Cannabis Corner: Shakeout Coming

Hilary Kramer

Hilary Kramer is an investment analyst and portfolio manager with 30 years of experience on Wall Street.

The big cannabis stocks I track are down another 20% this week in the aggregate. Why am I so excited?

First, we dramatically reduced exposure to the commodity plant producers months ago. The suffering long-term shareholders are feeling now doesn’t apply to us. 

Second, the pattern of the losses suggests that investors are finally recognizing that these stocks are not interchangeable. They shouldn’t all move together.

Instead, strong companies should support strong stocks. They’re defensive. They’re built to last. As such, they should perform better when the market lurches lower.

Canopy Growth Corp. (NYSE:CGC) is the giant in the group. With a drop of only 10% this week, it looks a whole lot better than small rivals like Hexo Corp. (NYSE:HEXO) and  

Tilray Inc. (NASDAQ:TLRY), where the losses have been truly apocalyptic.

Once we see a few of these little companies exit the business entirely, room will open up for the survivors. 

That’s simply how consolidation works. It can look cruel when you’re in the middle of the process but, ultimately, it’s a kindness that spares the strongest competitors. 

At that point, the winners can finally enjoy the rewards of their business strategies. We’re not there yet, but the day is coming.

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