Cannabis Corner: Relief or Rally?

CANNABIS CORNER: RELIEF OR RALLY?

Big Cannabis had a great week, with most of the stocks on my screen rebounding 8-20%. But don’t get too excited yet. With the S&P 500 up 12% since March 3, those gains are really only in line with Wall Street as a whole.

These stocks are still battered. It has been a bad year for the industry as euphoric expectations have collided with the hard market reality.

I am reluctant to recommend the group until reality looks a little brighter. In the absence of a sudden increase in demand, that means resolving the lingering supply imbalance.

And that, in turn, means consolidation. We are going to need to see one or more of the weakest cannabis farmers suspend normal operations before the stronger names become interesting as long-term investments.

This week’s market activity tells me Hexo Corp. (NYSE:HEXO) might be the one that needs to go before Canopy Growth Corp. (NYSE:CGC) and the others get back to work.

It will happen. We simply need to remain disciplined and pick our positions carefully.

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).