This Week In Cannabis Investing September 13th
The Seed Investor has been busy this week covering a multitude of subjects. Cannabis lobbying. More on the growing connection between cannabis and professional sports. Celebrities and cannabis. A review of the current health scare involving tainted vape pens. A look at the stellar bargains available for investors in cannabis retail. The possibility of a powerful short-squeeze in cannabis stocks, and more.
Monday began by examining the modest spending by U.S.-based cannabis companies on political lobbying. Congress is currently bogged down in talks to legalize cannabis and states like New York have failed to pass a legalization law this year. So there is little to show for the ~$2 million spent on lobbying by the cannabis industry.
That’s only about 1/10th what the tobacco industry spends on its own political lobbying, so current spending represents a very modest commitment of dollars. But are there better uses for this money? We argue that the cannabis industry would get more bang from its buck at directing its spending to public education about cannabis.
Also on Monday, we reported on now professional sports athletes (and NFL players in particular) are becoming outspoken advocates about the benefits of medicinal cannabis. More and more, players are saying that cannabis has a role in treating injuries not just after but during the careers of these athletes.
Tuesday, we asked whether the upcoming Q4 earnings for Aurora Cannabis (released Wednesday) could be a possible spark for a sector rally. The argument became moot when Aurora slightly missed its own guidance the following day and the stock was subsequently punished.
The Seed Investor also took a look at celebrities touting the benefits of cannabis, but for medicinal not recreational use. We cited music/film celebrity, Olivia Newton-John. She has been suffering from recurring breast cancer since 1992. When the disease came back for the second time in 2017, Newton-John turned to cannabis.
It’s great advertising for the cannabis industry. And for cannabis investors, what made the story significant was where it was told, the mainstream publication: Good Housekeeping. We discussed sports celebrities who are enthusiastic proponents of medicinal cannabis – and whose testimonials are also appearing in mainstream media publications.
Wednesday, our feature story was how Canadian cannabis retailers represent an “ultimate investor bargain”. We looked at the three leading pure plays in Canadian cannabis retail today: National Access Cannabis (CAN:META), Choom Holdings (CAN:CHOO / US:CHOOF) and Fire & Flower Holdings (CAN:FAF / US:FFLWF).
Taking the numbers from Tilray’s recent acquisition in the retail space, we projected valuations for the three retail leaders based on those metrics. The result? Huge current upside potential for National Access (+453%), Choom (+179%) and Fire & Flower (77%).
Then The Seed Investor took a close look at the serious respiratory illnesses (and even 6 deaths) that have resulted from tainted vape pens in the United States, including both legal and illicit products. This is a direct result of cannabis Prohibition at the national level – and the lack of proper regulation/testing of products. This puts even more pressure on Congress (and the Trump administration) to deal with legalizing cannabis nationally, sooner rather than later.
Thursday, we took aim at the U.S. federal government (again). This time, we noted how the federal government is ‘educating’ itself on cannabis and regulating cannabis as a drug based upon studying the cannabis that was grown and consumed 30 years ago.
The Seed Investor then alerted investors to news from one of the previously mentioned leaders in cannabis retail. Choom Holdings is opening yet another cannabis retail store (its 12th), in Brooks, Alberta.
We then criticized Canada’s federal government (again). The federal government is being sued on behalf of medicinal cannabis users because of overly strict THC limits in packages of cannabis edibles products, due to become legal in Canada in October.
The Seed Investor noted two points. First, as detailed in the lawsuit, high-intake medicinal patients would be endangering their health with (toxic) sugar consumption, in order to obtain enough cannabinoid content.
Second, the government’s limits for cannabis products are much, much stricter than limitations for alcohol products. This is despite the fact that alcohol is toxic (and deadly), while cannabis is non-toxic.
Friday, we ended the week with a Seed Investor endorsement for U.S. presidential candidate, Elizabeth Warren. Warren has been a strong, consistent advocate for marijuana legalization since 2017 – and has long been known as a champion of the American consumer.
We closed the week with another feature article. The Seed Investor has pointed to the very large short positions across the cannabis space (despite current rock-bottom valuations). We see this as being the perfect set up for a powerful short squeeze – and a major rally in North American marijuana stocks.
DISCLOSURE: Choom Holdings is a client of The Seed Investor.
Published at Fri, 13 Sep 2019 20:52:49 +0000