If investing in small-cap stocks wasn’t enough of a rush, take a look at investors in small-cap cannabis stocks. Even the mature, multi-billion dollar names move up and down like a rollercoaster. Friday’s action was no different, except this time, shares in leading cannabis stocks were moving higher, not lower.
Cannabis Stocks on CMI Soar
After a tumultuous week which saw a continued broad sell-off in many marijuana-related plays, weed stocks rebounded. The Canadian Marijuana Index gapped up 4.68% or 34 points to close at 781.21. The index is fighting to find support after falling below 800.
Canadian Marijuana Index – 3 Month Chart
The broader North American markets rebounded Friday, easing fears of contagion, giving marijuana stocks a boost. Aphria, one of 18 constituents that make up the Canadian Marijuana Index, helped move the market Friday after some strong words from its CEO.
Aphria CEO, Vic Neufeld predicts “there will be supply shortages in the early stages of adult use, including from Aphria, as the industry crosses a major inflection point.”
He also predicted the “Whole program is in big trouble” if not fixed by January, according to a Bloomberg article this morning.
CSE Soars as Weed Stocks Recover
The CSE that we’ve dubbed Canada’s marijuana exchange had a great day. Liquidity remains strong on Canada’s junior exchange which is attracting U.S.-based marijuana issuers. We wrote about this phenomenon in US Cannabis Deals Target Canadian Securities Exchange – Canada’s Marijuana Exchange.
We are entering a critical period for Canadian marijuana plays with recreational legalization set for next week in Canada. The U.K. announced yesterday that medicinal cannabis is now legal. According to gov.uk,
“Patients can be prescribed medicinal cannabis by specialist doctors from 1 November 2018.”
While Canada has been a leader in medical marijuana for years, recreational marijuana is now stealing the limelight. Soon attention will change from Canadian legalization to U.S. legalization as more states embrace cannabis. The opening of new jurisdictions is paramount to the narrative propping up valuations of many Canadian marijuana stocks. While fears of overvaluation ran wild on Wednesday and Thursday, new buyers were gobbling up shares of beaten down weed stocks Friday. With demand hard to measure, investors in this space must pay close attention over the coming quarters. Finally, as we’ve always said, a supply glut is coming to Canada; the real winners will be brands that can go international, rising above the small domestic Canadian market.