#25 - Big Predictions for 2020 Cannabis Investing
In this episode we make some predictions for what is to come in 2020 for cannabis investing. In this episode:
1. "The Great Divide" - Winners & Losers Emerge
- Mentality will shift: sector will stop moving as one and winners will emerge
- Shifting from ETF mentality to stock picking (from passive to active)
- Example: Trulieve should separate from the pack given their isolation in Florida and strong financial performance
- Losers will lose HARD while winners will distinguish themselves
2. Predicting Sales for Canada in 2020
- The $3B sales bet...under or over?
- Major catalyst for 2020 sales with Cannabis 2.0 and Ontario store increases
- Will be a slow rollout for both, so the ramp will be gradual
- Many unknowns still to be seen (like how Beverages sell)
- Still a short list of winners in Canada who will be in a better position in 2021
3. The US & Canada - The Separation Begins
- US will begin to outperform Canada
- Illinois and Michigan will prove to be very strong markets with a strong ramp in 2020 but will really shine in 2021
- Data and results will drive investors to invest in the US in 2020
- 280E Taxation remains the biggest issue US operators will face
- Big States which may go Rec: Pennsylvania, New York, New Jersey, Arizona (I mentioned Florida but their initiative is now dead)
- New Jersey seems the most likely and represents a very lucrative market ("Florida 2.0")
- Mexico story looks promising, Europe story is less attractive
- CORRECTION: MediPharm did NOT get their EU GMP certification yet, they got their Australian GMP
4. Rough Patch Ahead - Be Careful!
- Capital crunch has turned into a capital crisis - very difficult to raise funds
- Very few companies have gone under despite being very close to it
- Circle the Drain Financing: Desperate companies will take crappy deals to try to save the ship
- Some companies will turn it around, others won't
- Bankruptcies will cause a domino effect and pull many others down with it
- Ramp up of sales in Canada will be slow and won't be fully realized until H2 2021
- The general cannabis market will get punished as this occurs
- There is no bottom for crappy companies! Some will go to zero! Especially those low on cash and burning fast
- The companies who survive will come out stronger and better positioned
5. M&A From Unlikely Sources
- Companies will look to merge to survive...but cash is king!
- Potential for non-cannabis companies with cash on balance sheet combining with struggling cannabis companies
6. Up & Downs Continue
- Things will not go straight up or down. Volatility will continue
- FOMO is dead. Be patient, be picky and take profits!
- No federal legalization in US in 2020 but 2-3 major states to go rec
QUESTION: What are your predictions? Email us!