The Canadian Cannabis Report - Monday, May 4

MACRO

For the trading week ended 5/1/20 my Canadian Cannabis Company Index (MCCCI) decreased by 3.2%, which reversed the positive direction of the 2 prior weeks. 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 widespread carnage in this sector for the foreseeable future, including but not limited to business failures, consolidation, and a pronounced downtrend in valuation. Since there has been some consolidation during 2020. The survivors will be those companies can that operate profitably when the equilibrium price is established by the supply/demand dynamics. I will post a link to an article I wrote in 201  in which I said that I did not expect a final equilibrium price to be determined in late 2020 Let’s look at this week’s good, bad and ugly stocks.

MICRO

THE GOOD

This week there was only 1 stock that increased more than 10%, which is my threshold for this category. ALEAF was again at the head of the class, and the stock gained 22.8% for the week and closed at $0.3775.As I said last week, ALEAF’s low market capitalization stock does not make it a stock that I would consider investing in, but others may disagree. And that’s what makes a market, right?

THE BAD AND THE UGLY

For the 2^nd week in a row, there were no stocks in the MCCI that decreased by more than 10%, which is my threshold for this category. CBWTF fell 6.6% and closed at $0.2534 after the release of Q4  results. APHA was a repeat offender and again declined 4.2% and closed at $3.39 for the week. However, since it has 1 of the highest market capitalization stocks in the MCCCI, it had a pronounced effect on the Index.

RECAP

The relative strength indicator decreased by 3.2 % compared to the overall index which decreased by 9.6%. I attribute this significant difference mainly to the market capitalization-based construct of the MCCCI. Let’s see how this volatile sector has performed the same time next week shall we?