Is It Time to Buy Marijuana Stocks?

The TDR Three Key Takeaways Regarding Cannabis Industry Trends in 2024: 

1. Jones Soda faces regulatory hurdles in California due to illegal Delta 9 isolates.
2. Canadian cannabis LPs show promising performance in 2024, says TDR.
3. YOLO ETF’s diverse holdings drive its success in the cannabis market, notes TDR.

This Monday episode of the “Trade to Black” Podcast, co-hosted by Shadd Dales and Anthony Varrell, covered the current state of the cannabis industry and the factors affecting the market in 2024. The episode featured guest Dan Ahrens from Advisor Shares, who discussed market trends, regulatory challenges, and investment opportunities.

One of the issues in the cannabis industry is the strict regulatory environment, particularly in California. For instance, The Jones Soda Company’s hemp-infused product line. The state issued a notice regarding the presence of illegal Delta 9 isolates in Jones Soda’s beverages, which could potentially lead to significant market losses. This highlights the stringent regulatory landscape in California and raises questions about the future of hemp-derived products in states with established cannabis markets. “Jones Soda is facing a potential major market loss involving their hemp fuse line due to the presence of illegal Delta 9 isolates,” explained Anthony Varrell. “This is just the tip of the spear. I mean, granted, I don’t know how much to look into this as the state of California basically says everything causes cancer as far as their product labels and their warnings go.”

The episode also spotlighted the performance of Canadian Licensed Producers (LPs), particularly Village Farms and Organigram, which have shown promising growth in the first five months of 2024. According to a report by Pablo Zuinich and Associates, Village Farms has notably increased its market share in the flower category from 10% to 16% over a two-year period. Similarly, Decibel’s market share in the pre-roll segment has grown from 5% to 14.2%. “It’s a promising year so far for Village Farms,” Varrell noted. “They’ve actually grown their market share from 10% to 16% in the two-year period, backing up what they reported last quarter with their market share growing 6%.”

In the pre-roll segment, Decibel emerged as a significant player, demonstrating impressive market share growth in cannabis industry. This segment’s growth contrasts with Tilray’s declining market share, which has decreased from 23.7% to 11% over two years. “Decibel has actually grown its market share from 5% to 14.2% in two years,” Varrell highlighted. “It’s an impressive growth profile when we’re talking about the product category, particularly with their infused pre-rolls being one of their best sellers.”

Dan Ahrens provided valuable insights into the performance of the YOLO ETF, which has been the best-performing cannabis fund in 2024. Despite the challenges faced by US multi-state operators (MSOs), YOLO’s diverse holdings, including prominent Canadian companies like High Tide and Village Farms, have contributed to its success. Ahrens highlighted the importance of active management in navigating the volatile cannabis market. “I think YOLO needs more love. It’s a pretty good fund,” Ahrens stated. “The largest holding besides the affiliated fund is High Tide, which has been a pretty good performer this year. Right behind that is Village Farms.” Ahrens further emphasized, “Active management doesn’t mean I’m fooling with it every day or every week. It’s just not an index. So about half or a little less than half of the fund YOLO has the fund MSOs as its top holding.”

The launch of Ohio’s adult-use cannabis industry was another key topic. With the state’s regulatory framework allowing existing medical license holders to transition to adult-use sales, Ohio is poised to become a substantial market. The comparison to Maryland’s successful rollout last year provided a positive outlook, suggesting that Ohio could replicate or even surpass Maryland’s market performance. “Ohio is a substantial state,” said Ahrens. “It’s a big state, very populous, and they are looking at states that have done things properly and turned on adult use, making it available for existing license holders in the medical market.”

Despite the optimism around market trends and state-level reforms, the lack of federal reform continues to hinder the full potential of the cannabis industry. The podcast emphasized the need for investors to stay informed and adaptable, considering both the opportunities and risks associated with the regulatory developing environment. “There’s no new money in. It’s gonna take a couple of months,” Varrell commented. “But is this a good time to get in? And again, not investment advice, but that’s just some of the sentiment I’m hearing and seeing in the last couple of days and weeks recently, which has been a nice surprise.” Want to be updated on all things Psychedelic, Cannabis, AI, and Crypto? Subscribe to our Daily Baked in Newsletter!