Momentum is Growing
The big news in the marijuana industry this week is that the Tilray/Aphria merger is complete, turning these two Canadian firms into the biggest marijuana company in the world—for now. Someday, Tilray may be a good investment again. But right now, trading under the ticker TLRY in the U.S., the chart is still a reminder that this stock peaked at the insane price of 300 back in September 2018, just before selling marijuana in Canada became legal. Today, trading at 16.5, and well off its February high of 67, it has no momentum.
Where I do see momentum developing is in the leading U.S. stocks, and one reason for that, though far from the only one, is a piece in Barron’s over the weekend that pointed out that these stocks were actually reasonably (some even cheaply) valued, given their growth metrics.
The other big reason is the 50% correction that the sector experienced from its February high to its mid-April low. As I wrote last week, there’s no guarantee that the correction is over, but the odds are good, which is why I recommended buying again three weeks ago and have taken the portfolio’s cash position down from 64% to 28%. If this nascent uptrend continues, I’ll certainly buy more.
In the meantime, if you’re feeling underinvested in the sector, the best-looking stocks in the sector today are those trading above both their 25- and 50-day moving averages. Among the first-tier players, these are Cresco Labs (CRLBF), Curaleaf (CURLF) and Green Thumb (GTBIF). And among the second-tier players, which are growing even faster, the best charts belong to Columbia Care (CCHWF), Jushi (JUSHF) and TerrAscend (TRSSF).
The one obvious laggard is Trulieve (TCNNF), which was a top performer until March, and then was sold more heavily than average, not bottoming until April 20, substantially later than the rest of group. I wouldn’t buy TCNNF here, but I am holding, and it is still the fourth-largest holding in the portfolio.
Turning to the news:
Columbia Care (CCHWF) last week announced the acquisition of a 34-acre cultivation site in eastern Long Island, New York that will supplement the company’s existing Rochester facility. Currently used for growing ornamental flowers, the site should yield harvests of marijuana in the fourth quarter of 2021, pending regulatory approvals.
Green Thumb (GTBIF) on Monday announced its entry into the Virginia market with an agreement to acquire 100% of Dharma Pharmaceuticals, which was the first operator to provide medical marijuana to Virginia’s patients in 2020 and has an existing production facility and retail dispensary located in Abingdon. Upon completion of the acquisition, Green Thumb will have a presence in 13 markets: California, Colorado, Connecticut, Florida, Illinois, Maryland, Massachusetts, Nevada, New Jersey, New York, Ohio, Pennsylvania and Virginia.
Jushi Holdings (JUSHF) yesterday announced that it had closed on its previously announced acquisition of 100% of the equity of Organic Solutions of the Desert, an operating dispensary located in Palm Springs, California and approximately 78% of the equity of a retail license holder located in Grover Beach, California with the option to acquire the remaining equity in the future. The company expects to complete the buildout of a BEYOND / HELLO Grover Beach location in Q3 2021 and plans to add an additional California location in Culver City, which is expected to open by Q2 2022.
TerrAscend (TRSSF) yesterday announced the completion of its previously announced acquisition of HMS Health of Maryland from Curaleaf. HMS currently produces and sells dried flower and oil products for the wholesale medical cannabis market from an existing 22,000 square foot cultivation and processing facility at the site, but because Maryland law allows a company only one growing site and one processing site, Curaleaf chose to sell this facility and focus its efforts elsewhere. This marks TerrAscend’s entry into the Maryland market, which is adjacent to its core Northeast markets of Pennsylvania and New Jersey.