E The Canadian Cannabis Report - Monday, Oct. 19

For the trading week ended October 16, my (proprietary) Canadian Cannabis Company Index (MCCCI) decreased by 4.5% compared to last week when it increased by 22.8%. 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 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 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 Q3's volatility, and the 1st 3 weeks of Q4, it appears that the sector will most likely experience continued frothiness going forward. Now let us look at this week’s good, bad, and ugly stocks.


There were 3 stocks that increased by more than 10%, which is my metric for inclusion in this category: CBWTF + 80.3%; VVCIF + 16.7%, and TRSSF +12.0%. The euphoria in Auxly Cannabis Group Inc. ostensibly was due to their introduction of Back Forty, a new cannabis brand which the company says is “all about embracing simplicity and getting back to the basics.” CBWTF is a 3rd quartile MCCCI stock, which means that this week’s meteoric price rise had a muted effect on the Index. TRSSF has now been “good” stock 2 weeks in a row. It appears to me there is increased optimism regarding the company recent mega-expansion in California, and it may attract more scrutiny from “swing traders” based on this event. VVCIF rebounded this week from being a (very) “ugly” stock the week before when it decreased by 33.3%.

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