Posting has been less frequent than usual – while I’ve been tending to some life (and peppers) – it doesn’t mean we haven’t been busy.

I’ve been over-hauling my core capital models – an annual occupational hazard – to adjust for changes in share structure and optionality, as well as Incremental acquisitions and topside adjustments. Most of the time – it’s largely incremental, but installing $AYR.B’s purchase rampage and $CURA’s international foray took time (yet still I haven’t been able to back into $AYR.B’s reported derivative liability. Sigh. One of those small things that stays in one’s head….. I’m gonna bulldog it eventually 😊).

GoBlue’s been extending our thoughts on Asset Quality – and the discussions we’ve been having are the forward looking information sell-side doesn’t mention. His full research is coming imminently now posted.

Speaking of sell-side, a Jefferies analyst put out a real pump piece (dutifully reported/repeated across multiple channels and platforms…with all of the buzzword bingo one could ever hope for from a salesperson.

This is called a sales cycle – and the impending drop of Chuck Schumer’s Bill, widely signalled to happen this month – is perfect tinder to reignite interest after the previous sales cycle that began late last summer and ran out of gas in February. Since then, there’s been a ton of sideways chop in the MSO space, with few companies able to get back to anywhere near those spring heights.

Below is a graph of the ‘big’ MSOs ($CURA/$TER/$CL/$TRUL/$GTII):

TheCannalysts believe that NY State’s announcement put a stick in the spokes of sector interest. We also believe that despite valuations running (largely) in tandem- there is a wide variance in the quality underpinning assets they present.

I also see advancing interest in $GTII as representative of a higher grade of asset(s) within their fleet.

And I’ll put nuance to the persistent claims about ‘volume’ limitations that are made by sell-side that CSE/TSX-V listings are preventing wider market interest and participation. Strictly speaking: yes, it’s true. I’ll also claim that no institutional is going to purchase assets for more than what they put a value to them, aside from trade position.

So that puts us into a place where us, TheCannalysts – an independent outlet doing independent research and analysis, has as a comparative for information – a financial sector machine…..that at its’ core…. is simply an advertisement. Sell side makes money book-running; Investment Banks make money on derivatives and asset valuation and credit; Funds make money on management expense ratios. And the thing that makes that sector sing in unison is the prospect of fresh capital inflows.

The world is coming out of a (hopefully) once in a lifetime pandemic, and there is a whack of liquidity and increased interest in equity markets to supply those inflows.

As it is, yesterday’s advances in MSOs is counterbalanced this morning by the same metronomic cadence we’ve watched over the past few months. And I’ll reiterate……holding short-term volatility requires recompense:

I’ve been thinking a lot lately about the next 3-6-9 month windows. While Blue divines where there’s dirt hidden under some of the MSO rugs – I realize there is an entire sector of hype and energy and cross-selling that’s going to be putting buzzwords like ‘“Generational wealth” “All names a Buy” “Average upside 100%” out with shameless guile.

Blue remarked pithily that the only generational wealth that’s guaranteed here is for investment banks and cannabis executives. And I fully agree.

We can’t tell the future. The MSOs could bolt again and hold, or, remain sideways moving and high volatility. Perhaps there’ll be a gradual (or faster) decoupling – something that we witnessed in the Canadian sector – but horribly glacial to watch from an investing perspective. My gains on many equities took several quarters to realize, and it was only on fundamentals (loosely, and relative) that they came about. Many have made a lot of money speculating on sector/company interest – and that’s cool.

Just be aware of the risk, and put funds at risk that you can live with becoming smaller, or static. You’re not going to hear that from sell-side, and they sure as hell aren’t going to keep you whole if your darling lays down because it’s entire fleet of cultivation just became worth 10% of where it was.

Just because we’re on the cusp of the ‘new’ product class with known demand and profitability being introduced widely doesn’t mean that the current formation and assets within it are going to attract superior returns in the short-to-midterm. There’s a beauty to seeing something like cannabis come in from the cold, and new business and people being able to realize their dreams.

Regarding equities, Caveat Emptor.

I’ve wrapped several days in the spreadsheet trenches….(also incorporating the Cresco Labs NCI took a ton of research)…and normal programming returns now.

We thank you for your support.

The preceding is the opinion of the author, and is in no way intended to be a recommendation to buy or sell any security or derivative. The author holds no positions in any of the companies mentioned.