Jushi is my top cannabis pick, this investor says

It’s been a tough year on stocks across many sectors but the cannabis space has been a particular disappointment, with sustained losses now stretching back to early 2021. That’s also been the story for American name Jushi Holdings (Jushi Stock Quote, Charts, News, Analysts, Financials CSE:JUSH), a small cap company whose share price has been decimated to the tune of an 84 per cent drop in value since its high in February, 2021.

And while good companies as well as bad can get roughed up in a market like today’s, savvy investors can rest assured they’re getting a quality name in Jushi, according to portfolio manager Bruce Campbell, who just offered the stock as one of his top picks.

“The interesting thing about Jushi is the management team — they have some pretty interesting characters that are operating this company,” said Campbell, president of StoneCastle Investment Management, who spoke on a BNN Bloomberg session on Tuesday where he nominated Jushi as one of his three top picks for the upcoming year.

“They have some big Wall Street finance expertise, they have some technology expertise and they also have some cannabis expertise. You’ve put all those three together and what you have is a company where they’re able to grow their revenue both organically and by acquisition, and they’re in seven states right now,” he said.

Jushi, based in Boca Raton, Florida, is a multi-state operator (MSO) in the US cannabis space, where pot is still classified at the federal level as a Schedule 1 narcotic. That status makes it difficult but not impossible for companies to develop their businesses, as conditions change per state, with jurisdictions essentially requiring companies to be vertically integrated in that market, operating production, distribution and retail assets. 

For Jushi and its operations in seven states, the company has core markets in Illinois, Pennsylvania and Virginia. Jushi has been expanding at a strong pace, recently opening its 33rd dispensary in the US and growing its business in Nevada through the acquisition of NuLeaf. That deal brought with it 27,000 sq ft of cultivation, 13,000 sq ft of processing and three retail locations. 

Founder and CEO Jim Cacioppo spoke of the company’s progress in Jushi’s second quarter 2022 financial release, saying, “In the second quarter, we completed the first phase of construction of the cultivation portion of our grower-processor facilities in Pennsylvania and Virginia. In these two very important markets for Jushi, we are focused on expanding production, improving the sell-through rate of our own-branded products at our Beyond Hello stores and building out our wholesale business.”

“We are also focused on diversifying our product portfolio, including the introduction of many new strains, along with hydro-carbon products and Live Rosin vapes and concentrates that will allow us to differentiate our product offering, while continuing to meet consumer demand,” he said.

Jushi, which began trading on the Canadian Securities Exchange in December 2019, saw its share price go through the roof in 2020 when all the pot stocks were doing well. JUSH went from about $1.75 to start that year to $7.50 by the end of December — and that wasn’t it, either, as the stock peaked at $11.00 in early February, 2021. That’s when sentiment turned against cannabis and Jushi started tumbling, ending up back where it started at around $1.75 as of this week’s trading. 

The lack of love is sector-wide, however, as exemplified by the Global Cannabis Stock Index, which is down about 88 per cent since its high point in February, 2021.

One of the problems for the industry is the lack of movement on legalization in the US, where hopes were high (pardon the pun) after the 2020 US election saw the Democrats take over the Whitehouse and both chambers of Congress. While legislation like the Marijuana Opportunity Reinvestment and Expungement Act (MORE) and the SAFE Banking Act has gained healthy bipartisan support, the US Senate has been a stumbling block for reform, and with the mid-term elections coming up the composition of Congress could change dramatically — for the better or worse, as far as cannabis goes.

But many say it’s more a matter of ‘if’ than ‘when’ on legalized pot at the federal level, and Campbell says he’s optimistic about reform, which would be a watershed moment for the industry.

“We think there’s a really legitimate opportunity here for the SAFE Act to get passed this year, and if it does it’ll mean amazing things for cannabis,” he said.

“If it doesn’t, [Jushi] continues to execute and make acquisitions. They’ve been very specific about what they’ve done. They’ve gone into only specific markets and only where they pay the right price,” Campbell said. “There’ve been examples where they’ve made an offer on a company that the vendors didn’t want to sell and then they came back and actually sold to them at a lower price down the road.”

“So, they’re very disciplined in what they do. They’re just going about their business building this up,” he said. “Cannabis is really out of favour right now. That’s not going to stay that way because the business itself keeps growing, especially in the US.”