Cannabis investors have been on a rollercoaster ride this year, with COVID-19 fundamentally changing the sector. Staring into the second half of 2020, what kind of metrics should market participants look for?

Nawan Butt, portfolio manager with Purpose Investments, told the Investing News Network (INN) that among other things he’s been drilling down on key balance sheet numbers. He noted that in the Canadian marijuana sector, attention is shifting to the sales performance of public producers.


He’s also been examining the value of the cannabis brands put forth by these companies. Read on for a closer look at what Butt wants to see among marijuana companies right now.

Balance sheets and achieving profitability

Sales have been in focus as the novel coronavirus has spread across Canada. While COVID-19 has ramped up the struggles seen by public cannabis names, it has also brought much-needed solid movement in retail sales of recreational product across the country.

Recreational cannabis sales in Canada have been varied during the outbreak, but on Wednesday (July 24), Statistics Canada confirmed that sales for the month of May upended those of April by over 4 percent. The total for May was just under C$186 million.

Speaking about performance, Butt said that the pressure on cannabis companies has heightened thanks to the economic impact and investment complications seen from the reaction to COVID-19. He said he’s been dedicating a lot of attention to the balance sheets of public cannabis companies in order to really see the strength of their presence and if they are ready to survive further tension.

“For these producers, the current year or the second half of the year really depends on getting to profitability, and getting to profitability is going to be a large battle in the deep-value space,” Butt said.

The Q2 2020 period for cannabis highlighted the shifts in thinking surrounding the cannabis opportunity.

At a recent online investor forum, Alan Brochstein, marijuana analyst and industry commentator with 420 Investor and New Cannabis Ventures, said cannabis investment stories are beginning to be rewarded for simplicity. That’s compared to earlier, when more complex operations were valued.

Butt told INN he evaluates the various licensed producers (LPs) in Canada by grouping them by distinctive metrics and comparing them.

“For instance, LPs that have balance sheet strengths, we put them up against each other and we take a look at their multiples … LPs that have distressed balance sheets, we take a look at those together. LPs with smaller footprints, more specialized products, we take a look at those together,” he said.

Cannabis investments have grown to the point where a blanket statement of performance no longer works; instead, investors have to really evaluate the different sizes and opportunities attached to these companies and compare them to the respective groupings they belong in, according to Butt.

Brands struggling to catch on with consumers

Butt said brand competition will be key particularly when it comes to value options and the ability to sell large volumes of cannabis product from producers.

“That deep value is essentially going to subsidize any operations that go on for the higher-margin products that they’re taking a look at,” the expert said.

However, brands in Canada have not really made an impact in the minds of consumers. A recent report from the Brightfield Group shows that no current active brand in the country has a higher recognition factor than 41 percent, with most averaging between 1 and 15 percent only — a tough blow for the marketing and promotion done by the cannabis industry so far.

The data from the researchers shows that when it comes to actual purchase decisions, consumers will pick products based on price.

Don’t forget to follow us @INN_Cannabis for real-time updates!

Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.

 Sweet Earth Holdings Corp. (CSE: SE) (FSE: 1KZ1) (OTCQB: SEHCF) (“Sweet Earth” the “Company”) is pleased to announce that it has received full Depository Trust Company (“DTC”) eligibility in the United States. On October 20, 2020, Sweet Earth announced that its shares had been listed on the United States’ Over-The-Counter Bulletin (“OTCQB”) under the ticker SEHCF.

DTC status means that Sweet Earth shares are now eligible to be transferred between brokerage accounts within the United States and significantly augments the ease in which American-based investors are able to trade Sweet Earth shares.

Keep reading... Show less

Hill Street Beverage Company Inc. (TSXV: BEER) (“Hill Street” or the “Company”), announces that further to its press releases dated July 21, 2020 and July 31, 2020, the Company proposes to amend the exercise price of 19,405,804 warrants of the Company that were originally issued on July 27, 2018, to $0.10. These warrants are set to expire on December 31, 2020.

The Company had initially proposed a lower amended price, but that proposal was not approved by the TSX Venture Exchange (“Exchange“), however, the Exchange indicated that a $0.10 exercise price, may be more acceptable. Accordingly, the proposed amendment remains subject to Exchange approval.

Keep reading... Show less

Issuance of U.S. Patent No. 10,851,077 covering methods for extracting and concentrating cannabinoids using ultrasound-enhanced solvent extraction bolsters World Class’ intellectual patent portfolio

World-Class Extractions Inc. (CSE:PUMP)(FRA:WCF)(OTCQB:WCEXF) (the “Company” or “World-Class”) is pleased to announced the United States Patent and Trademark Office (“USPTO”) has issued U.S. Patent No. 10,851,077 on December 1, 2020 in relation to the Company’s methods for extracting and concentrating cannabinoids and other target compounds from cannabis using ultrasound-enhanced solvent extraction

Keep reading... Show less

Ubican brings well-known brands and is a trusted vendor with an established sales and marketing program

Chemesis International Inc. (CSE:CSI) (OTCQB:CADMF) (FRA:CWAA) (the “Company” or “Chemesis”), announces Ubican Global (“Ubican”) as its primary supplier for its United States VICKI program. Ubican is a trusted supplier of a family of brands, each with multiple types of products. The products include tinctures, digestibles, edibles, pet, beautyskincare, topical, edible, fitness, and smokable products

Keep reading... Show less

 Lobe Sciences Ltd. (CSE: LOBE) (OTC Pink: GTSIF) (“Lobe” or the “Company”) is pleased to announce that it has engaged VisionWorks Engineering of San Diego, CA to commence engineering work to complete and test a proof of concept prototype of its nasal mist device.

This is a major milestone towards the ultimate goal for development of effective delivery methods and commercialization. The Company holds several provisional patent applications including for a nasal mist device entitled “Device and Method for the Treatment of Traumatic Brain Injuries and Post-Traumatic Stress Disorder”. This device includes a nasal delivery system for administration of pharmaceutical agents such as a psilocybin-derived agent and/or N-acetylcysteine (“NAC“) at preselected dosages and times. The device design allows for the precise control and delivery of medicines through the nasal cavity for faster and more efficient uptake of psychedelics and other medicines that target the brain.

Keep reading... Show less