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Weekly Cannabis Report: Smaller And Leaner Is The Way To Go

Cornerstone Investments profile picture
Cornerstone Investments


  • Cannabis stocks fell sharply across the board after global equity markets were roiled by coronavirus-related fear.
  • Valens and Ayr Strategies both reported strong Q4 2019 results including strong revenue and meaningful positive EBITDA.
  • MedMen, Acreage and Green Growth reported weak results; Green Growth is looking to sell its CBD business to a related-party.

Welcome to our Weekly Cannabis Report, a reliable source for investors to receive the latest developments and analysis in the cannabis sector.

Trading Summary

Amid a global selloff, the Horizons Marijuana Life Sciences Index ETF (HMLSF) fell 14.7%, the ETFMG Alternative Harvest ETF (MJ) lost 15.6%, and the Horizons U.S. Marijuana Index ETF plunged 18.4%.

(Source: Bloomberg)

Canada: While global equities market plunged, cannabis stocks also fell particularly hard. Both Canopy (CGC) and Aurora (ACB) fell double-digits. Cronos (CRON) fell 18% after delaying the release of its Q4 results. Tilray (TLRY) fell 26% after Four20 sued it for reneging the acquisition. Valens (OTCQB:VLNCF) fell 25% despite reporting a profitable Q4.

(Source: Author, based on public data)

The U.S. and International: Acreage Holdings (OTCQX:ACRGF) fell 21% after reporting a 6% quarterly decline in sales last quarter. MedMen (OTCQB:MMNFF) plunged 22% after releasing disappointing Q4 results. iAnthus (OTCPK:ITHUF) dropped 28% after launching a lawsuit against one of its debt holders.

(Source: Author, based on public data)

Industry News

This article was written by

Cornerstone Investments profile picture
We are your best guide to cannabis investing. Read our 2021 Cannabis Sector Outlook here. We also provide in-depth industry analysis and coverage of 70+ cannabis stocks to help you get started.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (70)

@Cornerstone Investments ,
Lot more going on than this sector , Huh ? ...
Cornerstone Investments profile picture
Coming back soon
When will we get the next weekly update ? Not on a corona strike I hope
Cornerstone Investments profile picture
Just woke up from a hiatus. See you next week!
Thank God it was not corona . Will be glad again to hear the weekly updates
Good to hear you're. Was wondering if you had caught the bug or just took a break.
PT Larry profile picture
Cannabis companies were declared essential and to remain open during COVID-19 epidemic. @SA Repressed and Blacked Out

CWEB reported reasonably good earnings. FDA is almost ready to act.
after yesterday's market blood bath. opened positions on trulieve, cresco and valens.
headnugg profile picture
I finally opened a position on $TCNNF as well.
I like the title to your article because there is one CEO in the pot industry that has being saying that even before Canada legalized pot, its Steve Gormley of International Cannabrands Inc. (INCB). ICI has done a reboot of its business plan and is making small accreditive investment purchases that are positive cashflow. It has recently launched the BaselineCBD line of products and are in final stages of closing a new deal involving BioNeva Innovations of Carson City, LLC. Anyway you can check out the websites for further information:
Holding ACRGF and MJ. thought I had it going on. just figured Acreage loss was due to expansion. also Figured MJ as a ETF would be a for sure Slam, this article has made me re evaluate my way of thought.
@TrumptyDumpty yes a very astute observation, the cannabis sector is in a bear market! 

Does that mean you are put of the sector completely? and if so, did you get out before incurring losses?

the old adage is " all ships go down when the tide goes out" ;however, we also see who is swimming naked.
TrumptyDumpty profile picture
Not sure what you're replying too...at least comment on the same thread as my comment if you're going to criticize me!
Clairvoyant Investor profile picture
www.benzinga.com/... Analyst Gordon Johnson has Tilray stock going to 0. He also has ACB going to 0. Somebody gets it and they are not bearish contrarions either. People that know really know; these worthless dumpster trash companies will drag the entire sector down with them.
Clairvoyant Investor profile picture
mjbizdaily.com/... Moodys prognosticates credit downgrades around the world as the global economy collapses. They have not worked in China in 3 months and will not work for at least 2 more months as Wuhan cases rise. 5 months of no Chinese work being done will contract/retrench the world financially. If no support at 2855 on the S and P, the next level is 2360. Check out the article on expert level vulture investors who say the 2020 cannabis industry will make a major downturn. These are expert level investors like NY based Altitude Investment Management who say astute market players can carefully assess equity opportunities. Check out the article
@regenerativelivesoil. sounds like you are describing Khiron Life Sciences.

they are flush with cash (in the process of buying 5%of outstanding share), are integrating themselves into a medical systems worldwide and producing sun grown flower and concentrates in Columbia.

one of the few companies whose stock price is going up when most are going down
OneStrawRevolutionFarming2023 profile picture
@eloibertholet Fair enough and thank you :-) I will start reading about KHRNF :-)
TrumptyDumpty profile picture
hilarious description of the share price. "Stock price going up when most are going down" is flat out incorrect. Down from $3 a share to $0.50 a share. Let the chart speak for itself. Horrendous performer just like the rest of the group.
OneStrawRevolutionFarming2023 profile picture
@eloibertholet Thank you :-) I got back into KHRNF today and am hopeful about them selling Colombian cannabis to patients in Peru and Brazil :-)

There might be others like KHRNF or trying to emulate them in Colombia but have lower share prices currently :-)
OneStrawRevolutionFarming2023 profile picture
The recent closing of the ACB and CGC greenhouse assets is perhaps reflective of indolent thinking by the boards and executives of those two companies: those are potentially wonderful assets but those companies' boards have a "mono cropping" mindset that they cannot shake and as a result they reduce opportunities mistakenly in response :-(

We need new financial thinkers to construct the Wellness industry safely and all of this old financial thinking is placing a noticeable drag on companies' performance and its creating share price volatility when it's probably unnecessary. If companies want to succeed they need to get new financial thinking before they run out of cash reserves :-)

If the boards of those companies understood what they are trying to involve themselves in and if they weren't so mentally indolent they would know that part of the construction of the Wellness industry is the precept converted to commercial activity: "Growing food as medicine" :-)

How do we "Grow food as medicine"? With regenerative "live soil" polyculture, intercropping farming and "live liquid soil" aquaponics - both can be indoors and outdoors :-)

Instead of closing those greenhouses as an "old financial" thinking knee-jerk reaction when there is a "mono-cropping" mindset, the boards and CEOs and executives should have engaged investors to finish the construction and grow "chemical-free" produce there: there is going to be a potentially gigantic market for "chemical-free" food and those boards are too lazy in their thinking to realize that the Wellness industry is in some ways a dress rehearsal for vertical and "live" farming: it is not about just cannabis :-)

In those assets, when/if finished, ACB and CGC could be/could have been growing cannabis and other "chemical-free" food and eschewing a "mono-cropping" mindset so that more potential sources of revenue could be grown :-)

Now all of those lazy heads can only produce "goodwill" and write downs which make them vulnerable to the amazingly talented shorts :-(

The "mono-cropping" mindset could be partially or completely ruinous for companies if they don't get new financial thinking relatively soon - those bank accounts won't be sturdy endlessly :-)
Perhaps Village Farms , or someone else , may buy up these
" Roadside sales " , and start producing Veggies and Herbs , Hmmm ..
Let the auctions begin ..
OneStrawRevolutionFarming2023 profile picture
@Balaland Polyculture and intercropping mean better nutrients in the plants and more types of plants to bring to market which mean more chances at revenues :-)

Mono-cropping means much higher input costs, the degradation of the soil, and fewer opportunities to sell fewer varieties :-(

Polyculture and intercropping resemble conceptually the "entourage" and "ensemble" affects (synergies) that we see with cannabis :-)
I am from Canada and I hate to say it, but I don't think Canadians are good entrepreneurs.... Bombardier, Blackberry what else ?
the problem with pot stocks are there are too many street dealers robbing profits from legitimate stock pot companies. the legal cannabis community is going to have to buddy up with law enforcement to arrest and punish the street dealers. The cannabis industry will never compete with the illegal street dealers price points. the,quality is also compatible in many instances. this type prohibition is much different than alcohol. it's going to take some very creative enforcerment and laws changed. personally I think we need a pot rat web site that pays a reward to those who turn in the street dealers....
unfortunately, those street dealers are the only way most cannabis users get their goods. maybe more enforcement in states where recreational use is legal.
exactly my point
OneStrawRevolutionFarming2023 profile picture
The MSO model may work for companies in a sustainable revenue state that acts as its base of operations: AZ (if adult use passes in 2020) FL, MI, IL, CA (maybe), MA, and perhaps later NJ and NY :-)

The vertically integrated - small and maybe medium to start - model might lead to survival in markets where the "informal" market still has a large market share (CA and Canada, for example)

Scale and standardization reduce safety and quality; the business model or structure is important but companies which focus on safety, quality, and ethos commerce (which builds out Wellness in communities one by one) and ethos commerce (CEOs that engage investors to make money by saving lives and deriving the medicinal value of the plant) will simply be leveraging the maximum commercial of this botanical :-)

Scaling and standardizing reduces the commercial value of this botanical :-( It is not booze and it is not tobacco :-)

No, thank you to the "domination" commodity metrics mentality or the brashness of the tech. crowd; Wellness is what can be sold and it must be safe and excellent quality and lead to ethos commerce and ethos investment: this will maximize the commercial value of the botanical :-)

The Scots Miracle Grow approach of bottled nutrients and herbicides and fungicides and herbicides is likely out because regenerative "live soil"
polyculture (many species and more crops to sell from the same fields)
intercropping (planting hemp and/or cannabis in between the rows of blueberries)
farming has much, much lower input cost and much lower IPM (pest management) costs and produces the most phytonutrient, "clean medicine" form of the plant :-)

The Amsterdam indoor hydroponic approach produces effects with perhaps somewhat diminishing returns: consumers are initially impressed with the effects but soon sense and realize that there can be an "incomplete" feeling subsequently and especially after consumers try sun grown regenerative cannabis :-)

As a result, some of these companies will realize this and change from hydroponics to aquaponics which has the added benefits of offloading fish protein to local food banks (ethos commerce opportunity) or selling restaurant quality fish (multiple revenues possibilities and ethos) locally :-) This is essentially adding cannabis production to all of the fish farms already in existence perhaps :-)

Investors have seen how a big bank account does not completely deflect the potentially negative outputs of poor decision-making focused on commodity metrics and plugging cannabis into the current systems :-(

The companies, then, that might survive might not be the ones with a big bank account but the companies that are able to throw off the Prohibitionist mindset,

(indoor cannabis is the best; feeding the plant is the best; mining international locations for cheap costs is the best; consumers just want THC at low cost and NOT the medicinal benefits; controlling distribution will "corner" a market; "racing to the bottom"; attaching cannabis to toxic, fatal, addictive synthetics medication; being willfully ignorant about the science; comparing to other commodities, among others perhaps)

begin to treat this medicinal plant as a unique item - and not exclusively a commodity nor exclusively an API nor exclusively an ingredient for CPGs, reinvent CPGs and medicines, "build out" Wellness one community at at time, get people out of jail, support the medicinal needs of all including veterans, and teach people not to be afraid but to learn instead :-)

The investors that believe that a "long" outlook might remedy the Prohibitionist mindset might need to think again; without a change in mindset, there might not be big enough bank accounts to lead to success :-)

Safety, quality, ethos :-)
Why don't you write your own articles and get paid?
OneStrawRevolutionFarming2023 profile picture
@Jethro Powers Fair enough and thank you :-)

I view these as "thought exercises" in order to view the market components through a different lens: learning and sharing the learning so that we the retail investors might survive and succeed as a group against the bots and institutional investors that trade at 4 milliseconds :-)

In addition, I'm still learning the math :-)

And I don't possess the amazing talent of the shorts, although I wish they would not short the Wellness industry :-)
Cannabis can absolutely be scaled and distributed just like tobacco. Just because something is scaled and produced in larger numbers doesn't necessarily mean it will be of low quality. There will always be a "craft beer crowd" that are more discerning but most users are not. Cannabis will be a fantastic CPG product especially when fermentation of cannabinoids is perfected and scaled up and distributed to the masses.
Trulieve is one of the very few Cannabis companies I would own. Positive earnings and EBITDA with very limited dilution. I’m speculating that they could do 500 million in Revenues for 2020. Take a look at the trajectory of the OMMU reports coming out of Florida. Long and staying long. GLTA
Agreed, like to throw in Greenthumb as well.
@Cornerstone Investments ,
Excellent update and analysis ...
PT Larry profile picture
For the remainder of this year, the industry will be producing progressively higher results. Canopy Growth just did a deal in Israel for medical cannabis and Charlotte's Web is grinding out positive production results.

The FDA should act to at least ok CBD, as a dietary supplement, by this year's growing season, otherwise hemp farmers could get real discouraged.
@PT Larry ,
Read Recent CGC article here on S/A ...
Mute point at this time, come back in a few months & decide where to invest. More unknown factors at this point. But I'll keep CGC on my radar.
Cornerstone Investments profile picture
We saw the BC Tweed greenhouse closure coming

HEXO is also close to getting a NYSE delisting warning. I sold last month seeing little chance for recovery in the short-term, or next decade, for that matter. ACB could get there too - wouldn't that be a kick in the *ss for all those who (still) consider it the cat's meow of the CA LP's.
I should have followed my gut and sold my HEXO last summer when the CEO made some ridiculous comment about being perfect. Clear sign of a "cluster B" personality disorder but I ignored the warning and paid the price when I finally sold last week, along with dumping all my other holdings in the sector at a horrendous loss. I figure I'll still be better off watching for a bottom rather than holding, and investing elsewhere in the interim.

Why sell? It finally dawned on me the cannabis stocks aren't merely competing with each other, but they are also competing any other "speculative" Investments out there. I see cannabis stocks languishing while Virgin Galactic sports a $7 billion market cap on zero revenue, and realize that I should be watching the entire market to see where the speculation capital flows next.
Martin Brenner profile picture
Good luck, I'm waiting with what I have for now.
PT Larry profile picture
Thanks for the article.
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