Will Canadian Licensed Producers Sink Or Swim In 2021?

For the cannabis industry, 2020 was a year for the record books and we are excited to see how the sector advances this year.

Today, we are publishing the first story that is part of a series of articles that cover specific verticals of the cannabis sector as well as the companies that are best positioned to capitalize on it.

The first topic will cover Canadian Licensed Producers (LPs) which is a vertical that came under pressure during the last few trading days of 2020. Last year, many analysts became less bullish on Canadian LPs and several companies were downgraded by several leading broker-dealers during this time.

One of the reasons which explains the less than a favorable trend on Canadian LPs is related to the international market. In 2020, several leading Canadian LPs wrote off more than $1 billion worth of international cannabis assets that were previously acquired. The market punished these operators for these bad investments, and we will monitor how sentiment changes for Canadian LPs this year.

Canopy Growth Corporation (WEED.TO) (CGCis considered to be a global cannabis leader and owns cannabis assets that are located in strategic markets. Through a series of investments and acquisitions, the company quickly became levered to markets such as South America and Africa. So far, these investments have not proved to be successful and we believe the management team is working to bring the company in a different direction.

In 2019, Canopy Growth made major changes to the management team and to the board of directors. The company replaced many of the founders with executives that have a proven track record of success in the alcohol industry and the business seems to be heading in the right direction.

Canopy Growth has found success with the cannabis beverage vertical and this is a trend that we are favorable on. When compared to every other cannabis company, Canopy Growth has the strongest balance sheet and has enough cash to weather the COVID storm. We believe the company is well-positioned to record growth over the long-term and is an opportunity that we will continue to closely follow.

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