Last Week's Cannabis 'Legalization' Stock Rally In Perspective

In last week’s graph of the week, we analyzed US MSO multiples and showed that they are far too low relative to other industries, particularly given their outsized growth potential.  

Our call was answered Friday by freshman GOP congresswoman Mace with her draft of the “State Reform Act.” At worst, the proposed bill is brilliant politics, grabbing hold of the debate and offering a compromise between the “all or nothing” Democratic proposals and the simple de-scheduling favored by many Republicans. The market reacted with enthusiasm, pushing the widely followed AdvisorShares Pure US Cannabis ETF up by 9.5% on the day.

  • A bit of perspective is in order, however. The graph shows the results of an investment of $100 in one of three baskets of cannabis stocks on 12/31/20. 

    • The blue line on the graph depicts the performance of a tier-one basket composed of equal dollar weighting of the nine largest MSOs for which we have full-year stock price data.  

    • The orange line depicts the performance of a tier 2 basket …

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