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.

There will also be delays, like we saw in New York and New Jersey, and at the United Nations, for that matter, and stumbles, as witnessed in the fourth quarter of last year.  And there will be infighting, land-grabs, and lots of duplicity, as if often the case when there are vast sums of money involved.  Capitalists, activists, opportunists, entrepreneurs, social justice-seekers, politicians, scientists, doctors, lawyers, and bankers all want a seat at the table. 

But consider this: cannabis, while still Federally illegal, is already the biggest cash crop in the world and the fastest-growing labor market in the U.S.  And the primary arbitrages central to the secular bull market– time, vs. policy; price, vs. institutional participation; perception, or ‘getting high vs. getting well;’ and liquidity, or scale—are all remain firmly on the horizon.  

If all market moves are defined by three phases – denial, migration and panic – we believe banking reform will serve as the first cusp, paving the way for institutional participation (migration).  As the marketplace saturates with financial products—cannabis funds and ETF’s—we believe clinical trials, or more precisely, awareness of the efficacious agility, will trigger the final phase of panic, or FOMO.

This will take time and arrive in lurching stages.  For instance, as everyone embraced farming and cultivation, margins migrated to the back-end.  As people get comfortable with the CPG story, the “sustainable” side of industrial use-cases will emerge.  And as that takes shape, investors will follow the science to cannabinoid wellness through organic, synthetic and bio-synthetic pathways.

There were several notable events in March, highlighted by the Curaleaf Holdings earnings report.  In addition to reaffirming $400M full-year guidance, announcing a distribution deal with CVS, and locking-up insiders through October, we learned that Blackrock bought $11M of Curaleaf stock.  While that is a rounding error for the $6-trillion asset manager, it was one of the first publicly disclosed investments by a major institutional investor into US cannabis.

In other March news:

· Two separate ETFs were filed in March that would consist of U.S cannabis companies only.

· The House Financial Services Committee Voted on the SAFE Act and House Rules Committee Chair Jim McGovern said the House will vote on the STATES Act “within a few weeks.”

· Citigroup considered working with cannabis companies.

· Harvest to Buy Verano for $850 Million in Largest U.S. Pot Deal.

· Aurora Cannabis Appointed Nelson Peltz as a Strategic Advisor.

As always, please let us know if you have any thoughts or questions. 

Todd Harrison

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.

 
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todd harrison