MACRO

For the trading week ended 7/2/20, my proprietary Canadian Cannabis Company Index (MCCCI) decreased by ~ 1% compared to last week when it decreased by ~5%. 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 Canadian cannabis sector. 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 sector. 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

This was truly a unique week for the MCCI portfolio as there were no stocks that qualified for inclusion as either good, bad or ugly stocks. Perhaps the shortened trading week was a factor, as well as decreased volume due to the summer season. And uncertainty surrounding COVID-19 is another issue that may have contributed to this situation.

RECAP

The overall index (unexpectedly) increased by 11.2% compared to last week’s decrease of 9.3 % Quite candidly, I’m really not sure how to decipher this statistic, other than to consider it an anomaly pro temp. Let’s see how this volatile sector has performed same time next week shall we?

AUTHOR’S NOTE The new metric that I cited last week which my investors believe will enhance their ability to make informed investment decisions regarding their Canadian cannabis portfolios is based on the betas of the 25 stocks in the MCCCI. I expect that my models will be updated to include this information by next week, so I will keep readers here informed at that time.