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Summary

  • More and more states are legalizing or moving towards legalization.
  • BDSA data suggests that strong cannabis growth, driven by demand for flowers, continued into January.
  • Illinois continued to see strong growth in adult sales in February.
  • Health Canada has issued 3 licenses.
  • 420 investor model portfolios are up 63.2-74.5% year-to-date, while the Global Cannabis Stock Index is up 37.6%.

review

BDSA data for January showed strong growth in 8 markets, particularly for flowers. California accelerated and the mature markets in the west continued to suggest that the legal market is converting illegal market consumers. Illinois released data for February showing overall 85% year-over-year growth, with adult usage increasing 132% and medical care increasing 19%.

Virginia approved adult legalization, but the program doesn’t begin until 2024 and requires additional approvals in 2022. In Florida, a Republican legislature proposed THC limits for medical cannabis products. Pennsylvania lawmakers are planning to introduce a bipartisan legalization initiative.

Health Canada data showed that inventories of not only flowers but also food would remain high from November onwards. Health Canada added 3 licenses, bringing the total to 616, including 5 licenses that have expired, revoked or suspended.

During the week, I shared these insights with subscribers of 420 Investor:

  • Curaleaf Q4-20 earnings preview
  • Composition of the model portfolio 02.26.21
  • Review of the cannabis subsector – 02/26/21

Here are some of this week’s highlights for 420 investor focus list names:

  • The CCHWF announced fourth quarter revenue of $ 76 million with Adjusted EBITDA of $ 8 million and forecast pro forma revenue of $ 500 million to $ 530 million with Adjusted EBITDA of $ 95 to 105 in 2021 Million USD.
  • CGC has launched Quatreau’s CBD beverages in the United States
  • CRLBF filed a preliminary prospectus to raise up to $ 1 billion
  • CWBHF paid $ 8 million for an option to potentially acquire Stanley Brothers at a predetermined valuation. This allows them to enter federal markets for cannabis wellness products, which include THC
  • The FFLWF announced that it is converting $ 28.5 million of its 8% convertible bonds and $ 23.6 million of the convertible bonds held by Couche-Tard into shares, so that Couche-Tard is now 19.9% ​​of the shareholders
  • FLOOF proposed an additional rescheduling that would extend the term, lower the price and allow for a mandatory conversion, with the majority of owners so far having agreed
  • GNLN acquired Eyce, a manufacturer of specialty silicone smoking products, for 426,000 shares
  • GTBIF has partnered with Cann, a California-based cannabis beverage brand, to bring its microdosed social tonics to Illinois and then to New Jersey
  • LOWLF reported that fourth quarter revenue was down 15% year over year to $ 9.2 million due to return and other issues, and suggested the challenges continued to affect the first quarter
  • OGI launched two new products, including a 14-pack of pre-rolls and a bar of milk chocolate
  • SHWZ raised additional capital through the sale of convertible preferred stock and completed the purchase of the remaining Colorado Star Buds pharmacies.
  • SMG announced that it will improve its 2021 outlook for EPS from $ 8 to $ 8.40 when it reports its second quarter in May.
  • SPRWF announced an at-the-market share program for $ 30 million
  • TCNNF opened its 76th and 77th pharmacies in Florida

The Global Cannabis Stock Index fell for the third straight week as general market weakness weighed on it, falling 8.4% to 61.08:

The index, which lost 34.1% in 2019 and 54.9% in 2018, after rising 91.8% in 2017 and 88.8% in 2016, rose 5.2% in 2020. The index has gained 37.6% so far in 2021. It currently comprises 38 stocks and ended 2020 at 44.39:

420 investor model portfolios

420 Investor offers three model portfolios for subscribers, including two that are long-term and fully invested to outperform the Global Cannabis Stock Index, 420 Opportunity, and 420 Quality. 420 Opportunity ended the week valued at $ 178,724, down 8.4%. The model portfolio, which grew by 69.6% in 2021, increased by 35.6% in 2020 and by 257.5% since April 2014. 420 Quality ended the week at $ 263,557, a 7.7% decrease for the week and a 63.2% increase in 2021 after a 42.8% increase The model was launched and straightened in March 2017 to long-term investors looking to invest in leading, low-portfolio-turnover cannabis stocks. Since inception, it has risen 427.1% compared to a 24.5% decline in the index. Flying High, which is focused on swing trades, ended the week at $ 440,370, down 8.6%. The model portfolio grew by 52.7% in 2020 and increased by 74.5% in 2021. The return since inception at the end of 2013 has been 4334%.

outlook

After a strong rally in early 2019, the cannabis sector saw a sharp decline to unprecedented levels over the next year due to several negative developments including the CannTrust scam, Bruce Linton’s surprise termination as CEO of Canopy Growth, a disappointing introduction of legalization in Canada, the US regulatory confusion over CBD and a slow roll-out of legalization in California, the vaping crisis and then financial turmoil and market disruption due to the COVID-19 pandemic. The sector saw capital available to fund expansion, a situation that continues to challenge negative cash flow companies as availability is limited to stronger operators.

Cannabis stocks overreacted and bottomed in March. You are now benefiting from the perception that the industry has strong growth prospects, which was not clear at the time. One big change was that the pandemic has led many regulators to allow previously banned types of retail activities such as roadside pickup and delivery. The legal market quickly benefits from becoming even more convenient than the illegal market and being able to order online. High unemployment and large deficits are likely to fuel government legalization efforts as well as more favorable regulatory scrutiny at the local level. Access to capital is now improving rapidly.

There are some potential catalysts ahead, including the FDA clearing up CBD, advances in Canadian legalization that began in October 2018 and encompassing a wider range of products, and continued growth in German and Israeli MMJ and other international markets is slow to develop. The adult implementations in California and Massachusetts have been slow to roll out, but are starting to show major improvements. Michigan and Illinois were legalized in late 2019, and these markets are experiencing strong growth that could encourage other states to legalize. Voters in Arizona, Montana, South Dakota, and New Jersey approved adult legalization in November.

The big issues ahead are likely to be more cross-industry investment in the sector and greater consolidation in Canada and the US, as well as a possible reform of federal regulation (SAFE Banking Act and other broader legislation) that will remove the 280E taxation and the Trade with higher taxes could enable exchanges for MSOs as well as the widespread use of credit cards for cannabis purchases), steps to enable cannabis research, the introduction of MMJ in Germany, Mexico and Australia, and further advances in South America and possible legalization of adult use in Israel and Mexico , new legal cannabis implementations in AZ, MT, NJ and SD as well as MMJ implementations in Virginia and soon also in Mississippi and West Virginia, possible legalization by legislation in CT, DE, FL, MD, MN, NH, NM, NY , PA, RI and VA and implementation of the commercial VT program in 2022.

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Alan Brochstein, CFA

Alan is based in Houston and leverages his experience as the founder of the online community 420 Investor, the first and largest due diligence platform focused on publicly traded stocks in the cannabis industry. With his extensive network in the cannabis community, Alan continues to seek new ways to connect the industry and fuel its sustainable growth. At New Cannabis Ventures he is responsible for content development and strategic alliances. Before focusing on the cannabis industry in early 2013, Alan worked as an independent research analyst in 1986 after having worked in research and portfolio management for over two decades. Alan is a prolific writer with over 650 articles published since 2007 on Seeking Alpha where he has 70,000 followers. He is a frequent speaker at industry conferences and a frequent source for the media, including the NY Times, the Wall Street Journal, Fox Business, and Bloomberg TV. Contact Alan: Twitter | Facebook | LinkedIn | E-mail

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In this article:

Canopy Growth, CCHW, CCHWF, CGC, Charlottes Web, Cl, Columbia Care, Cresco Labs, CRLBF, CWBHF, CWEB, FAF, FFLWF, Feuer, Feuer und Blume, Floof, Flower One, FONE, Gnln, Green Thumb Industries, Greenlane , gtbif, Gti, gtii, Lowell Farms, LOWL, LOWLF, OGI, Organigramm, schwazze, Scotts Miracle-Gro, SHWZ, smg, SPRWF, highest cannabis, tcnnf, TRUL, trulieve, WEED

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Charlotte’s web positions on American cannabis legalization with an option to acquire Stanley Brothers