The Canadian Cannabis Report - Monday, Dec. 11
For the trading week that ended December 8, 2023, my proprietary Canadian Cannabis Company Index (MCCCI) increased by 4.2% compared to the prior week when it increased by 10.4%. The index consists of 14 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. MCCCI's 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. Now let us look at this week’s good, bad, and ugly stocks, shall we?
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The Good
There were 2 stocks that increased by more than 10%, which is my metric for inclusion in this category: CGC +32.5% and ACB +10.6%. In my view, the recent price spike in Canopy Growth Corporation is largely due to the recent sale of the Biosteel business which is expected to reduce debt and therefore interest expense.
The Bad
There was 1 stock that decreased by more than 10% (but less than 20%) which is my metric for inclusion in this category: ROMJF -10.6%. Rubicon Organics Inc. was a “good” stock last week and its thinly-trade history adds to the trading volatility.
The Ugly
There was 1 stock that decreased by 20% or more, which is my metric for inclusion in this category: NEPT -45.8%. Neptune Wellness Solutions Inc. is a 4th quartile MCCCI stock with frequent price swings.
Valuation Metric Review
There was a 3.6% increase in the “Big Four” (3 of which increased) compared to the prior week when there was an 11.5% increase. As cited above, CGC was (by far) the outlier of the group. However, I believe this may likely be short-lived.
Recap
There was a 7.3% decrease in the relative strength index compared to the prior week when there was a 17.1% increase. 4 of the 14 MCCCI stocks increased, all of which are among the 6 highest capitalization stocks in the MCCCI. This anomaly may be a “1-off” but it is indicative of how they often trade in “lock-step.” Let us see how this volatile sector has performed at the same time next week, shall we?
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Disclaimer: The information provided in this article is for general informational purposes only.