Murderers' Row
The meat of the US canna line-up steps to the earnings plate
Before we begin, I would like to make a toast. If you believe, as we do, the cyclical low of the secular bull market for global cannabis was put-in last March, please raise your <device> and join me in wishing this fledgling industry a very happy birthday.
We acknowledged our cannaversary in Monday’s letter to investors (LTI), where we noted that while there’s much to look forward to, the easy trade is likely behind us as ‘tell me’ becomes ‘show me’ for an increasingly skeptical investing audience.
[note: back in October, we offered that fast money was betting on the election and smart money was focused on the fundamentals. I’d bet a good chunk of the recent retracement was the former camp taking very nice trades and moving on; hence fast]
Here’s our bet tho: just as 2020 will be remembered as the year U.S canna took root, 2021 gonna be remembered as the year of the migration; when our thesis matured, institutions onboarded and the Band-Aid was violently ripped off the War on Drugs.
For that to happen, for this to happen, we need a three-point plan; and while even this won’t guarantee a profitable near-term outcome—market forces and animal spirits will drive that—these conditional elements must be in place:
Fundamental growth. To our friends in US canna leadership: keep doing what you’re doing bc if you can deliver EBITDA+ during a pandemic / while federally illegal / navigating multiple domains / paying an effective tax rate of 70+% / not having access to capital / with guys like Jeff Sessions and Bill Barr chasing you…
In terms of the earnings, $CURLF $AYRWF $CCHWF* already released (all steady / solid), $GTBIF reports tonight, $TCNNF and $TRSSF are Tues AM, $CRLBF is next Thursday + $HRVSF the week after. It’s the meat of the U.S Canna line-up and our big bats gotta / gonna deliver; Ben Kovler might even point to right field before his call starts tonight.
Continued state adoption. New York, Pennsylvania, Connecticut, Rhode Island, Maryland, Delaware, Minnesota, Wisconsin, New Mexico, Hawaii, Alabama… I see / hear what you see / hear but we’ve been here before so you’ll forgive us if we don’t take anything for granted.
But they’re all coming tho, we just don’t know when, and the ability for states to reach across the aisle—to continue to set an example for the federal government—will help shape the slope / grade of our ‘up-and-to-the-right’ secular journey.
Federal follow through. While Senate Majority Leader Chuck Schumer has promised comprehensive legislation later this session that’ll address, among other things, social justice, the FDA and interstate commerce, investors want progress and they want it soon.
We do expect SAFE Banking to be re-introduced by month-end and an updated Cole Memo thereafter; but don’t be shocked if capital markets language isn’t in the first draft. This process will take time and incrementalism seems to be the preferred path forward. Because, you know, politics. But it’ll (all) happen.
Remember this: less than three months ago we thought we’d still be dealing with Mitch McConnell and our bet woulda been that step-function progress will reward the existing US MSO FAANGS as the rules relax, perceptions change and wealth is created, over time. So slow and steady is good. Just saying.
Some Charts:
AYR Wellness; $AYRWF; Lotsa moving parts but if they execute, the definition of ‘growth @ value.’
Columbia Care; $CCHWF* Second largest US footprint levered to NY NJ VA…
Curaleaf; $CURLF putting in a nice (international) flag. M. BoJo & Co
Green Thumb; $GTBIF reports tonight. Leaders lead, and the set-up is there.
Trulieve; $TCNNF thisclose to another blue-sky breakout. see leaders comment^
TerrAscend; $TRSSF there was alotta terra-envy last year and the 30% cool-off is putting in a nice handle through a weekly lens.
$MSOS* US Cannabis ETF broke the downtrend / retested and ready to resume assault on all-time highs.
[and GTFO w that ‘right shoulder’ talk…]
Random Thoughts
Village Farms $VFF CEO Mike D: "If Texas goes, we'll be ready." The state’s legislative session runs until May 31 and several bills are being considered.
4Front $FFNTF* is building “Big Daddy,” which will be the largest cultivation and production facility in Illinois.
A study highlighted CBD, and its active metabolite, 7-OH-CBD, as potential preventative agents and therapeutic treatments for SARS-CoV-2 at early stages of infection. To which I say, follow the science!
New Mexico hard-limit for legalization is 3/20. $VREOF most leveraged there.
People of color made up 94% of marijuana arrests by NYPD in 2020. Shameful.
And finally, ur runner’s high ain’t endorphins; it’s endocannabinoids. True story.
Outa room; good luck out there.
/positions all /advisor*