In the latest Marijuana Market Update, I talk about the state of cannabis stocks in 2021 and what’s next.
I also show what cannabis investors seem to care more about when picking stocks to buy.
Finally, I tell you about an American company poised to breakout with recent legalization news.
The Cannabis Market in 2021
It hasn’t been the easiest year for cannabis stock investors.
2021 started strong, as talk about federal legalization of marijuana reached new heights. Members of the U.S. Senate were having serious discussions about the matter.
Since then, as with many things involving Congress, cannabis has taken a backseat. And companies remain left to their own devices.
We can look at the Money & Markets Cannabis Index to track the performance of the broader cannabis market.
The index looks at U.S. traded cannabis companies with a market cap of more than $10 million and equally weights the index.
In February, the index jumped from its baseline of 100 in January to more than 260 — more than doubling its value.
That lasted about a day before cannabis stocks pulled back and continued downward into August, where the index reached a low value of 148.49.
Then, we started to see a push up into late September when the index climbed to 187.64 — still not February numbers, but better than it had been for months.
It was followed by another pullback — followed by a new recent high of 194.21 in mid-November.
Then yet another pullback brought us to the present — 159.63 — about 60% up from the beginning of the year, but 41% off the index’s 52-week high.
It has been an extremely volatile year for the cannabis market.
One Company for 2022 (CCHWF)
As for individual companies, multistate operators (MSOs) aren’t doing as bad.
In the third quarter of 2021, 10 of 11 top MSOs saw a positive change in revenue quarter-over-quarter.
Pull out year-over-year, and all 11 analyzed by Marijuana Business Daily grew.
Columbia Care Inc. (OTC: CCHWF) reported $132.3 million in quarterly revenue — up 21% from the previous quarter and up a whopping 144% from the prior year.
However, Columbia Care reported a loss of $37.2 million for the quarter — which is exactly what potential investors are looking at.
In fact, six of the 11 MSOs analyzed reported losses in the third quarter, despite increasing sales.
Columbia Care holds licenses to sell cannabis-based health products in 18 jurisdictions in the U.S. and European Union (EU).
It has 99 dispensaries and 31 cultivation and manufacturing facilities.
Reporting a 21% quarter-over-quarter and 144% year-over-year increase in revenue would suggest this stock is hot with investors.
But, as you can see, it’s not.
Since reaching a high of $7.65 per share in February, CCHWF has been in a downtrend, falling to $3.04 per share on November 30 — more than 60% below its 52-week high.
Investors are more worried about the lack of legalization movement coupled with the $37 million loss the company reported.
But true cannabis investors can look beyond that and spot a company with good potential.
With Columbia Care, you have a multistate operator with a footprint in the EU. And, with Germany on the verge of opening one of the largest markets in the EU by legalizing cannabis, Columbia Care is positioned to exploit that.
Savvy cannabis investors may spot that Columbia Care is already selling its products in the U.K. and Germany — including starting a joint venture with Moeller Pharma GmbH in 2019 to sell cannabinoid-infused products.
Bottom line: I think Columbia Care has the potential to see a nice bounce back from its lows and, with a little more upside momentum, could present a very good buying opportunity for a long-term investment.
The bottom line is, as a smart cannabis investor, you have to look beyond the bottom line and the lack of news headlines related to legalization in the U.S.
While the U.S. is the largest cannabis market worldwide, it doesn’t mean companies that think ahead and position themselves for the future should be discounted.
As long as traditional investors are only looking at short-sighted potential and not for the long-term, cannabis stocks will continue to struggle, but that could open up nice buying opportunities, like Columbia Care, for smart cannabis investors like you.
If you have a question about a cannabis stock or the market, just email me at Feedback@MoneyAndMarkets.com. Send us a question and you can get free Money & Markets gear.
Where to Find Us
Coming up this week, we’ll have more on The Bull & The Bear podcast, so stay tuned.
And check out our Ask Adam Anything video series, where we ask any question to chief investment strategist Adam O’Dell, as well as our Investing With Charles series, in which our expert Charles Sizemore and I discuss the trends you write in to ask about.
Also, you can follow me on Twitter (@InvestWithMattC), where I’ll give you even more insights, not just in the cannabis market.
Safe trading,
Matt Clark, CMSA®
Research Analyst, Money & Markets
Matt Clark is the research analyst for Money & Markets. He is a certified Capital Markets & Securities Analyst with the Corporate Finance Institute and a contributor to Seeking Alpha. Prior to joining Money & Markets, he was a journalist and editor for 25 years, covering college sports, business and politics.