https://preview.redd.it/xlja2io9ksme1.png?width=800&format=png&auto=webp&s=7f1cd7414e4451d5f0fced80c4b369e3b5014b08
Cannabis was a shit trade over the last 4 years. Anyone who touched the sector was immediately sent to baggy land. The $MJUS ETF got delisted, market caps down 90%+, the AUMs of cannabis funds sliding to zero, there's zero investor confidence.
Look at that shit stain of a chart.
https://preview.redd.it/t327lusxasme1.png?width=880&format=png&auto=webp&s=48ab666c7b4de79cc30c7f58738dcb2a15b8090d
Guh
Anyone around in 2021 was familiar with the cannabis bull run. Stinky stoner teens in their moms' basements tossing their stimmy checks at shit like Tilray. It was all garbage. Everyone knew it, but the bet was federal legalization would bake in all the hype valuation.
After 🥭left in 2020, weed bulls were hype for ♿. Biden hit the office in 2021 and made it clear he didn't care about federal legalization. Efforts in congress grinded to a halt. Momentum faded and so did the share price.
Wishful thinking slapped the hand of dipshit trendfollowing retail yet again (I see you, $PLTR baggy!), and has seriously punished anyone holding cannabis over the last 4 years.
But of course, where there's enough blood in the water, you buy.
$CNBS is basically the last way to get broad exposure to US weed stocks now. All the other ETFs died. Here's what they hold.
https://preview.redd.it/nm631kpobsme1.png?width=561&format=png&auto=webp&s=8d67edb3fc075fe0d3f03e08f90f6281d022d766
And honestly, the valuations on these companies look **really fucking attractive** now.
Let's crack open Green Thumb, 1.6B market cap.
https://preview.redd.it/ssem3fzvbsme1.png?width=933&format=png&auto=webp&s=77242229227d439e25bd3e6eb3f2a92c1c5a9d6a
Share price down 90%+ has led to the company trading for \~7x operating income.
You also get $711M of tangible book value. That's basically half the market cap.
Of course, management for all these cannabis stocks were busy smoking the product in 2020-2022 and decided to acquire a bunch of shit for way more than they should have. This has inflated their goodwill on the balance sheet substantially, but their return on tangible assets is actually really good.
You can calculate the Buffett Return (similar to ROIC/ROA) to get an idea of how they are pushing income on their assets:
**Buffett-style Return Calculation:**
* Buffett-style Return = Owner Earnings / (Inventory + PP&E)
* Buffett-style Return = $245,012,000 / $550,163,000
* Buffett-style Return ≈ 0.445 or 44.5%
Green Thumb looks super attractive **at today's sales and revenue, assuming ZERO growth.** Their return is quite high, you're getting the business with substantial tangible book value, and at a single digit multiple to operating income. What else could you ask for?
That is the recurring thesis you will see with these holdings, that pessimism has peaked to the point that **weed could never be federally legal, no future states could choose to legalize, and the valuations here still make sense.**
Let's move to holding #2 Trulieve
https://preview.redd.it/mryat9i7fsme1.png?width=832&format=png&auto=webp&s=5f3e16d1016893fbee1989aea72d2811d36ccdd4
Stinky EBITDA after taxes.
What sucks about this industry is that the tax bills are massive. They're against the revenue and not the operating income of the business, so there's no real way to avoid them. They're also really, really high. But, it doesn't make Trulieve uninvestible.
At 775M market cap, Trulieve has 487M in tangible book value, about 2/3 of the market cap. That's a wild margin of safety. COGS and OPEX are also decreasing significantly. It looks like their gross margins are substantially increasing though. The stock looks pretty cheap at \~4X EBITDA. Even if we use their shitty EBITDA-Taxes, they're trading at \~7x the 3 year average.
Finally, I want to look at Curaleaf.
https://preview.redd.it/by7x70h2jsme1.png?width=826&format=png&auto=webp&s=4342887167ea0fa5d5d1ba792459fae65266c375
Beautiful profitability and steady with the revenue while increasing their margins. Always great to see.
At 780M market cap, Curaleaf actually has negative tangible book value of 800M. But you're paying 780M market cap for an amazing reason. The company is trading for about 4X cash flow, easily the best value proposition on an income multiple.
**My position:**
I am currently holding 500 shares long of $CNBS for around $10,000.
https://preview.redd.it/pny1ljdejsme1.png?width=862&format=png&auto=webp&s=17e21b417618d101699f7deb0d64d276a5c5bc52
I believe the tariff talk has caught these stocks in an unintentional crossfire considering the close Canadian ties. Obviously the chart technicals don't help.
Honestly, I'm bias towards buying deep value situations under deep investor pessimism. It's [how I made my bags on $BABA](https://www.reddit.com/r/wallstreetbets/comments/1h55bbd/china_bad_baba_good_dd/?utm_source=share&utm_medium=web3x&utm_name=web3xcss&utm_term=1&utm_content=share_button) which is up over 50% in the past 3 months since posting. These situations where investor emotions are clouding business fundamentals are my bread and butter, and hopefully some people here see the value as well.
I'm comfortable holding a relatively small position in Cannabis. If we don't get legalization, these bets are placed at fair value for their current operations. If we do get legalization in more states, or federal legalization, you know exactly what these stocks are doing. Up, up, up, but downside here is very muted. Asymmetrical risk at its finest.
TL;DR: Buy weed stocks, they're cheap, sentiment is horrible, can't really get worse from here. $CNBS