Ted Ohashi's Marijuana Stock Market Review & Outlook
The uptrend in the blue chip U.S. and Canadian stocks continued last week as expected. The Dow Jones Industrials gain+0.5% while the Standard & Poor’s TSX Composite Index advanced +1.1%. Both the Dow and TSX have advanced for nine consecutive weeks. The Dow had its best January in over 30 years and it looks as though February will also provide strong positive returns. The TSX has also been strong and with excitement building in the gold and precious metals markets, the uptrend in Canada could also continue. For the cannabis sector, strong uptrends in the major indexes means higher cannabis stock prices will be swimming with the tide. Another factor favouring U.S. cannabis stocks is the political scene. In Canada, the Prime Minister’s problems do not auger well for the cannabis group. If the polls go any further, it will be a concern for investors.
I continue to like the market action I see in the cannabis stocks. Prices in the LTB Marijuana Composite recorded a slight dip last week following the pattern of the past few weeks. Momentum has been weaker than prices during this time but the difference is not significant. This appears to be a period of price consolidation establishing a base to support a breakout to the upside.
No major shifts in the performance of the senior and junior Canadian cannabis stocks last week. The Licensed Producers actually posted a fractional gain in the previous five trading days compared with a fractional decline in the Low-Priced Stock Index. I still expect the more speculative Canadian cannabis stocks to have their day but it may be put off a while longer.
Both the U.S. and Canadian cannabis sectors continued the recent trends as measured by the Marijuana Indexes owned and managed by MJIC, Inc. Last week the U.S. index gained +4.2% while the Canadian side rose +1.4%. As a result, the U.S. Index outperformed the Canadian Index which is what I expect. Actually, we should think of it as the non-Canadian stocks outperforming the Canadian group.
Conclusion: The political dynamics in the U.S. and Canada are becoming ever more opposed. We anticipate very good news from the U.S. government now that the Democrats control the House. Although we like the fact that the Democrats are pro-cannabis but we’re not impressed by their approach to governing. They seem totally focussed on ousting President Trump. Be careful what you wish for! If Mr. Trump is deposed or decides not to run again, his replacement might be a much tougher election opponent. In Canada, the pro-cannabis Liberals and Prime Minister Trudeau seem bent on self-destruction. The only thing allowing them to keep their collective heads above water is the inexperience and incompetence of the opposition. It’s just another factor in support of our preference for non-Canada based cannabis operators. Our picks don’t change much from week to week even though the stocks are performing very well. Stick to companies such as Khiron Life Sciences (TSXV: KHRN) operating in Colombia, 1933 Industries (CSE: TGIF) which announced expanding sales into 46 states and Sunniva (CSE: SNN) that is staking out a claim as a leading operator in California.