The Perfect Storm for Cannabis Stocks (w/ Tony Greer and Todd Harrison) | Summary and Q&A

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December 10, 2020
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The Perfect Storm for Cannabis Stocks (w/ Tony Greer and Todd Harrison)

TL;DR

Todd Harrison discusses the current state of the cannabis industry, highlighting opportunities for growth and the impact of recent political developments.

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Key Insights

  • 🎚ī¸ Recent political developments, such as cannabis approvals at the state level and potential legislative changes, have created a favorable environment for the industry.
  • đŸ’Ē Top MSOs, such as Curaleaf, Green Thumb, Cresco, and Trulieve, exhibit strong fundamentals and growth potential.
  • ⚾ The total addressable market for cannabis continues to expand, with an increasing consumer base and potential legalization in multiple states.
  • ↩ī¸ The cannabis industry offers significant opportunities for investors, with the potential for generational returns.
  • 😘 Valuations in the industry are currently low, while revenue growth rates are high, suggesting the potential for multiple expansion.
  • ✋ Secondary and tertiary MSOs may offer more beta and optionality for investors, although they may carry higher risk.
  • 👾 Canadian companies like Canopy Growth and GW Pharmaceuticals also present opportunities in the cannabis space.
  • 🎭 Scotts Miracle-Gro, closely tied to the cannabis industry, has performed well as a supplier to the sector.

Questions & Answers

Q: How have recent political developments affected the cannabis industry?

Recent political developments, including the U.S. election and state-level cannabis approvals, have created a favorable environment for the industry. Although the blue wave did not occur, the gradual legislative process and increasing consumer base offer opportunities for growth.

Q: What is the significance of the MSOS ETF and its holdings?

The MSOS ETF, which holds multi-state operators (MSOs) in the cannabis industry, provides a great proxy for exposure to the space. Top MSOs like Curaleaf, Green Thumb, Cresco, and Trulieve are considered the best in breed with strong fundamentals and growth potential.

Q: Are we still in a generational opportunity phase to invest in cannabis?

Todd believes that we are still in the early stages of the cannabis industry, offering significant opportunities for investors. With the potential for federal legalization, the entry of mutual funds, and the overall growth of the market, cannabis investments have the potential for considerable returns.

Q: How do valuations and revenue growth rate compare in the cannabis industry?

The cannabis industry is currently characterized by low valuations and high revenue growth rates. Multi-state operators (MSOs) have valuations in the bottom third of all industries, making them attractive investment options. The sector's strong revenue growth suggests further potential for multiple expansion.

Summary & Key Takeaways

  • Todd Harrison believes that March 2020 marked the cyclical low within the cannabis market, and factors like COVID, the need for tax revenues, and social justice initiatives create a perfect storm for the industry.

  • Todd suggests that Mitch McConnell, not Donald Trump, played a significant role in hindering cannabis initiatives in Congress.

  • The blue wave in the U.S. election could have swung the pendulum too far in terms of social justice initiatives, but Todd sees a gradual legislative process as a blessing in disguise for the industry.

  • New Jersey's approval of cannabis and potential domino effects in neighboring states like New York and Pennsylvania are expected to create a significant market and consumer base.

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