The last three months of 2018 were particularly challenging time for cannabis investors. Despite seeing remarkable advances during the first nine months of the year, the final quarter saw most companies lose most if not all of their previous gains.
Canadian legalization ended up having the opposite effect on cannabis stocks, as many realized that these same hyped-up marijuana companies had numerous fundamental issues. The Horizon Medical Life Sciences ETF, which is considered to be a benchmark of the cannabis industry, declined from its mid-October peak of $26.05 down to $14.04 in late December. However, January has proved to be quite different as many stocks have rebounded drastically.
According to New Cannabis Ventures’ Global Cannabis Stock Index, cannabis stocks around the world bounced back in January, increasing 44 in the first month of 2019. The index, which contains 43 large cannabis companies across all areas of the supply chain, saw drastic gains in contrast to December, where the index had fallen around 55 percent.
The main winners included Khiron Life Sciences (TSXV: KHRN), which jumped up 95.5 percent, Canopy Rivers (TSXV: RIV), which increased 94 percent, Canopy Growth (TSE: WEED)(NYSE: CGC) which saw gains of 82 percent, Emblem (TSXV: EMC) and Cronos Group (TSX: CRON)(NASDAQ: CRON), with the last two increasing 81 and 89 percent respectively.
For most of these companies, big news announcements were the key driver behind these gains. Khiron announced that through a new acquisition they would be entering the Uruguay market. Canopy Growth made news through its entrance into the U.S. hemp market, succeeding in acquiring a prestigious license to grow the crop in the state of New York. Emblem’s gains were triggered by their announcement to merge with Aleafia (TSXV: ALEF).
Out of the 43 companies listed in the index, only three didn’t see at least double-digit returns. KushCo Holdings was one of the most disappointing stocks listed, staying relatively the same over the course of the month with a 1.3 percent gain. The company did see it’s share prices surge to year-highs upon the release of their most recent financial statements, only for them to fall again by a recent equity offering in order to raise funds.
The only company listed to drop in value was 22nd Century Group (NYSE: American XXII), which dropped around 10 percent over the course of the month. The company has recently been dealing with a series of class action lawsuits. According to the complaints as reported by Yahoo Finance, 22nd Century Group is accused of making false statements to manipulate their stock price through paid promoters and falsely representing the company. When the market found out the truth about the company, investors suffered stock losses.
Canadian cannabis producers slightly outperformed their American competition, according to two variants of the index listed by New Cannabis Ventures. Their Canadian Cannabis LP Index increased by 36 percent in January, while it’s American Cannabis Operator Index shot up 30.8 percent.
So far, January was a great month for cannabis stocks as investors are finally seeing a move away from what was a turbulent fourth quarter last year.