You’re reading this week’s edition of the New Cannabis Ventures weekly newsletter, which we have been publishing since October 2015. The newsletter includes unique insight to help our readers stay ahead of the curve as well as links to the week’s most important news.
Friends,
We have been very clear for quite some time: There are better Canadian LPs to buy than Canopy Growth and Tilray, which are the most popular ones. One that we have suggested in the past is Organigram. What a week!
We know that some bad news came out this week for both Canopy Growth and Tilray. The former sold stock at a big discount, and the latter missed analyst expectations for its fiscal Q2 as it burned a lot of cash. We aren’t sure why people plowed into Organigram on Thursday. Perhaps some investors were finally figuring out the story of British Tobacco investing more at a big premium.
We trimmed Organigram in our model portfolio at 420 Investor on Thursday, but we added it back near the low on Friday, down more than 6% from where we had sold some. It is currently about 20% of the portfolio.
Our research, which we shared here in prior newsletters, suggests that Organigram is much cheaper than its larger and more popular peers, and this remains the case in our view. If the U.S. reschedules cannabis and wipes out 280E, Organigram will likely not perform as well as the large MSOs in the U.S. If 280E remains, though, it will hold up much better due to its valuation and its strong balance sheet. Even up so much year-to-date, the stock trades at just 0.6X tangible book value.
Here is how Organigram compares to Canopy Growth and Tilray over several months since the middle of 2023:
While the stock has been hot recently, it is trailing the two since the end of June. Organigram has a lot of cash and no debt, and it trades below tangible book value. Tilray trades at about 4X. Canopy Growth trades near tangible book value, but it is selling stock there to stay afloat.
The Canadian cannabis industry remains challenging, and perhaps Organigram will not thrive. It will, however, hold up better than Canopy Growth and Tilray, both of which are burdened by substantial debt.
New Cannabis Ventures publishes curated articles as well as exclusive news. Here is some of the most interesting business content from this week:
Exclusives
Cannabis Markets Show Improved Growth in November
Illinois Cannabis Sales End 2023 Strongly
Capital Raising
4Front CEO Exits as Company Converts Debt to Equity at Discount
Canopy Growth Sells Stock at US$4.29
Financial Reporting
Tilray Q2 Cannabis Revenue Declines 5% Sequentially
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Sincerely,
Alan & Joel
