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.

The news flow in our sector was friendly too. Attorney General Nominee William Barr, in addition to speaking in favor of States’ rights, testified that he “supports the expansion of marijuana manufacturers for scientific research consistent with law,” and “if confirmed…will review the matter and take the appropriate steps.”

Separately, the World Health Organization recommended to the United Nations that marijuana be formally rescheduled under international drug treaties, calling for the whole plant, as well as resin, to be removed from the most restrictive category of the 1961 drug convention. While it remains unclear whether the UN will vote this year or next, history suggests they will follow the guidance of the WHO.

Wall Street firms continued to enter the space, with Piper Jaffray and CIBC analysts initiating coverage of select Canadian cultivators. We believe that this trend will continue as a foundational construct of institutional participation. To that end, Cowen research recently offered that they “believe there is a window for a broad financial policy bill that will act as a vehicle for cannabis banking.”

We have ~20% of our book in private or restricted securities that are slated to come public / become unrestricted by this summer. Most were bought at discounted levels and we’ll continue to look for similar opportunities to prudently supplement our public exposure. We have a high degree of confidence that once cannabis banking is resolved, institutions will articulate cannabis investments through publicly traded securities.

Finally, we’ve been approached by several companies, some of which are in our portfolio, who’ve asked for strategic guidance and introductions. We view this as a natural synergy to our investment management business and an opportunity to drive value and increase the value of our holdings. Accordingly, we will be advising select companies on a go-forward basis and wanted to share that news with you.

As always, please let us know if you have any questions or comments, and thanks as always for your continued support.

Todd Harrison
Chief Investment Officer
CB1 Capital Management

Disclosure: CB1 Capital Management may have positions in any securities mentioned. The mention of specific securities on this website is not a recommendation to buy or sell such securities. There is no guarantee that any of the securities mentioned on this website have been, currently are, or in the future will be, owned by CB1 Capital Management in its clients’ accounts nor that any of such securities have been, or will be, profitable.

todd harrison