E The Canadian Cannabis Report - Monday, Dec. 7

Editors' note: This article discusses one or more penny stocks and/or microcaps. Such stocks are easily manipulated; do your own careful due diligence.


For the trading week ended December 4, my (proprietary) Canadian Cannabis Company Index (MCCCI) increased by 2.6% compared to the prior week when it increased by 23.2%. 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 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.

As I have said here before, I also 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. My mid-year report showed that the MCCCI had decreased by 36% YTD, which I stated may be a guidepost for the rest of 2020.

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The survivors will be those companies that can operate profitably when the equilibrium price is established by the supply/demand dynamics. Absent a significant change in portfolio valuations, I am maintaining my long-term view regarding the sector. Now let us look at this week’s good, bad and ugly stocks.

The Good

There were 4 stocks that increased by more than 10%, which is my metric for inclusion in this category: VVCIF +44.5%; SPRWF +41.9%; HEXO +24.8% and CBWTF +16.3%. VIVO Cannabis Inc. is in the lowest quintile of the MCCCI portfolio, and simply a non-factor in the grand scheme of the sector. I’ve written articles on SA regarding my bearish views regarding Supreme Cannabis Company, Inc. and HEXO Corp. Auxly Cannabis Group Inc. has now been profiled 5 consecutive weeks here and is subject to pronounced volatility.

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: EMHTF -16.7%. On 12/4/20 Emerald Health Therapeutics, Inc announced that the company has terminated their agreement for the sale of their Quebec cannabis business which I believe may further impact their price performance on a short-term basis.

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