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Friends,
In April, I suggested selling the MSOS ETF to buy Canadian LPs. I even called out Tilray Brands as a buy then. Of course, MSOS has soared, gaining a ton since then, but so has TLRY:
I don’t always get things right, as I can’t predict the future perfectly. The good news for me was that while MSOS has soared, so have other Canadian LPs since then, including two that I have called out here often, Organigram and especially Village Farms, which is now up 255% year-to-date:
While TLRY is still down in 2025, I don’t like it, though I do think it should fare better than MSOS. It has been a very volatile stock. I did not like it for a long time, and I started liking it too early. I did stick with it, and, after its big rally, I downgraded it to Hold from Strong Buy last week, and I downgraded it at Seeking Alpha to Sell earlier today. The stock trades at a premium to tangible book value and looks expensive to me relative to other cannabis stocks and one alcohol stock that I follow closely. Yes, it could rally further, but it has gone up for the wrong reason, as this company has no exposure at all to the state-regulated cannabis industry in the U.S. My target a year out is $0.77, substantially below the current price.
I continue to have exposure in my model portfolio to one Canadian LP that I have written about positively in the past, and I added another one today too. Still, the model portfolio exposure is underweight relative to the Global Cannabis Stock Index exposure that totals currently 37.5%. I have a lot of cash now (the maximum permitted), and I am overweight ancillaries, where I hold three names currently, including 2 cannabis REITs. I explained why I like cannabis REITs last week.
I continue to be very cautious on cannabis stocks. Many traders are assuming 280E taxation will go away, which it may. I hope it does! If it doesn’t, it will be devastating to the MSOs in my view. By the way, MSOS has pulled back from where it was a week ago by 9%. The two REITs that I mentioned being long in my model portfolio have declined by less. Again, I think that they could go down if 280E does not go away, but they are less risky it appears than most of the MSOs.
So, cannabis stocks, which are down slightly year-to-date as measured by the NCV Global Cannabis Stock Index have bounced sharply. Investors should be careful here. MSOS is definitely not the way to invest in the sector, and neither is Tilray Brands in my view. Good luck to all in this volatile market!
Sincerely,
Alan
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