Nick Gastevich, known as CannaVestments, discusses Q3 cannabis efforts and companies protecting shareholders. Future of 280E and 7 stocks analysis. Retail investors navigating industry intricacies
Focus on companies with transparent reporting and good capital stewardship like Green Thumb Industries (GTI).
Consider balance sheet quality, operational stability, and potential catalysts when investing in the volatile cannabis market.
Deep dives
Market volatility and focus on cash flow and profitability
The cannabis market is currently experiencing volatility, with ups and downs influenced by factors like news around schedule three and federal-level developments. Companies are focusing more on cash flow and profitability after years of prioritizing growth. The Q3 earnings reports indicate that efforts to control costs and right-size operations have started to pay off. Companies like GTI and Curaleaf have demonstrated success in this regard. Some smaller players, like Grown Rogue, have also shown impressive cash flow and adjusted EBITDA figures despite operating in challenging markets like Oregon and Michigan.
Transparent reporting and good stewardship
Companies that provide transparent reporting and maintain good stewardship of capital are more favorable to shareholders. Green Thumb Industries (GTI) stands out for its strategic market allocation and financial discipline. However, there is room for improvement in terms of transparency and communication with shareholders. Truly, another major player, has shown improvement in its cash flow profile and effective cost management, despite a decline in top-line revenue. Companies like Verano, Glass House, and Planet 13 have also demonstrated good balance sheet management and operational excellence. However, negative aspects include high interest rates on preferred shares in the case of Glass House and debt overextension in the case of Planet 13.
Timeline uncertainty and portfolio allocation
Investors need to consider their risk profiles and investment timelines carefully when allocating their portfolios. Given the uncertain timeline of federal reform, it is important to balance investing in companies for potential catalysts with a conservative approach focused on balance sheet quality and stability of operations. Allocation in ETFs, like MSOS, can provide exposure to the cannabis industry, while Canadian names offer unique opportunities but also face challenges such as excise taxes. Additionally, investors should consider factors like 280E tax reform and its potential ramifications on companies' earnings and overall industry normalization.
Evaluating individual companies and assessing potential
Analyzing individual cannabis companies requires a comprehensive approach. Companies like Green Thumb Industries (GTI) have shown good financial management and strategic market choices. However, transparency and communication with shareholders are areas that can be improved. Other companies, like Truly, Curaleaf, Glass House, and Planet 13, have strengths in different areas, but also face challenges such as revenue decline, overextending growth, and unfavorable financing options. It is crucial to thoroughly evaluate each company's financial performance, market potential, and risk factors to make informed investment decisions in the cannabis industry.
Nick Gastevich, aka CannaVestments, talks Q3 cannabis efforts; avoiding dilution, equity raises or adding further debt (2:30). Navigating the industry as a retail investor; companies that protect shareholders (14:00). The future of 280E, catalysts definitely needed (24:00). 7 stocks - what's working, what's not (30:00).
