Tuesday , 12 November 2019


Cannabis Central: A Conservative Approach To Investing In Pot Stocks

This article identifies 7 major consumer and pharmaceutical corporations who have bought into marijuana companies to take full advantage of this rapidly growing market and how well each did in September.

Here are the details of the 7 major partners of marijuana companies and how their stock performance in September compared with their marijuana partners:

  1. Altria Group, Inc. (NYSE:MOhas a 45% stake in marijuana grower Cronos Group Inc. (NASDAQ:CRON). In September:
    • Altria went down 6.5% while
    • Cronos went down 18.5%
  2. Imperial (Tobacco) Brands PLC (LSE:IMB) has a 19.9% stake in Auxly Cannabis Group Inc. (TSXV:XLY), a vertically-integrated cannabis company with diverse international operations. In September
    • Imperial went down 13.0% while
    • Auxly went down 15.2%
  3. Constellation Brands Inc. (NYSE:STZ) has a 38% stake in Canopy Growth Corporation (TSX:WEED; NYSE:CGC), a vertically-integrated cannabis company with diverse international operations. In September
    • Constellation went up 1.4% while
    • Canopy went down 3.5%
  4. Molson Coors Brewing Company (TSX: TPX; NYSE:TAP) has a 57.5%/42.5% joint venture with HEXO Corp. (TSX:HEXO; NYSE:HEXO) known as TRUSS. In September
    • Molson went up 11.95% while  
    • HEXO went down 2.2%
  5. Anheuser-Busch InBev SA (NYSE: BUD) has a $100 million joint venture with Canadian grower Tilray Inc. (NASDAQ:TLRY). In September
    • Anheuser went up 0.69% while
    • Tilray went down 3.6%
  6. Novartis AG (NYSE:NVShas a global agreement with Tilray Inc. (NASDAQ:TLRY) which allows Tilray to use the Sandoz supply chain, sales force and global distribution network to distribute Tilray medical cannabis products. In September
    • Novartis went down 3.5% while
    • Tilray went down 3.6%
  7. Alimentation Couche-Tard Inc. (TSX:ATD.B; TSX:ATD.A), one of the world’s largest convenience shop retailers with 16,000 stores in 25 countries, has a 9.9% ownership (with the potential to increase to  50.1% in Fire & Flower Holdings Corp. (TSXV:FAF). In September
    • Couche-Tard went down 3.0% while
    • Fire & Flower went down 9.2%

In summary:

The 7 consumer products/pharmaceutical companies:

  • were down 3.6% on average in September compared to their associated marijuana companies which were down 5.86% on average,
  • have a very low average beta of only 0.70 compared to a very high 3.5 for their associated marijuana companies on average and
  • 6 of the 7 consumer products/pharmaceutical companies (i.e. excl. Couche-Tard) have dividends that yield 1.3% on average while none of the marijuana companies have dividends.

Conclusion

Taking a look at the performance of the above companies one could conclude that conservative investors who want to invest in marijuana stocks might be better served by investing in the above mentioned major corporations than in their associated cannabis companies. 

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