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As someone who has battled depression most of his life there have been many times where the world feels like a dark and exhausting place that can be absent of hope. Cannabis has always been a light in the darkness for me that has acted as an escape from the real world when things seem bleak. The obvious caveat here is that cannabis isn't a miracle drug that will cure all of your problems. It makes doing nothing completely okay, which in turn can lead to you not learning new things or building upon your life in productive ways. Just like anything in this world, moderation with cannabis is the key. I have been a heavy investor in the cannabis sector since January 2018. I missed out on the initial mania of Canada legalizing, and as a result I was down a large portion of my life savings in 2019 due to the initial hype fading. But thankfully I have been a staunch believer that investing in this sector is a once in a lifetime opportunity, and this belief has kept me in my seat and adding at every opportunity which has paid off handsomely. Legalization has never been about if, but when.
My thesis is that the value creation will ultimately reside with the US Multi-State Operators (MSOs). These companies effectively have separate operations in each state due to federal illegality of interstate commerce and the fact that each state has their own regulations. At first blush, any Freshman economics major will tell you that this is bad long term as it doesn't allow the companies to pick up cost savings from economies of scale in an industry where the product will ultimately end up as a commodity long term. This has led to many thinking that the true horse to bet on would be the Canadian Licensed Producers (LPs), as they have already been able to build massive cultivation facilities and have easier access to capital. The game changer here though is that just about every US state issues very limited licenses, so the barriers to produce and sell in each state are pretty high . The risk here is that the eventual Federal legalization will lead to everything opening up and the limited license model going away. However, Schumer's recent comments seem to indicate heading towards decriminalization and leaving it up to the states to enact their own rules (with interstate commerce not being a part of the initial proposal). This sets up for a "Goldilocks" scenario for the existing operators, as they would essentially be able to keep all of their existing market share while also removing a lot of the things negative things that are currently holding back MSOs. (Access to capital, ability to list to on major exchanges, the removal of the 280e tax penalty (which would shift effective tax rates for MSOs from 50% to 30%), etc.) Here are just a few of the potential upcoming catalysts:
Combination of SAFE Banking/States/MORE act passing, benefits of which listed above
Exponential quarterly revenue & profitability growth being reported each quarter (Top 4 MSOs expected to all report $200M+ in revenue for Q4)
New York going full rec (expected to be passed via the budget next month)
Arizona and New Jersey beginning rec sales (AZ officially started last week)
PA, VA, NM, RI could all go full rec this year
Texas with an outside chance of going full rec, likely to see medial expanded at the minimum
If you are interested in investing in the sector and would just like broad exposure without diving into the fundamental analysis of each company I would recommend the MSOS ETF. This may limit your upside a bit but it takes some of the downside risk out of the equation. My personal horses are: Green Thumb Industries (GTBIF), Columbia Care (CCHWF), Cresco Labs (CRLBF), & AYR Strategies, (AYRWF). I have included some resources below if you are interested in doing your own due diligence.
SEDAR: Where to look for financial statements, press releases, and other regulatory filings
State Side Cannabis Investors: Has a lot of great visualizations including: market cap growth, share unlocks, license breakdowns, quarterly comparisons, etc.
Investor Relations Sections of MSOSs websites: Will typically have investor presentations, press releases, other marketing material
DISCLAIMER: Please invest at your own risk, this is effectively an emerging market with its fair share of investing risks.
You ,too, can profit off the commoditization and over regulation of a sacred plant, for the benefit of INDUSTRY, and your own monetary gains.
Be a part of helping industry lobby to raise allowable pesticide application products and rates that enhance industry while completely stripping healthy benefits of a PLANT.
Help encourage INDUSTRY to continue to lobby to eliminate craft boutique licenses, so as to ensure skyrocketing margins, while decimating the families who fought for the normalization of plant, often at the risk/result of imprisonment, divorce, shot dogs, property seizure, suicide, etc.
ORRRRRR, maybe offer a CSA to a local farmer, who loves what she does, and the pride shows, as well as the benefit of freshness from a hands on made-with-love product not subjected to an over regulated, over taxed, supply chain staled commodity.
Maybe earn your retirement instead of piggybacking your investment money on the suffering of those who fought and sacrificed for your right to access RELIEF.
I hear those private prison stocks are pretty profitable too.
No, you won't stop it by not capitalizing from it. But maybe do things the right way rather than the easy way. Or just don't wince if I regard you in the same crowd as all of the other carpetbagging opportunists out there. These industry goon investor types are enslaving my people, while monocropping and spraying and machine trimming and lab colluding, and pretty much doing what they did to the food "industry".
. The risk here is that the eventual Federal legalization will lead to everything opening up and the limited license model going away. However, Schumer's recent comments seem to indicate heading towards decriminalization and leaving it up to the states to enact their own rules (with interstate commerce not being a part of the initial proposal). This sets up for a "Goldilocks" scenario for the existing operators, as they would essentially be able to keep all of their existing market share while also removing a lot of the things negative things that are currently holding back MSOs. (Access to capital, ability to list to on major exchanges, the removal of the 280e tax penalty (which would shift effective tax rates for MSOs from 50% to 30%), etc.) Here are just a few of the potential upcoming catalysts: