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Capitalize On Cannabis Report - 12/31/16

|Includes: MQTRF, Organigram Holdings, Inc. (OGRMF), TRTC

Cannabis stocks rallied sharply as volumes remained robust. Massachusetts legislators pushed out the beginning of the legal program six months to July 2018. The CanniMed IPO flopped, with shares dropping by over 10% on the first day.

Here are some of this week's highlights for Focus List names:

  • MQTRF was the subject of an article by The Globe and Mail that claimed its recent recall was related to banned pesticide myclobutanil
  • OGRMF announced a recall due to unauthorized pesticides
  • TRTC opened its Reno dispensary

The 420 Investor Cannabis Stock Index soared 15.3% this week to 74.10 and was up 18.8% in December and up 88.8% for 2016. The index, which currently includes 31 stocks, ended 2015 at 39.25.

420 Opportunity ended the week valued at $44,915, up 5.6%. YTD, the model portfolio increased 293.4% compared to the 88.8% increase in the index.

Valuations have increased and remain cautionary, and fundamentals are questionable for most of the >400 companies in the sector. The market rallied on the cannabis legalization efforts as well as the legalization path in Canada. It would be the wrong conclusion, in my view, to believe that the rally in the vast majority of OTC cannabis stocks is sustainable, so we could be in for a period of consolidation. The retention of the Republican Senate majority was a negative for the cannabis industry.

The big themes ahead are likely to be insight into the new President's plans regarding the federal view on state-legal cannabis (especially in light of his nomination of Senator Jeff Sessions as Attorney General), better clarity from the federal government for banks and cannabis research (both part of the proposed CARERS Act and other proposed legislation), DEA pushback towards the CBD from industrial hemp industry, the inclusion of a broader range of extracts in Health Canada's ACMPR program and its continued growth in patient enrollment, potential legalization in Canada (Spring 2017 introduction of legislation at Parliament), the introduction early next year in Germany of MMJ legislation as well as continued advances in South America, progress with respect to the new legal cannabis implementations in CA, MA, ME, and NV and the new MMJ implementations in Arkansas, Florida, Hawaii, Illinois, Maryland, Minnesota, Montana, Nevada, North Dakota, Ohio, New York, Nevada, Massachusetts, Pennsylvania and Texas, and the implementation of the new medical program in California.

The slide, which began in March of 2014, reversed out the entire gains from early 2014, with the market currently near the summer 2013 lows after the rally since mid-February. Most valuations remain high. Positively, we are seeing some new entrants into the publicly-traded sector of higher quality, and hopefully we see more in 2017, especially with the number of legal states doubling. Please remember that it remains the case that most of the penny stocks will not succeed. I expect that there will be just a few winners among the 400+ companies that are currently on our Broad List.

Here are some of the most interesting stories we published on New Cannabis Ventures this week:

CanniMed Deal a Dud as Cannabis IPO Tanks Initially

Five Steps for Cannabis Businesses to Minimize Punitive 280E Taxation

Mettrum Recall Related to Illegal Myclobutanil Pesticide

OrganiGram Announces Voluntary Product Recall

Why Cannabis Investors Prefer Canada


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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.