Cannabis Corner: Shakeout Coming

The big cannabis stocks I track are down another 20% this week in the aggregate. Why am I so excited?

First, we dramatically reduced exposure to the commodity plant producers months ago. The suffering long-term shareholders are feeling now doesn’t apply to us.

Second, the pattern of the losses suggests that investors are finally recognizing that these stocks are not interchangeable. They shouldn’t all move together.

Instead, strong companies should support strong stocks. They’re defensive. They’re built to last. As such, they should perform better when the market lurches lower.

Canopy Growth Corp. (NYSE:CGC) is the giant in the group. With a drop of only 10% this week, it looks a whole lot better than small rivals like Hexo Corp. (NYSE:HEXO) and

Tilray Inc. (NASDAQ:TLRY), where the losses have been truly apocalyptic.

Once we see a few of these little companies exit the business entirely, room will open up for the survivors.

That’s simply how consolidation works. It can look cruel when you’re in the middle of the process but, ultimately, it’s a kindness that spares the strongest competitors.

At that point, the winners can finally enjoy the rewards of their business strategies. We’re not there yet, but the day is coming.

Hilary Kramer

Hilary Kramer is an investment analyst and portfolio manager with 30 years of experience on Wall Street. The Financial Times describes Ms. Kramer as “A one-woman financial investment powerhouse” and The Economist distinguishes her as “one of the best-known investors in America”. Ms. Kramer is often quoted in publications such as the Wall Street Journal, New York Post, Bloomberg, and Reuters. She is a frequent guest commentator on CNBC, CBS, Fox News and Bloomberg, providing investment insight and economic analysis. Ms. Kramer was an analyst and investment banker at Morgan Stanley and Lehman Brothers. Ms. Kramer founded and ran a long-short hedge fund and has been chief investment officer overseeing debt and equity portfolios. Since 2010, Ms. Kramer’s financial publications have provided stock analysis and investment advice to her subscribers. Her products include GameChangers, Value Authority, High Octane Trader, Triple-Digit Trader, 2-Day Trader, IPO Edge and Inner Circle. Ms. Kramer, a Certified Fraud Examiner, has also testified as an expert in investment suitability, risk management, compliance, executive compensation, and corporate governance. Ms. Kramer received her MBA from the Wharton School at the University of Pennsylvania and her BA with honors from Wellesley College. Ms. Kramer has provided testimony regarding investment policy to the U.S. Senate and is a frequent speaker on the markets, portfolio management and securities fraud and compliance. Ms. Kramer is also the author of “Ahead of the Curve” (Simon & Schuster 2007) and “The Little Book of Big Profits from Small Stocks” (Wiley 2012).