Ted Ohashi's Marijuana Stock Market Review & Outlook
The improving trend in the major markets continues as expected. The markets had been poor over the late summer and fall but I anticipated an improvement starting after Christmas. The combination of weakness leading up to the period and a recovery starting post-Christmas resulted in the strongest January in over two decades. The charts show this rebound clearly. Of course I would be happier if the recovery in major stock prices happened a little more slowly. In any event, the markets and economy will be on the mind of President Trump as we head toward the 2020 elections so I expect to see the U.S government doing everything in its power to promote growth. Of course Prime Minister Trudeau faces his own judgement day on October 21, 2019 – only nine months in the offing. Cannabis investors need the Liberals to win one more election to ensure the cannabis industry will reach its full potential sooner rather than later. Right now, Trudeau is stumbling toward election day.
I much prefer the pace demonstrated by the Canadian cannabis stocks that are clearly recovering but at a lower rate of change. Aurora (NYSE: ACB) and Canopy Growth (NYSE: CGC) are due to report earnings in the week ahead. Organigram (TSXV: OGI) set the bar quite high and it will likely prove to be a tough act to follow. But the numbers should give us a better gauge on the impact of recreational sales in Canada.
No big changes from last week. The Licensed Producer sector continues to perform very well although it recorded a correction last week while the Low-Priced Composite continues to lag although it outperformed in a down week. Both Aurora (#1) and Canopy Growth (#2) are scheduled to report earnings in the week ahead. Depending on what they report we could see some volatility in the LP group.
Both the U.S. and Canadian cannabis groups gave up ground last week as measured by the Marijuana Indexes owned and managed by MJIC, Inc. The Canadian sector did not seem to be impacted by anything other than an abundance of caution while the U.S. side there is ongoing confusion regarding the position of CBD. As was the case with alcoholic beverages many years ago, cities and states are taking individual attitudes toward CBD. Some jurisdictions are trending toward CBD being regulated as a food additive while others, such as Texas are moving to have all CBD to be treated under their medical cannabis laws. I think this will work well for a company like my recent recommendation 1933 Industries (CSE: TGIF). 1933 is already in Nevada, Colorado and California and I think they will move into additional states as the regulations become clarified.