Excuse the stereotypically clickbaity headline, if you would, because I think one of these will actually genuinely shock most readers. It shocked me when I came to the conclusion I did, but that’s the markets for you.
Three or four weeks back, I said all over social media that I was selling everything weed-related. The government was coming in with new rules, most companies on the public markets had valuations tied into what they’d expected would be news of full deregulation and recreational weed and product being sold out of liquor stores/pharmacies/dispensaries/car boot sales/whatever.
And, as the old saying goes, you buy on rumour, you sell on news.
To me, if the new rules came out with full embrace of the new industry and recreational love, the big pop was already wired into most company valuations and we’d see a sell-off.
And if it didn’t, if it came out as some sort of hybridized holding pattern design to keep the Emery family from opening 600 illegal dispensaries while the rules were being worked out… we’d see a sell-off.
What we’ve seen since has been quite the cannabis sell-off. The institutionals have moved in to buy large chunks of the bigger players in return for eight-figure amounts, and the bottom end got a little wind knocked out of it in the meantime as new weed players bounded in to the markets to take whatever money was left.
Some, like Tinley Beverage (TNY.C) or Golden Leaf Holdings (GLH.C) for example, held firm and even clawed their way up. Others, like Vinergy Resources (VIN.C), have had the safe haven of an extended change of business halt to keep things okay. The respected weed aggregator and turnaround success Cronos Group (MJN.V): $3.41 in early April, down to $2.26 just yesterday after its assets Hydropothecary (THCX.V) and Peace Naturals failed health Canada tests. Hell, Canopy Growth (WEED.T), down from $12.80 in February to $7.78 yesterday.
A lot of weed stocks, especially at the top end, had a good day Thursday, Canopy and Supreme included, so there’s every possibility we’ve hit the bottom of the post-law change sell-off, which would be a nice thing. So I decided maybe it’s time to figure out where the best value will come from a shift back into the weed game.
Here are my picks, in no certain order.
ABCANN MEDICINALS (ABCN.V): It’s been a rough opening ride for Abcann, which not only came out right in the midst of a weed market softening, but also endured its founders absolutely blasting out 41c stock at the open, destroying the market handily. With some in the market having the good sense that might happen, the shorters were also out in abundance, so the stock got triple hammered until it appeared to bottom out Wednesday, at $0.84, having opened the show as high as $1.50 just days earlier. If you got in at that $1.50, your balls are hurting now.
But if you didn’t – if you missed that show of market dysfunction and vengeance selling, you’ve got a major Canadian LP with all their licenses and a reputation for if not the best weed on the market currently, then at least among the best, with some $25 million sitting in the bank – for a $49 million market cap.
That’s fucking absurd. There are late stage applicants going public with bigger market caps than that. Beleave (BE.C) is, by my count, running at a $67.5 million valuation, with no license to speak of. Hell, this is what you see when you go to their website:
But worth $17 million more than Abcann? Wake up to yourself, market.
FULL DISCLOSURE: As of today, Abcann is an Equity.Guru marketing client.
EMBLEM CORP (EMC.V): Remember these guys? No, of course you don’t, because you’re looking at a shiny red dot on the wall.
Emblem were the biggest thing in the world for a hot minute, when they were coming to market with a fat valuation and a big plan to grow hard and fast with wads of dollah dollah bills y’all flying into their pockets.
Then they went public and the TGOD financing happened and Emblem’s party was like Monday night at the Ukrainian Cultural Centre; three guys nursing a pint, an old lady falling asleep in her peirogies, and a flickering TV showing old poker programming.
But dudes, Emblem didn’t fall asleep in their peirogies. It’s doing what it said it would do – sure, it’s not putting out a lot of news about it, but the plan remains and is being executed.
Meanwhile, what you would have paid $4.17 for in February you could have bought yesterday for $2.21. At a $155 million market cap, it’s a cheap buy-in.
One thing to consider: A bunch of pre-IPO stock comes free trading, like, now. So if you’re going to buy in, you’ll get more value in the days ahead.
SUPREME PHARMACEUTICALS (SL.C): I have picked the shit out of this stock over two years, accurately predicting the ups, the downs, and making money off it hard. Why? Because Supreme has some things the others don’t.
One of those is CEO John Fowler, who I’ve long referred to as the T-1000, and the name has stuck
Fowler knows everything you’d ever want to know about weed, about growing weed, about negotiating deals (he’s a hell of a lawyer), about who’s doing what in the business, and about who’s blowing smoke when they claim good things. If you ever get him off the record, it’s like a freaking masterclass in the industry.
Also, he’s got a $50m + war chest. Also, he’s got one of the biggest grows out there. Also, he doesn’t have a sales license yet.
And that’s the real hook here. There’s NO DOUBT that Supreme will get that sales license eventually, because they’ve had their grow license for a while now, and had no grief from Health Canada. Well, limited grief. But nothing on the level of Organigram or Mettrum or Hydropothecary.
Supreme’s grief has been more of the ‘we’re using this nutrient because we think it’s the balls and you guys haven’t tested it yet, so can you test it while we continue to vault pound after pound of sweet weed?”
Supreme has enough weed in its vault to fix the supply problem of any major LP in the business overnight, but Fowler’s in no rush to get it to those LPs because as supply continues to underwhelm demand, that weed isn’t going to get any cheaper.
Take the war chest out of their valuation and you’re looking at less than $200m. I think that’s chump change, and it’s why I’ve never had a problem saying SL is a buy. Even if it drops a bit tomorrow, it’s going to come back hard. And, frankly, it has again and again, to my personal good fortune.
Always bet on Fowler.
The stock was at $1.85 a month ago. It was $1.43 yesterday. Take advantage of the weak hands when they show who they are.
CANABO MEDICAL (CMM.V): I can’t even, with this stock.
I talk to these guys more than any other company, because they are CONSTANTLY putting out news, constantly hitting their milestones early, they have data that every LP, health insurer, large employer, academic researcher and god knows who else will pay good money to access, and they have a multi-pronged revenue strategy.
So why is their stock selling for about 1/3 of what Aphria (APH.V) paid for it back in October of last year? Because pre-IPO stock just blew out, Aphria just blew a chunk of their holding out, and because the market thinks it’s a clinic play, because the company can’t realistically and without hype set an idea of what the upside on their data licensing is.
Let me put you in a scenario: Let’s say I’m EquityGuru Health Insurance. I need to know if I can stop paying for benzos when my patients are in pain, because they’re addictive, increasingly less effective, and they’re not cheap. CMM just released an observational study that showed 45% of patients will, if given cannabis-based treatments instead, drop the benzos entirely after 90 days. That’s MASSIVE.
Now I want to know what strains those patients are getting, and how much, and from where, because I want to be paying for that instead of the benzos. Thanks Canabo! Here’s a fat cheque for your consultation.
How much is that cheque for? It depends. Do I need Canabo to do more studies? Do I need ongoing access to that data? How many people do I need to access it? What other medications could I switch out? How many patients do I have? This could be a $50,000 deal, or a $250,000 per month deal. And that’s the disconnect with investors right now because we’re waiting for those deals to get locked down.
Canabo has a $16 million market cap right now, and that’s absurd. They have patient records and health data for over 15,000 people across Canada, which is a chunk of data nobody else in the world has access to. You wanna study weed in the US? You’ve got to come to Canabo. You want a prescription but your doctor won’t give you one? Canabo clinics will take that doctor’s referral.
It’s clean, they play it straight, they’re doing god’s work and it’s CHEAP.
Aphria paid $1.40 per share. Today, you get it for $0.45. VALUE.
FULL DISCLOSURE: Canabo is an Equity.Guru marketing client.
ORGANIGRAM (OGI.V): No, really.
Look, I’ve made no secret of my disdain for Organigram over the last eighteen months. The fakey organic bullshit, the spraying pesticide on their weed bullshit, the year long product recalls, the trying to bury your recalls with a press release five minutes before the last day of trading of last year, the not paying their bills (cough). For me, that all came down to the guy at the top, Denis Arsenault, who feathers his own nest like a god damned bald eagle. Organigram hasn’t made a move over the last two years without Arsenault making sure he’s got his, and their reputation for chicanery has not helped sales.
BUT: Arsenault has been punted sideways to a ceremonial corner office, the closest thing one can do to firing a guy who owns a shit ton of your stock, and has been replaced by a new man. Health Canada is crawling all over everything they do, meaning we won’t be seeing any more sneaky pesticide drops, and though the company still potentially faces class action lawsuit issues for that whole recall mess, I think we’re likely to see a newer, cleaner Organigram going forward.
Also, at the present market cap, they’re a total takeout target. The guys who set up the original deal are all doing other things now (Abcann, Emblem, TGOD), so there’s no reason why a decent takeover offer wouldn’t be taken on.
I said this company was a mess at $2 with Arsenault at the helm and that I wouldn’t touch it with a barge pole. Even at $2.50 today, without Arsenault pissing in the gears, they move to a screaming hell yes.
— Chris Parry