E The Canadian Cannabis Report - Monday Dec. 28

For the (shortened) trading week ended December 25, my (proprietary) Canadian Cannabis Company Index (MCCCI) decreased by 2.4% compared to the prior week when it decreased by 1.4%. The index consists of 25 stocks, many of which are among the most widely held holdings of the 3 ETFs (MJCNBS, 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. With only 4 trading days left in this year, my thesis of a significant downturn in the sector in 2020 is a virtual certainty.

My mid-year report (published here on TalkMarkets) showed that the MCCCI had decreased by 36% YTD, which I stated may be a guidepost for the rest of 2020. I fully expect the year-end report to mimic the earlier metric. Now let us look at this week’s good, bad and ugly stocks.

green plant on blue plastic pot

Image Source: Unsplash

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 4 stocks that decreased by more than 10% (but less than 20%) which is my metric for inclusion in this category: TGODF -11.9%, SPRWF - 11.1%, CBWTF -10.4% and MEDIF -10.3%.  

The Ugly

There were no stocks that decreased by 20% or more, which is my metric for inclusion in this category.

Valuation Metric Review

There was a 2.3% decrease in the “Big Four” compared to the prior week when it also decreased by 2.3%, which is an extreme statistical aberration. My key takeaway is that the highest market capitalization stocks are limping to the end of this epic year, and will continue to serve as a proxy for the MCCCI as a whole.

Recap

The relative strength index decreased by 10.2% compared to the prior week when it increased by 3.2%. For the 2nd consecutive week, all of the “Big Four” decreased in value. APHA, which I  put at the top of my “watch list” last week, decreased  another 6.3%, giving short-term traders a little something extra in their Christmas stockings. In my view, this is further evidence that whatever euphoria that may have existed prior to their merger with TLRY is not reflected in their stock performance post-merger. To keep it simple mathematically (or is this a non sequitur?), in this case 1+1<2. I will let readers ponder this conundrum.

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