Be Careful With Cannabis Stocks!

I like cannabis stocks! I hate them too!!!

I have been analyzing the cannabis sector since early 2013, and I launched 420 Investor, now at Seeking Alpha, in August 2013, so it has been around for a dozen years now. It has had ups and downs in terms of the number of subscribers, and times are tough right now, with the cannabis sector 4 1/2 years into a bear market.

I do more than just 420 Investor, as I run New Cannabis Ventures, which is free of charge to readers and which was started a decade ago. There is a lot of news and information there, and I publish a free weekly newsletter too. Just recently, I launched THC-Shopping.com, which is a blog to help educate people about cannabis products and retailers.

This was a busy week for me at Seeking Alpha, where I published 5 articles and have one pending too. Usually, I publish a single cannabis article per week. You can find them here:

https://seekingalpha.com/author/alan-brochstein-cfa/analysis

I have been writing at Seeking Alpha since 2007, so before cannabis. I stopped for a while when I got very busy with cannabis, but I started writing cannabis articles there when I moved 420 Investor there in late 2022. I do write a few articles that aren't on cannabis too!

I launched this website in 2023, and I have said here many times that I don't plan to publish a lot of content on the cannabis industry here. You can see all the cannabis articles that I have written, but check out the top: This is my 5th cannabis article in just two weeks!

Why so many at Seeking Alpha this week and on this blog this month? Rescheduling! What is rescheduling? I wrote about it earlier this week, warning to reduce exposure. This was Tuesday, and cannabis stocks soared this week, peaking on Wednesday afternoon and then pulling back Thursday and then sharply on Friday.

I am not going to repeat the arguments I shared already, and cannabis stocks could keep going up, especially if 280E taxation goes away, but there could be problems. Instead of discussing this here today, I am going to share my views on the 19 cannabis stocks that I follow closely for my subscribers at 420 Investor plus a few others.

Before I do that, I want to share a list of companies I was following closely but have removed:

• 2023: Aurora Cannabis, Charlotte's Web, Jushi Holdings, springbig, TILT Holdings and Vireo Growth

• 2024: CEA Industries, Greenlane and urban-gro

• 2025: AYR Wellness, Cannabist, Lowell Farms and SHF Holdings.

Before I discuss the current Focus List, I want to share my model portfolio composition by sub-sector. The Beat the Global Cannabis Stock Index model portfolio is currently up 3.8% year-to-date, while the Global Cannabis Stock Index, which has 23 names, is down 4.1%.

Here is the portfolio by sub-sector as well as the GCSI:

I have a lot of cash right now, just below the maximum of 20%. I own no MSOs and only 1 Canadian LP, Organigram (OGI). The other four stocks are ancillary, including Chicago Atlantic Real Estate Finance (REFI), GrowGeneration (GRWG), Innovative Industrial Properties (IPR) and WM Technology (MAPS). These stocks are all down year-to-date, with each down more than the Global Cannabis Stock Index:

In Q3, the Global Cannabis Stock Index has increased a stunning 31.5%. These stocks have gone up less or declined for the most part:

Here is a table that I share with my subscribers that has the 19 Focus List tickers alphabetically:

I will share my thoughts on each of these by name in the order of the tickers:

• Ascend Wellness is a cheap MSO relatively but has a bad balance sheet and is buying back stock. I like that MSOS owns so little!

• Canopy Growth is horrible. I have written extensively about this and remain very negative, expecting it to make a new all-time low.

• Cresco Labs is okay, but is sure has rallied a lot recently. It is not my favorite MSO, though my last Seeking Alpha article gave it a Strong Buy. I am not bullish right now.

• Cronos Group posted a multi-year high last week and trades below tangible book value slightly. It's a big wad of cash, essentially.

• Curaleaf is horrible! It has a very negative tangible book value, lots of debt and a high valuation. STRONG SELL! Plus, the MSOS ETF owns a ton.

• GrowGeneration has rallied a lot since I wrote bullishly. While I own it still in my model portfolio (11.8%), I did reduce it and expect it to decline somewhat. It trades at tangible book value but is losing money.

• Green Thumb Industries has lagged its peers badly (finally) and MAY be a buy soon. Its balance sheet is the best among peers. MSOS owns a lot but has been reducing. I don't like what the company is doing with Agrify (AGFY).

• Hydrofarm stinks! It could get better with 280E going away, as its customers will be able to spend on its products.

• Innovative Industrial Properties is scary but cheap. I think the dividend could get cut, but it trades below tangible book value, which may go down. If 280E goes away, it should do much better. My position size there is 20.5%.

• WM Technology, which is 20.0% of my model portfolio, seems very cheap to me and has no debt and lots of cash.

• Organigram is a good company in my view. I like that British American Tobacco owns a big amount and is working closely with them. You never know!

• Planet 13 rose a lot last week despite getting punished after they reported Wednesday afternoon. The stock is safer than peers due to its strong (but deteriorating) balance sheet. I don't like the Florida medical cannabis market, but PLNH might pull one of there with its recent acquisition.

• Chicago Atlantic is a mortgage REIT and has a high dividend. I am not super-impressed with the company and prefer IIPR, but my position is 15.5%. If 280E goes away, it should be very helpful.

• Scotts Miracle-Gro has a lot of debt and a valuation that doesn't impress me. They are in the process of spinning out Hawthorne, which I could care about.

• Trulieve is a terrible stock in my view and a very large MSOS position. They are super-exposed to Florida and to 280E remaining.

• Tilray was one I hated and then liked and then loved. I am "Neutral" now but really a "Sell".

• TerrAscend scares me. I will leave it at that.

• Village Farms was one that I loved and then downgraded to Neutral after a huge, huge rally. The stock is now a Sell in my view due to 18 million warrants being deep in-the-money.

• Verano is my favorite large MSO and very cheap.

So, these are my current views. I don't cover Glass House (GLASF) or Agrify but have written on this blog about them negatively. I keep my eyes on Aurora Cannabis (ACB) and SNDL (SNDL) too, but I don't like them right now enough to even add them to my Focus List. I have written negatively on this blog about a couple of other OTC penny stocks too.

As I said at the beginning, I still like cannabis stocks. Well, covering them! I think that they have rallied too much and too soon. If you have any questions, you can ask them here and I will respond to them. You can also post questions on my Seeking Alpha blog, which is free. Wanna know what's wrong with Benzinga? Happy to answer that one! Wanna know why I didn't care for Adam Bierman of MedMen? Again, happy to answer that one too. I have met a few really good people in this industry and a lot of scary people too.

I call it like I see it, and I am happy to share my perspective with you.