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THE SMOKE ABOUT WEED STONKS 😶‍🌫️

If you missed Friday’s blog, we analyzed the top trending keywords used in corporate earnings calls over the past year. It was a spicy one.

And though it was ~jam packed~ with insight about how drastically the broader stock market lexicon has changed this year, there was one nugget I just didn’t have room to cover: the rapid increase in conversation about cannabis.

More than rapid; ‘cannabis’ was one of the fastest-growing words in earnings calls over the past year; and its mentions nearly 5x’d over the past quarter alone. Why? Mainly pertaining to rumbling of future recreational marijuana legalization in the US.

So today, I figured we’d spark a little more convo about *why* weed stock chatter seems to keep climbing. Let’s take a quick dive in. 🏊

WEED STOCK NEWS MENTIONS

Outside of earnings calls, chatter about cannabis-related topics in finance news has maintained a steady upward trajectory over the past 9 months…

driven more recently by two primary event’s from the Biden Administration:

• Biden’s marijuana policy proclamation on October 6th, in which he pardoned federal convictions for simple marijuana possession offenses, and directed the Attorney General to formally review the federal status of marijuana

• The Cannabis Research Bill cleared Congress & was signed by Biden on December 7th, promoting expanded domestic research into the uses of cannabis.

And while some may argue that both of these actions could ultimately result in whopping nothing-burger, the implication here (as far as news reporting goes) is clear: the table is being set for recreational marijuana to be legalized at a national scale. 

As for conversation substance, the debate no longer seems to be as centered on the medical or criminal ramifications of legalizing cannabis, but more now on its *economic* benefits (or lack thereof). The question: for the 29 states who have yet to legalize recreational weed, is it a good ~investment~ to do so?

The answer is (of course) still highly debated. And with my lack of macroeconomic knowledge, it’s hard for me to say whether it is or isn’t… but one things for sure, there are still A LOT of people who are highly opposed to passing the buck along — including the Mayor of my old home town in Minnesota, who recently made national news for arguing against legalizing weed because it would put crime dogs out of business. 😅

TOP WEED STOCKS

Now, whether or not nationally legal marijuana in the US is near on the horizon, the interest in weed-related stocks has stayed hot. 🔥

So we took a look to see exactly *which* cannabis-industry companies have been getting the most news coverage. The results: conversation has been DOMINATED by a handful of stocks:

Most-Mentioned Weed Stocks:

1. Tilray (TLRY): comprised ~43% of total weed stock mentions

2. Constellation Brands (STZ): 17% of total mentions

3. GrowGeneration (GRWG): 11% of total mentions

4. Canopy Growth (CGC): 6% of total mentions

5. Aurora Cannabis (ACB): 4% of total mentions

Tilray gets more than twice the news coverage of any other cannabis stock, despite having the third largest market cap in the industry ($1.8B) — behind Curaleaf ($2.7B) and Green Thumb Industries ($2.1B)

In second is Constellation Brands, which is actually a Fortune 500 beer, wine & spirits company (owning brands like Corona, Modelo). But because it also owns roughly 10% of Canopy Growth, most outlets consider it a weed stock by association.

Notable Non-Weed ‘Weed’ Stocks:

• 3rd: GrowGeneration (GRWG): the nation’s largest hydroponic store, a major supplier of most indoor cannabis growth operations

• 7th: Innovation Industrial Properties (IIPR): a real-estate capital provider for the medical-use cannabis industry

• 10th: Hydrofarm Holdings (HYFM): another major hydroponics equipment distributor, whose primary customers include large indoor cannabis growers

• 13th: Scotts Miracle-Gro (SMG): yes, that’s right — the Miracle Gro lawn & garden company; another hydroponics distributor for the cannabis industry.

• 16th: WM Technology (MAPS): an ecommerce & compliance software provider for the retail cannabis market.

So there you have it, a quick overview of the weed-related stock market zeitgeist, the most talked-about weed stocks, and a few notable non-‘weed’ stocks that serve as major suppliers to the cannabis industry.

If you’re looking to invest a few bucks into marijuana-oriented stocks before it’s (probably) legal at a national scale, then hopefully this helps point you in the right direction. ✌️

DOPE NEWS NUGGETS 🌿

Top trending commentary about cannabis-related stocks

🟢  | 📰 MarketWatch | 📆 Tilray’s Q2 earnings report on Jan 9th:

“Tilray Brands Inc. CEO Irwin Simon is keeping an eye out for more acquisitions… as the company looks past its second-quarter loss toward growth potential in the alcohol business in the U.S. and the adult use cannabis in the Great White North… Tilray would also consider growing other types of products such as fruits or vegetables in its 3 million square feet of greenhouses if the opportunity presents itself, he said.”

🔴 , , | 📰 MotleyFool | 📆 analysts’ legalization commentary:

“According to analysts polled by S&P Global Market Intelligence, if marijuana remains illegal under federal law, and banks remain unable to provide banking services to marijuana companies, it will be 2024 or even 2025 before SNDL has a chance of turning profitable, 2025 or 2026 for Tilray, and Aurora Cannabis won't earn its first profit before 2027.”

🔴 ,  | 📰 MotleyFool | 📆 Prospects for Canadian growers in the US…

“Even if you believe legalization will take place within a few years, [Canadian] companies like Canopy Growth and Tilray may be in much worse positions to compete with multi-state operators (MSOs) that already have positions in the U.S. market.”

🟢  | 📰 SeekingAlpha | 📆 Rectifying Aurora’s balance sheet…

“Aurora Cannabis' strategy of prioritizing its global medical-cannabis business while pursuing the premium-priced Canadian consumer market makes sense to cull its operating deficit, I believe, given that medical markets offer stable growth and high margins.”

🟢 | 📰 InsiderMonkey | 📆 Innovative Industrial Properties high price targets…

“In early January, Piper Sandler analysts kept an Overweight rating on Innovative Industrial Properties, Inc. stock with a price target of $285 [current price $84.50], identifying new investments and cannabis legalization as some of the growth catalysts for the industry.”

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DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.

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