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Cannabis Stocks Outperform The Market In The First Day Of Trading

As goes January so goes the market is an often quoted saying by traders.  While it is to early to know what the rest of January will bring, the first day of trading has gotten off to a solid start for the cannabis sector. 

The ETFMG Alternative Harvest ETF was up a solid 5.93% on the day.  The S&P 500 had another wild day and opened down over 1% before charging higher to a near 0.50% gain before retreating to a minor 0.12% finish. 

Meanwhile the cannabis stocks opened higher and remained positive throughout the day.  In general, most cannabis stocks closed up by mid single digits to mid teen percentages. 

The largest increase for the day was Organigram Holdings Inc. which saw a 17.15% increase, while the notable exception to the rally was Tilray which fell a modest 0.11% to start the year. 

Perhaps more relevant, the sector closed higher versus the Invesco DWA Momentum ETF (PDP) which finished the day down -1.32%. 

The prior year saw significant investments both from within the cannabis space as well as from outside looking to gain exposure, if not outright access, to the space.  Notably was the $190 million investment by Constellation Brands, Inc. (STZ) in Canopy Growth Corporation (WEED.TO)

Meanwhile current market data points are hinting at an imminent global recession.  The data points include the revenue warning from Apple Inc. (AAPL), as well as the latest manufacturing survey out of China with a below 50 reading.  While the outlook for equity markets has significant headwinds for 2019, the cannabis sector looks poised for continued growth with triple digit revenue growth for many names in the space. 

The next week or so should prove telling for both the broader equity markets and the relative performance of the cannabis sector.  It is unusual to see two negative years in a row for stocks.  If the first day of trading is any indicator, cannabis companies will have an exciting and volatile year ahead.

Written by Jason Bagg

Mr Bagg has over 20 years experience in financial services ranging from Capital Markets to Private Equity. Mr Bagg has helped clients build wealth, reduce taxes and plan for retirement. Drawing on his experience, Mr Bagg has spoken on different panels regarding investing and has written numerous due diligence reports and white papers in this area.

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