The Broadening Bull Expands to Cannabis

Key Concepts

• Cannabis Sector
• Regulatory Belief/Progress
• Momentum Trading
• MSOS (ETF)
• TOK (ETF)
• Glass House Brands (GLASF)
• GTBIF
• Green Thumb (CXX)
• Richie (Single State Nevada Operator)

Cannabis Sector: A Momentum-Driven Opportunity

The cannabis sector is identified as a potentially strong long position, driven primarily by regulatory progress and market momentum rather than strict fundamentals. This sector's trading behavior is heavily influenced by "the signal" and momentum, which provides the trading edge.

Key Points:

• Regulatory Catalysts: The sector's resurgence is linked to a "regulatory belief" and "progress," initially sparked by a Trump tweet highlighting the benefits of medicinal marijuana.
• Momentum Trading: The transcript emphasizes that focusing solely on fundamentals in the cannabis space can be misleading. The sector trades on momentum, and this is where the trading advantage lies.
• ETF Performance:
  • MSOS: This ETF is noted for trading "significantly above the value of the components," indicating a premium driven by market sentiment. A long-term chart of MSOS is described as "not great," suggesting significant volatility or a challenging historical performance despite current interest.
  • TOK: This ETF is highlighted as one of the "best" in the sector, with its composition having been "cleaned up." TOK experienced a 4% increase recently. Keith, a commentator, has reportedly increased his TOK position, acknowledging it as a potentially risky move but one aligned with his higher risk tolerance.

Specific Holdings and Long Signals:

Several specific companies within the cannabis space are identified as strong long signals, aligning with the holdings of ETFs like TOK.

• Glass House Brands (GLASF): Identified as a signal strength long.
• GTBIF: Identified as a signal strength long.
• Green Thumb (CXX): Identified as a signal strength long.
• Richie: A "tiny little one," described as a "Single State Nevada operator," also signals strength.

Performance of Long Signals:

Out of the three primary long signals mentioned (Glass House Brands, GTBIF, and Green Thumb), two are components of TOK. The transcript notes a "two for three" success rate, equating to approximately 67%, which is considered favorable.

Commentary and Attribution:

• Keith is credited with "sniffing out" the cannabis opportunity and correctly identifying its potential.
• Keith reportedly discussed the cannabis sector on "portfolio solutions" and the "macro show," where he indicated raising his TOK position. He acknowledged this as a potential "mistake" but justified it by his higher risk tolerance.

Conclusion

The cannabis sector is presented as a high-momentum, regulatory-driven investment opportunity. While fundamentals may not always support current valuations, the sector's trading is heavily influenced by positive regulatory developments and market sentiment. Specific ETFs like TOK and individual stocks such as Glass House Brands, GTBIF, and Green Thumb are highlighted as strong long candidates, with a recent positive performance and commentary suggesting continued interest from traders with a higher risk tolerance. The performance of MSOS, despite its current premium, is noted as historically challenging.