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Capitalize On Cannabis Report - 08/05/17

|Includes: ACBFF, American Cannabis Company, Inc. (AMMJ), CGC, GBLX, GRWG, ITHUF, KSHB, MSRT, TRTC

Summary

Cannabis stocks had their first weekly decline since the first week of July

The Canadian market was hurt by concerns that the Canadian Depository for Securities might move to block trading in the stocks of companies engaged in cannabis operations in the U.S.

420 Investor model portfolios "420 Opportunity" and "420 Quality" continue to outperform benchmarks in 2017

The cannabis market began August with a pullback after a strong July. Senator Cory Booker introduced a new bill, the Marijuana Justice Act, which would take cannabis off of the controlled substances schedule and correct some of the social injustices related to cannabis prohibition. The Attorney General's Task Force on Crime Reduction and Public Safety report supports the status quo. Canadian companies doing business in the United States may face some challenges if the Canadian Depository for Securities, a unit of TSX parent TMX, follows through on a proposal.Florida added two licenses, bringing the total to 9

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

  • ACBFF converted its debt to equity at Radient Technologies and finalized its deal to acquire a stake in Hempco Food & Fiber
  • AMMJ announced a third Arkansas client
  • GBLX announced a nonbinding joint statement with some Native American tribes in California to create a joint venture
  • GRWG reported 116% sales growth in Q2 with better margins than in Q1
  • ITHUF received approval to acquire NY licensed cannabis company, Valley Agriceuticals
  • KSHB upgraded its management team by replacing its CFO with an experienced veteran. It also announced that it has created special packaging for CannaKorps, the cPod Tower
  • MSRT ditched its "Facebook for Pot" aspirations and will be focused on selling compliance software to dispensaries
  • TRTC added an advisor, Alan Gladstone, to a newly created advisory board
  • TWMJF reiterated its rationale for not entering the U.S.

The 420 Investor Cannabis Stock Index had its first decline since the first week of July, losing 1.5% for the week to end at 62.12. The index has lost 3.2% to begin August and is down 16.2% YTD after gaining 88.8% in 2016. It currently includes 50 stocks and ended 2016 at 74.10.

420 Investor Cannabis Stock Index 420 Opportunity ended the week valued at $41,186, up 0.6%, and is down 8.3% YTD. In 2016, the model portfolio increased 293.4% compared to the 88.8% increase in the index. 420 Quality ended the week at $49,116, down 2.2%. This model portfolio was launched on March 2nd targeting long-term investors seeking to invest in leading cannabis stocks with minimal portfolio turnover and has lost 1.8% since inception compared to the 23.2% loss in the index.

Outlook

Valuations have increased and remain cautionary, and fundamentals are questionable for most of the >500 companies in the sector. The market has been consolidating for eight months in the U.S. and since April in Canada after it had rallied on the cannabis legalization votes last year as well as the legalization path in Canada. There are some catalysts ahead, including progress in the Canadian legalization and in German MMJ, but the consolidation of the gains from last year is likely to persist for a while.

The big themes ahead are likely to be insight into the President's plans regarding the federal view on state-legal cannabis (especially in light of Jeff Sessions serving as Attorney General), hopeful extension of the Rohrabacher-Farr Amendment (which is set to sunset at the end of September) to insulate state-legal medical cannabis businesses from DOJ intervention, 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, likely legalization in Canada, the rollout of MMJ in Germany, Mexico and in Australia 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, the implementation of the new medical program in California and the possible legalizations via the legislatures in NM and RI.

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 February 2016. 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 500+ companies that are currently on our Broad List.

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

Aurora Cannabis to Make Strategic Investment into Industrial Hemp Company

Cannabis Software Provider springbig Gains Traction with Dispensaries

Cannabis Wheaton Completes $15 Million Investment in ABcann at $2.25 per Share

Canopy Growth Won’t Enter Federally Illegal Markets

CNBC’s The Profit to Feature 3 Leading Cannabis Companies

DOJA Cannabis Company to Commence Trading on August 9th

GrowGeneration Q2 Sales Jump 116% to $4.1 Million

iAnthus Receives Approval to Acquire Licensed New York Cannabis Operator Valley Agriceuticals

Kush Bottles to Create Custom Packaging for CannaKorp’s Novel Cannabis Vaporization Device

Maricann Adds German Independent Director

Online Medical Cannabis Recommendation Provider PrestoDoctor Sells to Publicly-Traded Cannabis Sativa

Study Shows CBD is Replacing Traditional Pharmaceuticals

Resources:

420 Investor, founded in 2013, is an online due diligence platform that includes a Forum, 10 videos a week, news alerts, blogs, a weekly live chat, model portfolios and a monthly newsletter. The monthly subscription is $42, with a 30-day money-back guarantee, and there is a annual option for $420. The newsletter is also offered as a separate offering for $149 per year. Based on over 1300 reviews, the service has a 4.6 rating on a scale of 1 to 5.

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

Additional disclosure: At New Cannabis Ventures, we work with several publicly-traded companies, including ABcann, Aurora Cannabis, Canadian Bioceutical Corp, Canopy Growth, DOJA Cannabis, Emblem, GrowGeneration, Harvest One, iAnthus Capital, Kush Bottles, Liberty Health Sciences, MariCann, and Solis Tek, providing each of them with Investor Dashboards.