This Cannabis Subsector Has Gotten Even More Popular – New Cannabis Ventures
You are reading a copy of this week’s edition of the weekly New Cannabis Ventures newsletter, which we have been publishing since October 2015. The newsletter includes a unique preview to help our readers stay ahead of the curve as well as links to the most important of the week. new.
Three months ago, just before the introduction of the New Cannabis Ventures Ancillary Cannabis Index, we discussed how investors were starting to appreciate ancillary stocks. Ancillary businesses provide goods and services that enable businesses that grow, process or sell cannabis to operate. We have detailed several attributes that make the sub-sector attractive, including not being subject to 280E, the ability to trade on higher stock exchanges, and the ability to span multiple states compared to companies of cannabis limited by a lack of interstate trade.
Although the index has fallen slightly since we introduced it in late March, down 5.3%, it has outperformed the overall market as measured by the Global Cannabis Stock Index, which fell by 7%. , 8% so far this quarter.
Each quarter, the professionally managed Global Cannabis Stock Index is rebalanced, and we just completed that fiscal year this week, with the rebalancing taking place at the close of business on June 30. For a more in-depth look at upcoming changes to the Global Cannabis Stock Index, we encourage readers of this newsletter to join us at our premium subscription service 420 Investor.
The index will include 44 names, including 13 from the auxiliary sub-sector, making it, along with MSOs, the largest sub-sector, each representing 29.5% of the index. Joining the index will be four relatively new names in this sub-sector, including AFC Gamma, Forian, iPower and WM Technology.
The index has changed significantly over the past year in terms of its composition, which is based on trading volumes and minimum price levels. Here are the weightings at 6/30 compared to a year ago, with the ancillary weighting going from 21.6% to 29.5%:
The increase in the number of ancillary companies, as well as the increase in the number of OSMs and international companies, has come at the expense of Canadian LP and CBD companies. Of the 13 names in the index after it rebalanced, 6 made their debut in trading in the past six months.
We continue to believe that investors have a vested interest in paying attention to the ancillary products sub-sector, especially as it has joined MSOs as the largest part of the index. In addition to the benefits relating to direct operators that we have described above, subsidiary companies allow investors to participate in the growth of the industry without having to select the best operators. From our perspective, the ancillary companies provide liquidity to Canadian LPs with the growth prospects of the US cannabis industry.
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Alain and Joël