic Real Estate | REFI | 3.29.23 | $10.40 | $16.05 | 54.33% | 11.70% | Buy |
AFC Gamma | AFCG | 7.26.23 | $7.74 | $8.37 | 8.14% | 15.60% | Buy |
Sunrise Realty Trust | SUNS | 7.9.24 | $8.31 | $11.78 | 41.76% | 14% | Hold |
Cerevel Therapeutics | CERE | 8.9.23 | $21.91 | $45.00 | 105.39% | 0% | Bought out |
Average: | 52% |
Company Profiles
Ayr Wellness (AYRWF) This is a vertically integrated multistate operator based in Miami. It has over 90 dispensaries. It operates in Florida, Illinois, Massachusetts, Pennsylvania, New Jersey, Nevada, Ohio, and Connecticut. Ayr has 18 grow and production sites, around a dozen national brands, and a proprietary library of over 160 cannabis strains. Like many names in our portfolio, Ayr is strategically positioned in states that look poised to approve recreational-use sales. It has over 60 stores in Florida, for example.
Ayr has built out its brand development strength with the appointment of David Goubert as president and CEO. Goubert previously served as president and chief customer officer at Neiman Marcus Group, and he was at LVMH for 20 years before that.
Ayr is currently launching brands from its national portfolio in New Jersey, including Ayr’s Lost in Translation flower, Kynd flower, Road Tripper flower, STIX pre-rolls, Entourage vapes, Secret Orchard vapes, and Wicked soft lozenges.
Ayr recently reported $71 million in cash and $607 million in net debt. This debt overhang is one reason why Ayr trades at 0.15 times sales. The company is founder-run, which can be a plus in investing. BUY
Cresco Labs (CRLBF) Chicago-based Cresco has the #1 market share position in Illinois, Pennsylvania and Massachusetts. The company has the top-selling branded portfolio of cannabis products in the industry. It has the top of branded flower and branded concentrates, and the third best portfolio of branded vapes.
Cresco offers exposure to many attractive U.S. markets with an emphasis on Illinois. It is also in Pennsylvania, Ohio, New York, Massachusetts, Michigan, Florida, Missouri, and Maryland. Most of those are states that recently expanded into recreational use sales, or are expected to over the next two years.
The company is founder-run, which can be a plus in investing. Cresco Labs has a price to sales ratio of 0.55. BUY
Cronos Group (CRON) Cronos is mainly a foreign operator with exposure to Canada, Germany, Australia and Israel.
Cronos has respectable brand strength in Canada. It sells gummies, infused pre-rolls and vapes under the Spinach, Blue-Raspberry Watermelon and Tropical Diesel brands. Spinach products command 15.3% market share in the Canadian edibles category, and 19.8% share in gummies, according to Hifyre.
In Israel, Cronos sells dried flower, pre-rolls and cannabis oils in the medical market. The company has a partnership with Cansativa Group which allows Cronos to sell its Peace Naturals brand in Germany, where the cannabis market should grow dramatically over the next several years because of liberalization of restrictions on sales. Cronos has a 10% stake in Cronos Australia, a publicly traded company.
Cronos has $855 million in cash, or about $2.24 per share, against minimal debt of $2.26 million. Some of that cash could be deployed in acquisitions, possibly to expand in the U.S. adult-use market.
Cronos trades at 0.75 times book value. BUY
Curaleaf (CURLF) Massachusetts-based Curaleaf was the industry leader last year. It operates 145 dispensaries and several grow sites in 17 states and its European operations. It has one of the strongest brand portfolios in the U.S. led by Select, the number one selling vape brand in its markets. Here are three factors that support growth.
1. Curaleaf is an R&D powerhouse. A team of scientists is currently developing about 180 products.
2. Like many of the names in our portfolio, Curaleaf is well positioned to benefit from the opening up of rec-use sales in New York, Ohio, Florida, Pennsylvania near term.
3. Curaleaf will benefit from progress on liberalization of cannabis laws in Germany and elsewhere in Europe. It has a majority stake in Germany’s Four 20 Pharma, a licensed producer and distributor of medical cannabis that has more than 15%-20% market share in Germany. Curaleaf International is the largest vertically integrated cannabis company in Europe. It has a lot of room to expand production, and it boasts import and distribution in the U.K., Germany, Italy, Switzerland, and Portugal. Recreational use legalization in Germany is advancing, and it could open the floodgates to further legalization throughout Europe. Curaleaf has a 50% market share in the U.K.
The company is founder-run, which can be a plus in investing. Curaleaf has a price/sales ratio of 1.07. BUY
AdvisorShares Pure U.S. Cannabis ETF (MSOS) This exchange traded fund (ETF) has large exposure to most of our portfolio names so it may seem redundant. However, I want to put it on your radar as a liquid trading vehicle for getting in and out of the group without having to make a lot of individual stock sales, and as way to get exposure to many of our names with one purchase. It also gives us diversification beyond our names, to positions like Jushi Holdings (JUSHF) and Innovative Industrial Properties (IIPR), among others. Consider accumulating this ETF on weakness of 2% or more. BUY
AdvisorShares MSOS 2x Daily ETF (MSOX) This is the leveraged version of the ETF MSOS. It theoretically goes up (and down) by twice as much as MSOS, though the relationship does not always hold exactly. Consider accumulating on weakness of 2%-4% or more. Note that leveraged ETFs suffer from some persistent valuation decay because of the cost of the leverage. BUY
ETFMG Alternative Harvest (MJ) This ETF has outsized foreign exposure, which means it could benefit more than other marijuana exchange traded funds if we see progress on legalization in Germany and Europe. That could happen in the form of draft legislation and decriminalization of recreational use in 2023. “Legalization in Germany could be a tipping point for global expansion,” according to cannabis experts at ETFMG. This would put additional pressure on other European Union members to move forward with legalization. It could also encourage reform of the 1961 U.N. Single Convention on Narcotics which prohibits the cultivation and sale of recreational cannabis. “Such a result would be momentous and would open the doors to a global market,” says ETFMG. Owning this ETF broadens our industry exposure to names outside our portfolio, like Canopy Growth (CGC; WEED.TO), SNDL (SNDL), and GrowGeneration (GRWG), among others. BUY
Green Thumb (GTBIF) Chicago-based Green Thumb is our portfolio’s largest position. It has been the most profitable multistate operator of all the big ones – a sign of good management.
Green Thumb branded cannabis products include &Shine, Beboe, Dogwalkers, Doctor Solomon’s, Good Green, incredibles and RYTHM. The company operates a national retail cannabis stores called RISE. Green Thumb has 91 dispensaries across fourteen states. Green Thumb continued to strategically position itself in markets that look poised to expand to recreational uses sales, like Florida and Pennsylvania.
Founder Ben Kovler is chairman and CEO. Research shows that founder-run companies often outperform. Kovler has a 26% stake in the business and holds nearly 59% of voting power. Green Thumb trades at a price to sales ratio of 1.93. BUY
Organigram (OGI) Organigram holds the #2 position among Canadian licensed producers. It also sells high-margin flower in Israel, Australia and Germany. Germany should see robust growth over the next few years as it loosens rules on medical cannabis use. The CEO has alluded to “creative ways” to get into the U.S. cannabis market, but does not offer details.
The company has the #1 market share position in hash globally driven by popular products like Tremblant, Holy Mountain and SHRED. It has the #1 market share position in gummies.
British American Tobacco (BTI) is a big investor in Organigram, an endorsement of its potential. The two companies collaborate to develop cannabis products. The price to sales ratio is 1.1. BUY
Tilray Brands (TLRY) Tilray is a cannabis and consumer packaged goods company with one of the biggest global footprints in the industry. CEO Irwin Simon founded The Hain Celestial Group, a natural food company, which is in the business of brand development. This is a key factor for cannabis companies, too. So, the Hain Celestial experience may bode well for shareholders.
Tilray is a big recreational and medicinal cannabis supplier in Canada. It is ranked #1 there by sales for cannabis flower, oils, concentrates, and THC beverages; #2 in pre-rolls, #4 in vape, and among the top 10 in all other categories. It also offers medical cannabis in 20 countries on five continents through its subsidiaries and agreements with pharma distributors. It has operations in Canada, the United States, Europe, Australia and Latin America. It sells craft beer and CBD products in the United States.
Tilray seems like a good play on expected legalization of recreational use in Europe over the next few years, because it has been making significant investments there. It has a medicinal marijuana distribution network in Germany. It has production facilities in Portugal and Germany, the largest medical cannabis market in Europe.
Tilray sells hemp food products through its Fresh Hemp Foods division, and it has a craft alcohol business called SW Brewing, the tenth-largest craft brewery in the United States. The price to sales ratio is 1.38. BUY
Trulieve (TCNNF) Trulieve has long been the biggest medicinal marijuana vendor in Florida, where it has 50% market share. It has over 190 dispensaries and two thirds are in Florida. Cannabis activists are trying to get recreational use on the Florida ballot in November 2024. A win would be huge for Trulieve. Approval could make Florida the largest legal U.S. cannabis market with 22 million residents and 138 million tourists a year.
Meanwhile, Trulieve has been expanding across the country. It is diversifying its presence into Pennsylvania, Maryland, Georgia, Ohio and Massachusetts, among other states.
The company reports $320 million in cash against $795 million in debt. “U.S. cannabis has significant white space ahead, with many states yet to implement medical or adult-use programs, and the growing appetite for substantive federal reform,” says CEO Kim Rivers. It has a price to sales ratio of .98. BUY
Verano (VRNOF) Chicago-based Verano is one of the top five publicly traded multi-state operators in the U.S. by sales. Verano has nearly 140 dispensaries and 14 production facilities in 13 states. One of the most attractive qualities of this company is that it has a big presence in high-growth markets like New Jersey, Illinois, Florida and Connecticut, and states that may soon legalize recreational like Florida and Pennsylvania. The company’s strategy has been to position with medical dispensaries in states most likely to soon go recreational.
The company’s portfolio of brands includes Encore, Avexia, MÜV and its signature Verano line of product. To capitalize on the consumer’s trading down to value brands, Verano moved up the rollout of a new budget line called Savvy last year. It operates dispensary concepts called Zen Leaf and MÜV. It also has a licensing agreement with Mike Tyson’s Tyson 2.0 cannabis company.
The company reports cash of $194 million against debt of $541 million.
Verano is founder-run, which can be a plus in investing. Verano has a price to sales ratio of .54. BUY
The next Cabot Cannabis Investor Issue will be published on March 26, 2025.
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