I plan to substantially raise my cannabis holdings in the days ahead.
The reasons are multiple so Let's get Chai!
1. Price-to-sales ratios have gradually dropped from over 4x-5x to between 1x-2x as analysts, holders and management have become more realistic in their industry growth expectations.
2. State by state legislation continues apace.
3. As the larger multi-state operators, with reasonable balance sheets, enter new states, they are establishing deeper competitive moats against poorly financed competitors.
4. With a growing number of states permitting recreational use of cannabis it seems to me that federal legislation is inevitable.
5. With an increased and improving probability of federal legislation, SAFE banking -- uplisting, et al. -- also seems likely.
6. Along with SAFE will be an alleviation of custody issues which have prevented "plain vanilla" institutions from owning cannabis equities.
7. Sentiment could not be worse after -75%+ drawdowns over the last two years.
8. According to my calculus, and at current levels, the upside reward is compelling and dwarfs the downside risk.
9. As previously noted, a naked shorting ban in Canada-listed stocks was instituted last week.
10. ETFMG Alternative Harvest ETF (MJ) will begin including U.S. MSOs next week.
My holdings include AdvisorShares Pure US Cannabis ETF (MSOS) , Cresco Labs (CRLBF) , Trulieve Cannabis (TCNNF) , Green Thumb Industries (GTBIF) , Verano Holdings (VRNOF) , Ayr Wellness (AYRWF) , TerrAscend Corp. (TRSSF) , and Tilray (TLRY) .
(This commentary originally appeared on Real Money Pro on August 23. Click here to learn about this dynamic market information service for active traders and to receive Doug Kass's Daily Diary and columns from Paul Price, Bret Jensen and others.)