TM Editors' Note: This article discusses penny stocks and/or microcaps. Such stocks are readily manipulated; do your own careful due diligence.  

Cannabis stocks are volatile but if you were to invest in a basket of the major companies that have bought into marijuana companies you could reduce such volatility by more than 50% and possibly generate greater returns than only owning the associated marijuana company. Here are the details:

The munKNEE Conservative Pot Stock Index tracks the performance of 8 such major tobacco, beer/liquor, and other companies, and we compare them with their associated cannabis stocks and with the 4 other sector categories we track. The performance of the Index constituents and that of their marijuana partner last week were as follows, in descending order, with their performances YTD in brackets:

1. Molson Coors Brewing Company (NYSE: TAP): +8.3% last week; (+31.7% YTD); Beta (Volatility): 1.1; Dividend Yield (FWD): NIL
   • has a 57.5%/42.5% joint venture, called TRUSS, with Hexo Corp. (NYSE: HEXO): +9.1% last week; (+99.2% YTD); Beta: 1.7
2. Imperial (Tobacco) Brands PLC (IMBBY): +7.8%; (+10.8%); Beta: 0.9; Dividend Yield: 8.2%
   • has a 19.9% stake in Auxly Cannabis Group Inc. (CBWTF): N/C last week; (+55.0%); Beta: 0.7
3. British American Tobacco (BTI): +6.2%; (+8.3%); Beta: 0.9; Dividend Yield: 7.6%
   • has a C$221M investment and product development partnership with Organigram Holdings Inc. (OGI): +3.4%; (+106.8%); Beta: 1.0
4. Anheuser-Busch InBev SA (NYSE: BUD): +5.1%; (+6.7%); Beta: 1.5; Dividend Yield: 0.80%
   • has a $100 million joint venture with Tilray Inc. (Nasdaq: TLRY):  -11.8%; (+95.9%); Beta: 2.8
5. Altria Group, Inc. (NYSE: MO): +4.6%; (+23.9%); Beta: 0.6; Dividend Yield: 6.9%
   • has a 45% stake in Cronos Group Inc. (Nasdaq: CRON): -5.5%; (+10.8%); Beta: 1.7
6. Novartis AG (NYSE: NVS): +3.2%; (-3.3%); Beta: 0.5; Dividend Yield: 3.6%
   • has a global agreement with Tilray Inc. (Nasdaq: TLRY): -11.8%; (+95.9%); Beta: 2.8 allowing it to use the Sandoz supply chain, sales force, and global distribution network.
7. Alimentation Couche-Tard Inc. (ANCUF): +1.9%; (+1.1%); Beta: 0.9; Current Dividend Yield: 0.70%
   • has a 9.9% ownership in Fire & Flower Holdings Corp. (FFLWF): -1.1%; (+32.4%); Beta: 2.4, with the potential to increase to 50.1%.
8. Constellation Brands Inc. (NYSE: STZ): +0.2%; (+10.3%); Beta: 1.20; Current Dividend Yield: 1.3%
   • owns 39% of Canopy Growth Corporation  (NYSE: CGC):  -6.3%; (+9.4%); Beta: 2.2 and if it exercises its warrants and converts its notes will own 55% of Canopy Growth shares.

In summary

• Stock Performance:
  • the Conservative Pot Stock Index was +3.1% last week and is +9.7% YTD with its constituents having an average current annual dividend yield of 2.5%.
  • compared to their marijuana partners which were +7.9% last week, on average, (+74.9% YTD).
• Volatility:
  • the Conservative Pot Stock Index constituents have an average volatility of 0.96 which is less than the overall market and
  • compared to their marijuana partners which have an average beta of 1.91 or almost double that of the overall market.
• Dividend Yields:
  • the Conservative Pot Stock Index constituents, excluding Molson Coors, have dividends that currently yield 2.5%, on average,
  • while none of their marijuana partners have dividends.

Pot Stock & Pot-Related Stock Index Performance Comparisons

munKNEE.com tracks the performance of five (5) cannabis categories. Below is a comparison of how each index performed last week (first week of May) and YTD, which we think provides the clearest overview of the cannabis stock sector that is available anywhere:

1. The Conservative Pot Stock Index of 8 constituents tracks the performance of the major tobacco, beer/liquor, and other companies that have bought into marijuana companies and compares their performances with their associated marijuana companies .
   • It was +3.1% last week and is +9.7% YTD with an average Beta of 0.96 compared to its associated marijuana companies which were +7.9% last week and +74.9% YTD, on average with betas of 1.91, on average. 
2. The Ancillary Pot Stock Index of 17 constituents tracks the performance of companies that provide goods and services to cannabis operators.
   • It was +0.7% last week and is +28.2% YTD with an average Beta of 2.2.
3. The American Pure-Play Multi-State Operators Pot Stock Index of 23 constituents tracks the performance of those multi-state marijuana companies that derive 100% of their revenue from the sector and trade for at least US$1/share.
   • It was -1.7% last week and is +36.6% YTD with an average Beta of 2.69 (see details here).
4. The Cannabis-Centric BioPharma Stock Index of 13 constituents tracks the stock performance of those clinical-stage biopharmaceutical companies involved in the development of drugs using CBD and THC.
   • It was -3.2% and is +4.3% YTD with an average Beta of 2.9.
5. The Canadian Pure-Play Licensed Producers Pot Stock Index of 7 constituents tracks the performance of those Canadian producers that derive 100% of their revenue from the marijuana sector and trade for at least US$1/share:
   • It was -4.9% last week but is +26.0% YTD with an average Beta of 2.11 (see details here).

The above 5 non-tradable indices replicate the performance of a portfolio investing an equal amount of money in each company in the various cannabis categories, with daily rebalancing to maintain equal weight, to serve as benchmarks to measure the performance of individual stocks compared to their respective index. A sum total of 67 cannabis and cannabis-related companies are tracked out of a universe of approximately 200 (i.e. 33.5%) and, on average, they were +1.0% last week and remain +21.1% YTD.

Marijuana ETF Performances

For the record, the performance of the 8 marijuana ETFs (see details here) during the first week of May ranged from -0.2% to -4.2% (-1.8% on average) and have ranged YTD from +16.6% to +49.5% (+32.5% on average) so their performances don't provide an accurate overview of the true performance of the marijuana sector unlike the breakdown presented above which we think provides the clearest overview of the cannabis stock sector that is available anywhere.