For the trading week ended 6/12/20, my proprietary Canadian Cannabis Company Index (MCCCI) decreased by 3.1% compared to last week, when it decreased by 4.2%. The index consists of 25 stocks, many of which are among the most widely held holdings of the 3 ETFs (MJ, CNBS, and THCX) that I consider to be a reliable barometer of the industry as a whole. The MCCCIs differentiated business model is both weighted and market capitalization based because I believe that this approach best represents the current landscape of the Canadian cannabis industry.
As I’ve said here before, I believe there will be a pronounced reset in this sector, likely in Q3 or Q4 of this year. including but not limited to business failures, consolidation, and a significant downtrend in valuation. The survivors will be those companies that can operate profitably when the equilibrium price is established by the supply/demand dynamics. Let’s look at this week’s good, bad, and ugly stocks.
MICRO
BAD
There were 3 stocks that decreased more than 10% which is my threshold for inclusion in this category: WeedMD (WDDMF) -11.6% Hexo Corp. (HEXO) -11.2% Medifarm Labs Corp. (MEDIF) -11.0% All 3 of these stocks have previously been either good or bad stocks here at the CCR.WDDMF is making its 3rd straight appearance and in my view is the “Carrie” of the MCCCI as is has multiple “personalities” which make it problematic to analyze, and then some. I refer readers to last week’s issue for more information.
THE UGLY
N/A RECAP
The overall index decreased by 15.8 % compared to last week’s increase of 12.1% as only 8 of the 25 MCCCI stocks increased. The 4 highest market capitalization portfolio stocks decreased, and 6 of the 8 stock that increased were among the lowest capitalization portfolio stocks. My modeling work is trending towards this bifurcation to continue Let’s see how this volatile sector has performed same time next week shall we?
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