The Canada-listed cannabis stocks we’ve weeded out could bounced back quickly following tax-loss selling season
SmallCapPower | December 16, 2019: Cannabis stocks have been in an eight-month bear market, with the Horizons Marijuana Life Sciences Index ETF (HMMJ) down 61% since its 2019 high of $23.87 on March 26, 2019. Since then, cannabis stocks have also been under pressure from short sellers. According to financial analytics firm S3 Partners, the total short position of the Top-20 most shorted cannabis stocks was ~$3.0B, as of December 9, 2019. This a $1.5B increase in short exposure from December 2018. With an average borrow fee of 32% on their short positions, short sellers eventually will have to cover. Additionally, with tax-loss selling season in effect, a few days of bull volume could lead to a short squeeze. Today we’ve found four cannabis stocks that have sold off recently that could be set to bounce back early in the New Year.
*Share price data as at December 12, 2019, data obtained from S&P Capital IQ
Charlotte’s Web Holdings, Inc. (TSX:CWEB) – $11.26
Charlotte’s Web Holdings is a vertically-integrated cannabis company that is headquartered in Boulder, CO. With an initial focus on hemp-based, cannabidiol wellness products, the Company is starting to expand its offering with pet-focused products. The Company offers a hemp extract oil, infused balm, and hemp extract chews for pets. This addition to the offered pet products was announced last spring and is the result of the high demand and sales growth that exceeded expectations in the CBD pet care market. CWEB’s products are currently carried in 9,000 stores in the United States. On November 13, 2019, CWEB reported quarterly revenues of $25.1M (a 41.8% increase YoY) with gross margins of 71.3%. Charlotte’s Web is currently trading 25% below its 50-day moving average of $14.91.
- Market Cap: $1,168.6M
- 90-Day Return: -52.3%
- YTD-Return: -24.2%
- 90-Day Average Trading Volume: 435,080
MediPharm Labs Corp. (TSX:LABS) – $3.56
MediPharm Labs is the first company in Canada to receive a license to become a cannabis oil processor without first having a cultivation license. MediPharm Labs produces purified, pharmaceutical-like cannabis oils and concentrates through its cGMP and ISO standard clean rooms laboratory. The Company currently has a 70,000 sq. ft. facility with 150,000 kg capacity and is planning to expand to 250,000 kg. MediPharm Labs has invested in expert, state-of-the-art technology and extraction methods to deliver safe and precisely-closed cannabis products to consumers and patients. MediPharm Labs is currently trading 15% below its 50-day moving average of $4.15.
- Market Cap: $465.9M
- 90-Day Return: -23.0%
- YTD-Return: +114.4%
- 90-Day Average Trading Volume: 1,116,450
Cresco Labs Inc. (CSE:CL) – $8.40
Cresco Labs focuses primarily on cultivating medical-grade cannabis, manufacturing medical cannabis products, and distributing products to medical patients and recreational users. Currently, the Company has one of the largest footprints in the U.S., with operations in 11 states, 23 production facilities, 56 retail licenses and 22 operational dispensaries. In October, Cresco acquired Valley Agriceuticals, which is one of the 10 vertically-integrated cannabis business licenses in the State of New York. In addition, Cresco announced that it had received regulatory approval for five adult-use dispensaries in the state of Illinois, where recreational sales are expected to begin on January 1, 2020. Cresco Labs is currently trading 15% below its 50-day moving average of $4.15.
- Market Cap: $1,147.3M
- 90-Day Return: -20.4%
- YTD-Return: -9.6%
- 90-Day Average Trading Volume: 309,260
Green Thumb Industries Inc. (CSE:GTII) – $10.87
Green Thumb Industries manufactures, distributes, and sells various cannabis products for medical and recreational use in the U.S. GTII distributes its products primarily to third-party retail stores, but also sells its finished products directly to consumers in its own retail stores. As of May 2, 2019, it owned and operated 18 retail stores, as well as had licenses for 77 locations across 12 U.S. markets. Green Thumb operates five dispensaries within Illinois and is in the midst of a capacity expansion at one of its two production sites. As a major cannabis player in Illinois, Green Thumb is expected to benefit from the legalization of cannabis in Illinois, as it can now obtain five more retail licenses.
- Market Cap: $2,245.4M
- 90-Day Return: -13.1%
- YTD-Return: +0.2%
- 90-Day Average Trading Volume: 203,430
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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