Key insights
- The article discusses the potential positive impact of new US marijuana deregulation on cannabis stocks. It highlights Green Thumb Industries, Curaleaf, Trulieve, and Cresco Labs as potentially benefiting from improved access to financing and investments. The author suggests that regulatory catalysts could drive growth in the sector, despite past underperformance. The analysis points to attractive EV/EBITDA and EV/FCF ratios for some of these companies.
I know, I know, marijuana stocks are not the classic " Ben Graham" value play, but who cares? Regulatory catalysts can often push an entire industry out of the doldrums and finally allow quality capital allocators to thrive freely and legally. The marijuana space has been held back because of decades of regulatory constraints; the industry should finally be able to operate " properly", access financing and investments like any other business in a capitalistic society. The market should be left to determine the true value of these operators, not technocratic sanctioning bodies and complex legaleses.
Here is a small sample of potentially interesting marijuana related stocks for those who prefer the perfumed aroma of their investment account to the stench of marijuana vapes. Bottom line is to make money, so let's go.
1- Green Thumb Industries ( Green Thumb Industries Inc. (CSE:GTII)
Market Cap of CAD $2.4B, profitable, share buybacks, stock is up 45% y/y but down 70% in 5yrs. One of the soundest operators in the space. Should really benefit with the recent laws. The stock's EV/EBITDA ratio is 6.27, with an EV/FCF ratio of 9.51. Pretty solid company.
2-Curaleaf Holdings (TSX:CURA)
Stock is up by more than 300% y/y. The Canadian did not wait for US deregulation to pop off. Great name in the industry, stock is still down -60% from 5 years ago. revenues $1.74 B and positive net FCF. Earnings have been shacky but could be unlocked by new US deregulations.
3-Trulieve Cannabis Corp. (CSE:TRUL)
Trulieve Cannabis Corp. operates as a cannabis retailer in the United States. The company cultivates, processes, and manufactures cannabis products and distributes its products to its dispensaries, as well as through home delivery.
The stock is down -70% from its 5 years highs. The stock's EV/EBITDA ratio is 5.23, with an EV/FCF ratio of 8.14. Another potentially benefitiary of the renewed regulatory unlock.
4-Cresco Labs Inc. (CSE:CL)
The stock price has increased by +86.36% in the last 52 weeks. The beta is 1.64, so Cresco Labs's price volatility has been higher than the market average. FCF Yield 8.54%. The stock is still down about 80% from its 5yrs peak.
5-Organigram Global Inc. (TSX:OGI)
Looks a lot like a pure cigarbutts value play that should entice classic Grahamites. PB 0.72, net equity of 308M, PROFITABLE despite slight cash flow challenges. The assets are cheap, isn't that what Ben Graham preached?
Last but not least, $SNDL. The business sells below net enterprise value, low debt is always a plus. PB 0.43. The company is currently valued below 1/3 of its net tangibel BV. Free cash, $42M and the stock is down -80% in 5 years. Sounds appealing, doesn't it?
I also like $MAPS, but the company recently voluntarily filed to be removed from Nasdaq. The stock has halved on the news, but the company's moat as the leading aggregator of marijuana shops and stores is unique. The stock currently trades at near its net cash with an outstanding 20% FCF yield. Stock is down 50% y/y.
Happy value investing. I focus on uglystock; issues that have been discarded, abandoned, ignored, left for dead, and I try to acquire some of them and wait for the market to re-rate and reconsider.
Not investment recommendation or advice. Consult a certified financial advisor.
xoxo