The week in Review
The week was volatile, to say the least. This was one of the most volatile weeks I have seen in a long time. Many of our stocks moved more than 15% in either direction in the latter part of the week.
First thing I noticed was the volumes. Volumes – in Dollar terms – means the total value of all shares bought and sold for the day. Canopy growth saw volumes of more than $1 billion twice this week. Cronos and Tilray also saw volumes dip above the unicorn line. Amazing really.
The markets continue to be in a bull run and this is one of the side-effects. Massive corrections from time to time. Just understand that volatility is the name of the game when it comes to Pot Stocks. Expect it and don't worry. If you are investing in the right stocks, then you are going to see fantastic returns in the long run (next 3-5 years).
- The portfolio grew (showed gains) of 2.48% for the week.
- The monthly return for September currently stands at 6.73%
- CV Sciences up 40.36%
- Auxly (ex Cannabis Wheaton) up 35.53%
- Liberty Health Sciences up 23.68%
- Cronos Group down 13.43%
- Canopy Growth down 9.18%
- And GrowGeneration down 8.86%
The markets are still in bull mode and the massive correction seen on Thursday was a good thing. Seriously, there are a number of sticks that are trading at 100% above the 150-day moving average. In other words, the average stock price measured over the last 150 days of trading (~6 months). There was also newsworthy information from some of the following companies.
What a crazy week for Canopy Growth. With the last 2 weeks gains being almost completely eroded in one day on Thursday. Friday the stock did recover but still ended the week down. To be honest, investors should not be surprised. Rather this is a good thing, as the stock has been too hyperbolic for too long.
Massive volume. Volume is the Dollar value of the total amount of shares that traded hands. So if there 10 shares sold, at $5 each, the total volume for the day would be $50. Canopy passed the 1 Billion mark twice during the week. Think about? A billion dollars in trading value. The US market is awakening and it is a retail market, not an institutional one.
What this shows is that Americans have suddenly woken up the greenrush and are loving the fact they can easily buy these stocks on their exchanges. And when they're on the Nasdaq alongside some of the biggest names in the game, they feel safe to pile in.
Aurora acquires ICC Labs. Led by CEO Alejandro Antalich, a widely-recognised leader in the South American cannabis market with over 25 years of experience in the pharmaceutical sector, the acquisition of ICC will establish Aurora as the industry leader in South America, a continent with over 420 million people.
The transaction will leverage ICC's first mover advantage in South America, bringing significant low-cost production capacity, a well-diversified product portfolio, and extensive distribution channels throughout South America.
They then acquired Europe's largest producer, processor, and supplier of certified organic hemp and hemp products, Agropro UAB as well as hemp processor and distributor Borela UAB.
Agropro, a hemp seed contracting and processing company, and its sister company Borela UAB, currently has 4,000 acres potentially yielding more than 1,000,000 kg of organic hemp with additional contracts available to expand across Lithuania, Latvia, Estonia, and Poland.
Aurora continues to execute on a CBD-focused strategy that covers the entire value chain, from supply, through genetics research and clinical trials, to product development and distribution to various domestic and international markets across five continents.
Aurora is the undisputed heavy-weight of acquisitions. They continue to expand at a rapid pace, but with most of the deals being done via the issue of new shares (and not actual cash), shareholders are being continuously diluted. Something to watch. We are still very bullish on Aurora.
Emblem announced its intention to purchase approx. $1 million of units of Compass Cannabis Clinic at $0.60 each. Compass and its subsidiary adult-use retail entity Starbuds Canada have 40 confirmed leases for locations across Canada, a mix of operational clinics that are now open, in development, or in preparation with the intended use of becoming retail cannabis stores upon legalisation on October 17th.
Starbuds Canada has an aggressive expansion plan across Ontario, British Columbia, Alberta and Saskatchewan to serve cannabis enthusiasts across Canada. Starbuds Canada has received a cannabis retail license or a conditional license in two provinces along with a dozen retail development permits across the province of Alberta.
We are very favourable on this deal and the share price followed suit. This positions Emblem nicely for recreational legalisation. We continue to see Emblem as a potential candidate for acquisition. We are currently buying.
The Supreme Cannabis Company entered into a supply agreement to provide dried cannabis to Tilray, a global leader in cannabis research, cultivation, processing, and distribution currently serving tens of thousands of patients in 11 countries spanning 5 continents.
The value of this initial supply agreement is estimated to be in excess of C$2 million. Dried cannabis provided to Tilray by 7ACRES will be used primarily to support medical cannabis patients in Canada, including Tilray's robust patient population.
We are very favourable on this transaction and continue to view Supreme as having big upside with their wholesale strategy starting to show real execution.
Aphria entered into a wholesale supply agreement with Emblem Corp to supply 175,000 kg of high-quality cannabis over a five-year period starting May 2019 with a total of 25,000 kg deliverable for the balance of the first year. Under the agreement, Aphria will receive a non-refundable deposit of $22.8 million ($12.8 million in cash and 6,952,169 of common shares).
The Emblem common shares issued to Aphria are subject to a contractual lock-up and standstill arrangement, with five equal releases over the term of the Agreement, subject to certain customary exceptions
For Emblem, this is big, very big. The stock popped on news of this deal. They now have the supply to drive their medicinal and recreational strategies. For Aphria, it delivers on their wholesale strategy. This was a real win-win.
CannTrust announced supply agreements with Nova Scotia, New Brunswick, Prince Edward Island and Newfoundland. CannTrust has now achieved national distribution for its three recreational brands – liiv, Synr.g, and Xscape – and has a long-term strategy to be a market share leader in the Canadian recreational space.
Then, they announced plans for an exclusive partnership with Breakthru Beverage Group – the largest Canadian beverage alcohol broker of premium spirits, wine, and beer brands. Breakthru will establish a cannabis-focused sales brokerage company to represent CannTrust's specialty products to Canadian adult consumers.
Our favourite stock right now. CannTrust just keeps on delivering. Not only have they secured supply agreements, but they are also tackling the, potentially massive, beverages market. Stellar! We are buying CannTrust. Cannot say that any other way.
That's it for the week. Bottom line, we're in a bull market and there is a long way to go till the end of the year. Keep focused, keep hungry.