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Hey Nerds: Blockchain

Theme of the quarter: huge revenue expansion (unlike last year in Illinois this has happened without a new state going rec legal) but margin compressions. Seems like every operator had a decent downtick on margins which is to be expected as supply inches closer to meeting demand and you've got pricing competition going on. Some signs that Florida in particular is becoming more and more competitive which is fine. You expect that to happen... But let's just say trulieve was wise to expand out of Florida. But even with Thumb, who have minimal operations in Florida (planning on some expansion shortly, but will wait and see how it goes before investing further there.. They are very cautious to join the fight) showed a decent downtick in margins. Something to watch. New states going rec legal will make those margins explode and we didn't get any this year other Arizona, which was already a mature medical market (and Thumb isn't in that market anyway).

NJ and NY coming online in the next couple of years should help with the margin situation but yeah long-term these corporations need to prepare for life with competition. Still think we're at least 4-5 years away from this being a legit threat but it's interesting to see some corporations focus on branding and creating customer loyalty and others saying "fuck it, we're years away from that being a need." Feels like it would be wise to start looking at that kind of stuff well ahead of time but what does presto know?

Let's look at my favorite metric (and IMO most valuable of all) for each of the top corporations so far in 2021. CASH FLOW FROM OPERATIONS. This is the kinda metric that is crucial in a sector like this as you are better positioned to fund your cap ex without needing to dilute shareholders. For the first half of 2021:

Trulieve: $109.5m
Verano: $66m
Thumb: $48m
Curaleaf: -$79.13m

This is in spite of predatory tax rates. When 280e is repealed (could be several years from now in fairness) this value will at the very least double for everyone... Could even triple or quadruple. I've seen estimates up to 5x. I mean that's as game changing as it gets. As for Curaleaf... They obviously have different strategies. Being a behemoth has value!
 
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PLTR pumping on an excellent earnings report. Up 14%. Been creeping up for the past little bit. I still think it's a $40-50 company, so let's see if this get's the stock going. Position: June 17 2022 $27 call - bought July 20
 
TRUL has scared me for months and scares me even more after the verdict. This ain't some random dude.. There are ties to the company there. High upside if you scoop the bottom but I'm afraid to touch it when mostly everything else is falling with it at similar aggression.


As for the bottom... Anyone's guess. But many companies are trading at multiples not really seen in any sector. 6xEBITDA in 2022, 2-3x revenue for 2022, etc. This is kinda the moment I've been waiting for in the past few months. Could just be the beginning of it but this is why I HOARD cash. Kinda have to in this very cyclical sector.

There are risks longterm but the next few years are essentially a lock. Nothing drastic will change with legislation (which is good). The majority of the year will be a bear market, slowly bleeding on low volume and you'll have 1-2 months a year that are year makers. Back to the norm after the typical election year bump.
 
Aren't you knee deep in weed holdings?

You think it could really fall substantially more than this?

I want to lock this thread now. There is NO DISCUSSION ABOUT BLOCKCHAIN, just depressing weed shit!
 
LeafOfFaith said:
Aren't you knee deep in weed holdings?

You think it could really fall substantially more than this?

I want to lock this thread now. There is NO DISCUSSION ABOUT BLOCKCHAIN, just depressing weed shit!
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Never. Haven't been since January and even that wasn't really knee deep (and I sold most well before the top but it is what it is). Covid dump was the last time I was basically all in. Left a lot on the table by not being all in all year but that's how I manage risk. I use the cash for day trades or swing trades but I trim aggressively when I do that stuff. The cash hasn't been used for long-term positions in a long time.

And yes it can fall a lot more than this. Basic supply vs demand. No real investor or trader has any appetite to buy these stocks. Once we reach capitulation the tide can turn quickly but you've gotta keep an open mind and understand that it can always go a lot lower and not "make sense" on a fundamental basis. That's weed stonks unfortunately. It's good in a way but frustrating for sure.
 
The eventual ticket is the uplist. I don't think these companies face any real risk fundamentally for at least another 3-4 years. In those 3-4 years you're going to see many pull in a very profitable 2-3+ billion per year (many are currently trading at market caps at around 3-4b at this moment). Will they uplist before that? Not sure. That would be nice but I'm not necessarily counting on that. It's a nice little gem of a lottery ticket tho. The re-rating would be fierce.

The risk is that the risks and worst case scenarios play out in terms of legislation change in terms of interstate commerce and removing the moat around their businesses or remove limited license states (or vertical integration) and they start struggling with profitability and whatnot.. and this all happens before the uplist or before the stocks make any meaningful surge. In that case this would all be a waste of time.

But that's why it's stonks. Risks exist.
 
So all that hoarding for the moment to go deep on pot stocks, and that moment isn't now?

How far do they have to fall before you say this is nuts and dive back in?

Also, why the fuck did I put money in this shit?
 
LeafOfFaith said:
So all that hoarding for the moment to go deep on pot stocks, and that moment isn't now?

How far do they have to fall before you say this is nuts and dive back in?

Also, why the fuck did I put money in this shit?
Click to expand...
Ideally it never gets into that point. I don't want to go balls deep because as was the case in the covid dump, it usually means I'm severely under water and I am running low on money for my incremental buys on the way down. I don't like being in a position where I'm powerless and out of ammo.

I will continue slowly adding but I'm in no rush. I mean it's not like I have nothing in them.. I've still got decently sized positions that have taken an absolute ass beating, but the positions are a lot smaller than they've been in quite some time. If there is an encouraging reversal on volume I may buy into strength and hope for a multi-day run. Same goes for if there's a legislative catalyst (I was a buyer the day after the Georgia Senate runoff Dem win, for example, because that was always going to be a multi-day run).

TLDR: I hope I never go nuts and dive back all-in because that would probably mean that these things dump another 50% from here... Which means some companies would be trading at ~1.3x 2022 revenues.. That's about the point where I went all-in during the covid dump. So there's your answer I guess.
 
One thing I'll say is that I'm pretty confident you'll get it back. The fundamentals are there in a very big way, if that gives you any peace. The day to day stuff is just noise that comes from being on a 5th rate exchange.
 
AYR just reported and they were nice but they adjusted their 2022 guidance to $800m in revenues and $300 in EBITDA. It's trading at 2.375x 2022 guidance of sales and 6x EBITDA. Tier 2 names with execution risk like AYR and Columbia understandably will trade at lesser multiples than tier 1s but this is just another glowing example of the market inefficiencies that this sector presents us. I get my stonk mojo back when this kind of bludgeoning happens. Gets my juices flowing because things are suddenly exciting again.

The sector blew its load far too early, pricing in all sorts of things that were never gonna happen (i.e. legalization and not to mention, legalization that BENEFITS MSOs). Now it's going in the opposite direction. Good to take advantage of these things.
 
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