Strategy over the next month or twoWell cannabists i think it is time to talk strategy:
I think the time to start scaling back into weed stocks is when we have more clarity on the China/US trade war and when we have the results of impeachment in our rear view window.
Some might say that it is appropriate to start scaling in now given how beaten up the sector has become. I'm still not convinced that we won't see further deterioration in the cannabis sector because the broader market is looking so shakey due to:
1. China signaled today that it is in no rush to get the trade deal done with the US. Xi apparently is eating popcorn and enjoying the impeachment proceedings. If i was Xi I would do nothing until it wraps up and you know who you are dealing with in the USA. So with trade talks still not finalized and China signalling that they are going to take a wait and see approach I still don't think it is time to jump back into weed stocks of any kind whether it be Canadian LPs or US MSOs;
2. Many of these weed stocks still have massive write downs to get the goodwill and intangible assets that were over paid for off the books. Balance sheets are not healthy and Canopy, Aurora and Aphria have not done enough yet to clean it all up. Surprised they did not clean it up with these earnings. Now was a good time to take maximum pain I think rather than taking off the band-aid slowly over several quarters. So with hundreds of millions in write downs still to occur for so many Canadian LPs and some of the US MSOs I am not sure that now is the time to be scaling in;
3. There are no catalysts on the horizon right now. States Act going nowhere in the Senate. Germany and the rest of Europe not progessing all that well. Just nothing of great optimism to hang a hat on right now and I don't see any reason to get back in until the Republicans stop being such d*ck heads when it comes to legalization.
When will I start scaling back in? i will scale back in when:
a). The China/USA trade war strarts wrapping up;
b). The Republican Senate starts to talk seriously about passing the Safe Banking Act and it looks like it will get done and include the participation of US Capital Markets so that the MSOs can get off the shitty CSE exchange;
Who am I looking to scale back into:
1. Trulieve (looking forward to seeing their results this afternoon...so far one of the only bright lights in the sector. Although there is hair on this one with Kim River's husband being charged with corruption);
2. Green Thumb Industries (definitely one of the better managed companies so far and I look forward to seeing how their last quarter has gone later this week)
3. Ianthus (this company has been incredibly beat up and I think they may be worth a hell of a lot more than the market thinks they are right now...again earnings coming up soon)
4. Cresco (don't understand the Origin House deal enough. Don't understand why Cresco closed that deal given the current market conditions. Might be great and i have my eyes on them)
5. Organigram. If OGI drops down into the $200 million market cap range I will take a serious look at them for the long term.
6. Aphria. If APH drops down into the $400 million market cap range I will take a serious look at them for the long term.
7. WEED. If Canopy's market cap falls to what it has in cash + $1 billion for its assets (total of about $3 billion market cap) I will seriously thinking of buying back in for the long haul.
Bottom line: Cash is king right now. I hate being patient, but I think it is required right now given everything that is going on in the broader world and the sh*t show that is the cannabis industry right now. If these stocks get beat up more because of global economic conditions they should become outstanding buys is my thesis. So I hate to say it but I am taking a Cronos point of view and sitting on cash and hoping to buy asets for nickels on the dime.