A Matter of Trust

Industry Overview: Hurdles and Opportunities

The past several months has been an arduous journey for the cannabis complex.  Between the elevated Canadian valuations, the pace of DOJ reviews of U.S merger activities, the duration risk inherent in the clinical trials, and the uncertainty surrounding the FDA stance on CBD-derived hemp, there was ample cause for pause this summer.

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todd harrison
Mid-year Review

2019 has been a tale of two tapes for global cannabis, with first-quarter strength ceding its gains to a second-quarter retracement. The volatility in individual names was fierce, with the average cannabis stock losing 41% from its YTD high-water mark through the end of Q2. A five-year chart of global cannabis puts these recent swings in perspective.

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todd harrison
Spring Showers

As we listened to the Charlotte’s Web conference call the last week of May, I was reminded of how early it is for the cannabis industry.  Charlotte’s, while providing a business update, was unable to communicate the names of their major distribution partners as they await guidance from the FDA.  It spoke both to current obstacles and forward opportunities in the space.

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todd harrison
Passing of the Torch

Last November, our monthly letter to investors was titled “Winter is Coming” with an eye toward the darkness that would likely precede the light of spring. Several marquee multistate operators had just listed–Acreage Holdings, Harvest Health and Cresco Labs among them–and the cannabis complex lost 55% of its market value into year-end before bouncing in kind.

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todd harrison
Investment Perspective

One of the more surprising elements of the burgeoning cannabis industry will be the ubiquity of the applications.  There will be consumer products, such as beverages, nutraceuticals, cosmetics and pet supplements.  Industrial use-cases, like hempcrete and animal feed; and if our research proves true, an array of efficacy-driven solutions that will help solve medical riddles.

That is the future; it’s what’s on the horizon.  And it’s super-exciting.

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todd harrison
Building Blocks

February was a month of digestion for the cannabis sector after the January rally alleviated the previously oversold market conditions.

While there were some speedbumps to our thesis—hints the UN will push their vote to reschedule cannabis to March 2020 (despite the World Health Organization recommendation to do just that) and Departments of Health in multiple States barring CBD as a food or drink ingredient until FDA guidelines are published—there were also encouraging signs.

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todd harrison
Turnabout is Fair Play

Following the year-end carnage for financial assets, a confluence of events caught investors under-invested as the calendar flipped into 2019. Historically oversold conditions and negative sentiment, coupled with a softer rhetoric from the Federal Reserve and constructive vernacular on trade, helped fuel broad gains across the equity realm.

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todd harrison
Survive and Thrive

As bitcoin, equities and cannabis surged higher last December, we titled our monthly letter to investors “Don’t Confuse Brains with a Bull Market.” As we’ve shared with many of you in the past, our thesis should take several years to evolve as the foundational constructs of the cannabis industry take root and the eventual banking reforms allow for Wall Street adoption and institutional participation.

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todd harrison
Winter is Coming

As financial markets braved global headwinds in November, cryptocurrencies collapsed under the stress of their own weight. With so many crosscurrents in our midst, you may be wondering why we’ve highlighted that dynamic and the chart below will provide that answer; the white line is bitcoin and the orange line is the BIoomberg Global Cannabis Competitive Peers Index, since June 2017.

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todd harrison
The Good, the Bad and the Ugly

I’ve been trading for almost thirty years – through the Asian contagion and LTCM, the dot.com bubble and bust, and on both sides of the global financial crisis – and the volatility in the cannabis complex has been tough to stomach, even for me. We’ve discussed the drivers behind this, and our belief that Wall Street coverage will transition ownership from retail holders to institutional accounts, but we’re still early in that process and the journey remains bumpy on a month-over-month basis.

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todd harrison
Range Expansion

The demand for global cannabis exposure continued into September as a point of recognition seemingly swept through society. Those who’ve followed the space for a few years have seen similar waves of strength before one thing or another took the air out of the rally. However, with Coca-Cola publicly announcing that it is considering the cannabis beverage

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todd harrison
The Turn

August was a tale of two tapes as the trend that’s been in place since mid-January—selling, and a lot of it—came to a screeching halt the morning of August 15. That’s when Constellation Brands announced an additional $4 billion investment in Canopy Growth Corporation, the largest Canadian licensed producer, in a deal that will eventually give them control of the company.

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todd harrison
The Greatest Story Never Told

We’ve made no bones about our affinity for GW Pharmaceuticals. Let’s discuss.

The U.S. and U.K. commissioned separate but similar studies in the 1990s to help determine whether cannabis had medicinal value; and both found there to be encouraging evidence. The U.S. ignored those findings and continued the War on Drugs; the U.K. helped lay the groundwork for the emergence of GW Pharmaceuticals, which was founded in 1998.

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todd harrison
CB1 Capital Mid-Year Review

As Bitcoin, cannabis and large-cap tech orbited the earth into the end of 2017, we warned investors not to confuse brains with a bull market; true to form, the Global Cannabis Stock Market Index has since lost 29.5%—almost one-third of its entire value—while bitcoin has lost twice as much. Meanwhile, the NASDAQ rallied 10% despite continued late-stage signs in the technology sector.

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todd harrison
Waiting to Exhale

I went on TV in 2012 and said that cannabis was my single-best investment theme for the next decade.

I had just begun studying the science, so I spoke only of the potential economic opportunities and societal benefits: tax revenue, job growth, prison populations and crime rates. Unbeknownst to me at the time, I had entered a rabbit-hole

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todd harrison
The April Pivot

“This time is different” may be the four most dangerous words in finance, but we found ourselves repeating them quite often last year. We did so in response to persistent questions about when the U.S. government would change their archaic, if not cruel, assessment of the cannabis plant to allow for testing, growth and in-state commerce without fear of Federal prosecution.

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todd harrison
Survive and Thrive

The first quarter of 2018 is in the books, and what a quarter it was. After years of steady stock market gains, volatility exploded across asset classes. I’ve traded through several volatile stretches – Long-Term Capital Management, the Asian Contagion, Y2K (both ways) and of course, the 2007-2009 global financial crisis – and these last few months reminded me of those markets.

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todd harrison
Cannabis Going Global

January did not lack for excitement in the cannabinoid-wellness space as volatility arrived early and often. Between the decision by Jeff Sessions to repeal state cannabis protections to the brief-but-tenuous government shutdown, it was a politically-charged headline-driven month for our strategy.

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todd harrison
The Major Role of Minor Cannabinoids

Over the years I have often asked myself why some strains of cannabis are more effective than others for certain ailments. As time passed, I began to learn that there was another chemical compound in cannabis aside from THC, something called CBD. A thorough understanding of CBD has become somewhat of the norm these days as has the fact that they are both “cannabinoids” although each has very different therapeutic effects.

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Loren DeFalco