E The Canadian Cannabis Report - Monday, Sept. 28

For the trading week ended September 25, my proprietary Canadian Cannabis Company Index (MCCCI) decreased by 7.0% compared to last week when it increased by less than 1.0%. 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 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 recent mid-year report showed that the MCCCI had decreased by 36% YTD, which may be a guidepost for the rest of 2020. The survivors will be those companies that can operate profitably when the equilibrium price is established by the supply/demand dynamics. Based on Q3s continued volatility, it appears that the sector will most likely experience more frothiness going forward. Now let us look at this week’s good, bad, and ugly stocks.

THE GOOD

There were no stocks that increased by more than 10% which is my metric for inclusion in this category.

THE BAD

There were 6 stocks that decreased by more than 10% (but less than 20%) which is my metric for inclusion in this category: Auxly Cannabis Group Inc. (OTCQX: CBWTF) -17.8%; HEXO Corp. (NYSE: HEXO) -15.0%; The Green Organic Dutchman Holdings Ltd. (OTCQX: TGODF) -14.8%; Canopy Growth Corporation (NYSE: CGC) -14.4%; Neptune Wellness Solutions Inc. (NASDAQ: NEPT) -14.0% and WeedMD Inc. (PINK: WDDMF) -11.6%.

THE UGLY

There was 1 stock that decreased by 20% or more, which is my metric for inclusion in this category: Aurora Cannabis Inc. (NYSE: ACB) -22.7%. This stock has decreased by more than 90% YTD, and options traders have been handsomely rewarded. I have informed my private clients as to what I believe may be next for ACB. I have also issued an alert regarding another of the highest capitalization stocks as a swing trade opportunity.

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