Cannabis Investor Patience Is Being Tested

You’re reading this week’s edition of the New Cannabis Ventures weekly newsletter, which we have been publishing since October 2015. The newsletter includes unique insight to help our readers stay ahead of the curve as well as links to the week’s most important news. We no longer send these by email as we did in the past, but we post this and all of the newsletters on our website here.

Friends,

Cannabis stocks remain under pressure in early 2025, extending the bear market that began over 4 years ago. The New Cannabis Ventures Global Cannabis Stock Index, currently down 7.6% in 2025, has dropped over 93% from the peak 4 years ago:

The index, which was rebalanced at the end of the year, has 28 companies that qualified then for inclusion. The -9.0% median return in 2024 so far has been worse than the average return. 5 of the 28 members have declined more than 20%, while there are 3 double-digit gainers so far. We will publish our regular monthly review of the index for February at the end of next week.

The largest sub-sector, Ancillary, which represents over 37% of the index, has performed decently despite one of the stocks dropping over 18%. The 9 stocks have dropped just 0.5% so far. Canadian LPs, which currently represent 21.6% of the index, are down 9.9% despite one stock soaring the most of any member, with Aurora Cannabis up 36.2%. Two weeks ago, after a massive rally for the Canadian LPs, I warned in the newsletter, not to chase the Aurora move.

The sub-sector that traders and investors seem to favor the most over time has been under pressure. There are 6 MSOs in the Global Cannabis Stock Index, and they currently represent 21.0% of it. These 6 MSOs have dropped an average of 9.5%, with 4 double-digit decliners and just one that has rallied. The very popular historically AdvisorShares Pure US Cannabis ETF (MSOS) has dropped 14.2%. For those who like ETFs for MSOs, I wrote at Seeking Alpha recently why I think the Amplify Seymour Cannabis ETF (CNBS) makes more sense than MSOS.

The entire market sentiment has been derailed by the delaying of rescheduling, which may not occur. We have discussed for quite some time how important it is to eliminate 280E taxation, and the industry will struggle greatly if it remains. Quite simply, MSOs have a lot of debt as a group and they face a big challenge to pay it off or to extend it. Did you see what happened to Greenlane this week when it sold stock?

For investors, we have discussed how low the valuations appear to be. Yes, MSOs are risky, but they are quite cheap. My model portfolio at 420 Investor holds 4 MSOs currently that total 28.3%, a healthy overweight relative to the index I am working to beat. I have used this pullback in Canadian LPs to boost my positions to 40.8%, a much larger overweight. The remainder is in Ancillaries, though I am somewhat underweight the index currently.

Given how important the access to capital will be for American cannabis companies, we updated a page we share with our readers. Our Ancillary company directory did not have any banks listed, though we do list some REITs. The page is based upon input we get from the companies, but no banks have ever reached out to us. We have added 7 banks to the list and welcome any banks or credit unions that are catering to the cannabis industry to reach out to us for possible addition to this list.

Four weeks ago, this newsletter pointed out how catalysts for a rally are missing. The market, as measured by the GCSI, has dropped almost 2% since then, though it has lifted since the all-time closing low was set on 2/3 at 6.23, currently 2% lower. We have pointed out and continue to do so that investing in just American cannabis companies is not the way to go about investing in the sector. We understand that investors are having their patience tested and are aware that there may be no reversal at all to the bear market of the past four years. We continue to hope for better days!

Sincerely,

Alan

New Cannabis Ventures publishes curated articles as well as exclusive news. Here is what we published this past week:

Capital Raises

Greenlane Raises $25 Million Selling Units at $1.19

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