- Baked In
- Posts
- 👊 Keep Dreaming, GOP 👊
👊 Keep Dreaming, GOP 👊
Anthony Varrell
July 11, 2024
GM Everyone,
We have eleven days left in the comment period, and the good ole boys and gals over at the GOP seem to have their knives out towards the cannabis industry. This. Doesn’t. Matter. It's entertaining that they think there are still things they can do to really hold this up and stifle our progress. When you really dive into what's happening, it would be pretty tough at this point to pass anything legislatively with a Democrat-controlled Senate. Keep dreaming, GOP.
Today’s letter can be read in 7 minutes and 08 seconds.
What's Driving the Market Today?
Stock futures are slightly lower but will be moving in either direction at 8:30am EST:
Inflation data is out at 8:30 am EST.
Nvidia and AI stocks boost Nasdaq, S&P 500.
China curbs short-selling, lifts CSI300.
Sterling rises on strong UK GDP, BoE comments.
Oil prices are steady, and global demand growth slows.
💸 High Impact
Levered Free Cash Flow - Learn To Love It
The What - LFCFM measures the percentage of revenue remaining after a company has paid its operating expenses, interest on debt, and capital expenditures. Notice this includes even capital expenditures, which are future investments. It also measures the change in account receivables and payables. If you sell goods on credit, that shows as revenue but not levered free cash flow. LFCFM, by far, is the most punishing financial metric that an analyst can use, in my opinion.
The cash left over can be used to pay down debt, buy back shares, or even pay dividends in the future. But, the opposite is true; if you always have a negative balance, eventually, you need to take on debt or offer some shares.
LFCFM shows how much cash a company generates for every dollar of revenue after meeting its financial commitments. A higher LFCF Margin indicates a company is better at converting its revenue into cash that can be used to enhance shareholder value.
The Who - The charts below show two separate data points. First, they rank companies by their LFCFM; higher is better. The second chart shows the improvement over the last year; the higher up the company, the more it improved its LFCFM compared to its peers.
The Why: Despite historic lows, MSOs have made remarkable progress regarding cash flow in the last 12 months; most companies are positive or close to positive.
This was not the case in the previous 12-month period; almost all the companies had negative cash flows.
Becoming positive with cash flow de-risks companies. The chances of insolvency, dilution, and rising debt levels are mostly eliminated. Companies can pay down debt, increase Capital Expenditures, buy back shares, and even pay dividends one day.
Based on the above, this is the year that these positive cash flow MSOs have shifted from growth companies to mature growth companies.
📈 Dog Walkers
Illinois Celebrates $1 Billion in Cannabis Sales
Illinois Governor JB Pritzker announced that the state has reached $1 billion in cannabis retail sales by July 1, 2024. This milestone includes over $850 million in adult-use cannabis sales and nearly $150 million in medical cannabis sales.
Minnesota's Cannabis Beverages Boom
Minnesota's legalization of low-dose THC beverages has sparked a new trend in the state. Consumers can now enjoy cannabis-infused drinks, adding a fresh dimension to the legal cannabis market.
Good Supply's New Vape Innovations
Tilray Brands, Inc. (NASDAQ: TLRY; TSX: TLRY), a global lifestyle and consumer packaged goods company, announced that its Good Supply cannabis brand has introduced new signature vape products to elevate the cannabis experience.
🗞️ The News
📭 Research
Initiating Coverage: Green Thumb Industries - Download Here
Reconfirming Buy Rating: MariMed - Download Here
Initiating Coverage Of Verano Holdings Corp. - Download Here
Initiating Coverage: TerrAscend - Download Here
📺 YouTube
DC Expert Analyzes GOP Concerns on Marijuana Rescheduling
What we covered:
✅ Join us for an episode of Washington D.C. Wednesday, where we discuss the matters of Cannabis regulation and how it will affect Marijuana stock prices and the MSOS ETF.
John Sullivan, the Executive Vice President of Government Relations from Cresco Labs will join us and address the latest stories involving the GOP congressional committees efforts to try and block marijuana rescheduling.
John has a lot of credibility; he has been instrumental in influencing legislative and regulatory changes in the cannabis industry. He helped draft the SAFE Banking Act language in the U.S. Senate and an Illinois proposal allowing cannabis businesses to deduct ordinary business expenses from state taxes. Additionally, he introduced the first bipartisan adult-use legislation in Pennsylvania. Sullivan is an executive board member and chair of the Illinois Cannabis Association.