Today, for a change, I’ll cover the news first, and the investing advice second.
In Illinois, marijuana taxes exceeded alcohol taxes in the first three months of 2021. Marijuana tax revenue amounted to $86,537,000 while alcohol taxes brought in $72,281,000. I expect the gap to widen from here and there’s no question other states have taken note.
Moving to specific companies:
Today Canopy Growth (CGC), announced Southern Glazer’s Wine & Spirits as the distribution partner for its U.S. portfolio of CBD-infused beverages. This partnership announcement follows the recent launch of Quatreau – Canopy’s first line of CBD-infused beverages sold in the U.S market. Southern Glazer’s will distribute Canopy’s CBD beverages, beginning with Quatreau, across seven states, with additional states in the months to come.
Yesterday, GrowGeneration (GRWG) announced the acquisition of Downriver Hydroponics, a Michigan-based indoor garden supply center with annual revenues approaching $10 million. With this acquisition, GrowGeneration’s portfolio of hydroponic garden centers now includes 53 stores across 12 states, with seven of those locations in Michigan. This is GrowGeneration’s ninth acquisition this year.
On Monday, Jushi (JUSHF) announced an agreement to acquire Nature’s Remedy of Massachusetts, which currently operates two retail dispensaries, in Millbury and Tyngsborough, as well as cultivation and production facilities. This marks Jushi’s seventh state of operations and the third where it is vertically integrated.
Then today, Jushi announced fourth quarter revenues of $32.3 million, up 438% from the year before (its auditor is late in completing its final Q4 documents), and at the same time, announced preliminary first quarter revenues of $41.6 million, up 384% from the year before.
Finally, yesterday TerrAscend (TRSSF) announced an agreement to acquire KCR Holdings of Pennsylvania, adding three retail dispensaries located in Bethlehem, Allentown and Stroudsburg to effectively double the company’s presence in the state.
The message behind all these deals is simple: The marijuana industry is growing fast, consolidating fast and there’s plenty of cash available for doing deals. Someday that will change but right now, the boom times continue.
In Canada, by contrast, marijuana companies are now in a slump because of oversupply and restricted legal outlets. Because of that, we own only one Canadian company in the portfolio at the moment.
Moving on to investing advice:
Last week I recommended stepping back into the marijuana sector, saying that after nine weeks of correcting, the sector (which was down 49%) looked like it had put in a bottom and was ready to begin moving up again.
Well, it’s still ready. It’s not moving up yet. But if you’re a new reader, or you too took profits out earlier and are ready to get back in, I have some specific buy recommendations today.
In fact, this morning I did a deep dive into our portfolio, looking not only at stock performance (which is always most important), but also at revenue growth rates, profitability and valuation (as measured by price/sales ratio), and the result of that is that three stocks look like the best buys today.
First is Columbia Care (CCHWF), the second-tier vertically integrated multi-state operator I added to the portfolio last week. It’s less well known than the big four, so has more potential buyers (and also might be acquired) and it’s growing really fast. Just note that its low price means extra short-term volatility risk.
Second is Green Thumb (GTBIF), a first-tier company headquartered in Chicago. It’s got a fine chart (well above its late-March low), and the company has now posted two consecutive quarters of solid profits.
Third is Cresco Labs (CRLBF), the other first-tier company based in Chicago. Its chart isn’t quite as strong as the first two stocks, but the company is growing very fast, it’s had a profitable quarter (once) and it stands out for its relatively low valuation (price/sales ratio of 5.1).
Note: As I write, our portfolio is up 29.2% YTD, while the Marijuana Index is up 9.4%.