U.S. Investing

Cannabis Corner: New York Tests the ‘Green Map’ Theory

A lot of cannabis investors like to think every state that opens up to recreational sales will dramatically expand the market, as well as turning another spot on the map bright green.

I’ve never been a fan of that theory. As far as I’m concerned, people will travel to get the regulatory framework they want, effectively shopping for the cannabis laws that fit their interests.

Cannabis tourism in the early years pushed a lot of vacationers to Colorado and Washington before other states like Nevada responded in an effort to keep those leisure dollars from drifting elsewhere.

All in all, the market didn’t really expand as much as expected after every new state opened up. The existing pool of consumption simply broadened out geographically, without bringing a lot of fresh money to the overall table.

And if you still need convincing, just look at the cannabis stocks this week. New York finally agreed on a plan to legalize recreational sales and big names like Canopy Growth Corp. (NYSE:CGC) and Tilray Corp. (NASDAQ:TLRY) took a huge step backward.

Good news if you believe that the map is key to the industry’s future. Bad response.

The narrative only adds up when you accept that the map and the business model aren’t highly correlated after all. The map can expand and the stocks retreat.

Besides, we’ve seen the stocks soar without the map expanding at all. My proprietary cannabis index is still up 70% year to date after the last few weeks of selling.

Several companies like TLRY have doubled or even tripled in a matter of months. That’s not the map. That’s just the way money flows on Wall Street.

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Hilary Kramer

Hilary Kramer is an investment analyst and portfolio manager with 30 years of experience on Wall Street. The Financial Times describes Ms. Kramer as “A one-woman financial investment powerhouse” and The Economist distinguishes her as “one of the best-known investors in America”. Ms. Kramer is often quoted in publications such as the Wall Street Journal, New York Post, Bloomberg, and Reuters. She is a frequent guest commentator on CNBC, CBS, Fox News and Bloomberg, providing investment insight and economic analysis. Ms. Kramer was an analyst and investment banker at Morgan Stanley and Lehman Brothers. Ms. Kramer founded and ran a long-short hedge fund and has been chief investment officer overseeing debt and equity portfolios. Since 2010, Ms. Kramer’s financial publications have provided stock analysis and investment advice to her subscribers. Her products include GameChangers, Value Authority, High Octane Trader, Triple-Digit Trader, 2-Day Trader, IPO Edge and Inner Circle. Ms. Kramer, a Certified Fraud Examiner, has also testified as an expert in investment suitability, risk management, compliance, executive compensation, and corporate governance. Ms. Kramer received her MBA from the Wharton School at the University of Pennsylvania and her BA with honors from Wellesley College. Ms. Kramer has provided testimony regarding investment policy to the U.S. Senate and is a frequent speaker on the markets, portfolio management and securities fraud and compliance. Ms. Kramer is also the author of “Ahead of the Curve” (Simon & Schuster 2007) and “The Little Book of Big Profits from Small Stocks” (Wiley 2012).