Ted Ohashi's Marijuana Stock Market Review & Outlook
As I said in our annual outlook report, one factor I felt would help the cannabis stocks is positive momentum in the major North American markets. It is always easier to swim with the tide than against. For most of 2018, the major markets were declining and this made it harder for the cannabis stocks to post gains. In the earlier part of last year, it didn’t matter. We showed on several occasions that the cannabis stocks weren’t impacted that much by the background noise. But as the year went on, the overall trend had a greater impact on the cannabis stocks. In a few years, the cannabis stocks will be totally mainstream and will join the herd moving up and down.
As both charts show, the stock markets in the U.S. and Canada are co-operating. Since Christmas, both markets are moving higher as I expect. I think this pattern will continue at least through the spring and perhaps all year.
Last week, I speculated that although the rally had reached five weeks in duration, a point at which many rallies falter, there was sufficient momentum to keep going to maintain the uptrend for another week or two. I was wrong as the Let’s Toke Business Marijuana Composite Index checked back as did other cannabis stock indexes. However, the correction was relatively modest and it sets the stage for a new rally to begin that can run another four to six weeks without interruption. Even if the cannabis stocks remain in a consolidation for another week or two, it should not impact portfolios in a major way. I have said moving ahead in 2019, security selection will be more and more important. As an example, The Cannabis Report Model Portfolio that I run actually increased in value last week.
There was nothing special indicated by the other price indexes. For example, the LTB Licenses Producer Index rose but only very slightly and the LTB Low-Priced Index declined 2.8% that is not worth commenting upon. In other words, the decline last week was insignificant.
In order the monitor the performance of the Canadian and U.S. based cannabis stocks, we use the U.S. and Canadian indexes owned and managed by MJIC, Inc. As we have detailed from time to time recently, it is our expectation that the U.S./International cannabis market oriented companies will outperform those that are concentrated mainly in Canada. In a relatively quiet week on the cannabis markets, the U.S. index did outperform the Canadian index and the one year trend appears to be unchanged.
Conclusion: It was an eventful week for some of the stocks on our list. Khiron Life Sciences (TSXV: KHRN), Lexaria Bioscience (CSE: LXX) and Sunniva (CSE: SNN) all had important developments that did or likely will result in outstanding shareholder returns. These are discussed below. The upshot is, for example, The Cannabis Report Model Portfolio that owns each of our recommendations had an outstanding week posting a gain of over 2% in a week that most of the marijuana indexes were down.
I believe the cannabis stocks will continue to advance to higher levels as I have been saying for many weeks. I am continuing to explore other interesting opportunities in the cannabis industry that will be added to The Cannabis Report Model Portfolio and written up in the Let’s Toke Business newsletter and Seeking Alpha if appropriate. So I continue to urge readers to move forward with their investment plans.