Cannabis Investors Should Take Advantage of This Annual Opportunity – New Cannabis Ventures

You’re reading a copy of this week’s edition of the New Cannabis Ventures weekly newsletter, which we have been publishing since October 2015. The newsletter includes unique insight to help our readers stay ahead of the curve as well as links to the week’s most important news.

Friends,

As the year’s end approaches, it’s a great time for investors to take action to reduce their near-term tax liability. For cannabis investors, this is especially important this year given the big run-up in the sector in the early part of the year followed by declining prices. Those who booked gains on the way up but haven’t booked losses could be looking at large tax bills in early 2022. Also, more diversified investors with gains from other parts of the market may be in this position. Fortunately, it’s not too late to take action.

To illustrate what many of our readers may be facing this year, let’s use an example. Suppose an investor bought 1,000 shares of Tilray on December 16th at $9.50 after the Tilray/Aphria merger was announced. This hypothetical investor didn’t get out at the very top, but let’s say she sold at $29.50 on February 8th, realizing a short-term capital gain of $20,000. If that is the only trade she did, then she will pay tax on the gain at her marginal tax-rate. Assuming 24%, this tax will be $4,800.

In our example, though, she took most of her $29,500 proceeds and bought 800 shares of Green Thumb Industries that same day at $34, which she continues to hold with an unrealized loss, with the stock at $20.64, of approximately $10,700. By selling all of her GTI, she could cut her capital-gains taxes owed by more than 50%.

This process of harvesting unrealized losses in order to reduce a near-term tax liability can be challenging for investors, as it is difficult to admit failure. Further, no one wants to sell out at what could be the bottom. For this reason, we wanted to share some ideas about how investors in the cannabis sector can take advantage of an abundance of opportunities to realize losses this year.

In order to book a loss for tax purposes, an investor must not buy back the same security within 30 days, or it is considered a wash sale, unless the investor has elected to use mark to market accounting. One can, however, buy back a similar security, and this is what we encourage our readers to consider. In our example of the investor now holding GTI, she has a number of options. GTI has four other peers in the same market cap range, and she can simply replace it with one of those. Another idea is that GTI represents 10.8% of the AdvisorShares Pure US Cannabis ETF (MSOS), and she can sell GTI and buy MSOS and probably get relatively similar performance. For a sense of how closely these all track one another, here is the performance since the end of Q1:

This same concept can be applied to other parts of the market. For example, selling one Canadian LP to buy another LP or an ETF with LPs or selling an ancillary stock like GrowGeneration to buy one like Hydrofarm (or vice versa) can be a way to stay invested while reaping the valuable tax-loss. Many readers who are focused solely on the cannabis sector may not have any gains but just losses given the decline in the market this year. Investors in the U.S can deduct up to $3,000 each year in capital losses and can carryover excess losses into the future, so selling some cannabis stocks at a loss can reduce one’s income tax to some degree, even if there aren’t gains to offset. The same idea discussed above applies, as one doesn’t have to exit the market. Instead, one has to stay out of the stock sold for 30 days and can then buy it back. For our American readers, the last date to book losses is 12/31, while our Canadian readers will need to do so by the 29th.

This content has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.


Lowell Farms award-winning pre-rolls started it all. Since then, the company formed by the combination of Indus Holdings and Lowell has been laser-focused on bringing scale to the fragmented California market as a vertically-integrated cannabis company. Lowell Farms is driving growth by expanding its brand licensing agreements to now three states, Illinois, Massachusetts and Michigan, and is taking advantage of its new extraction service business. Lowell appears to be in a position to see better results in California as the weakness in pricing from Q3 subsides and as the company’s services division grows.


Get up to speed by visiting the Lowell Farms Investor Dashboard that we maintain on their behalf as a client of New Cannabis Ventures. Click the blue Follow Company button in order to stay up to date with their progress.


New Cannabis Ventures publishes curated articles as well as exclusive news. Here is some of the most interesting business content from this week:


To get real-time updates download our free mobile app for Android or Apple devices, like our Facebook page, or follow Alan on Twitter. Share and discover industry news with like-minded people on the largest cannabis investor and entrepreneur group on LinkedIn.

Get ahead of the crowd! If you are a cannabis investor and find value in our Sunday newsletters, subscribe to 420 Investor, Alan’s comprehensive stock due diligence platform since 2013. Gain immediate access to real-time and in-depth information and market intelligence about the publicly traded cannabis sector, including daily videos, weekly chats, model portfolios, a community forum and much more.

Use the suite of professionally managed NCV Cannabis Stock Indices to monitor the performance of publicly-traded cannabis companies within the day or over longer time-frames. In addition to the comprehensive Global Cannabis Stock Index, we offer a family of indices to track Canadian licensed producers as well as the American Cannabis Operator Index and the Ancillary Cannabis Index.

View the Public Cannabis Company Revenue & Income Tracker, which ranks the top revenue producing cannabis stocks.

Stay on top of some of the most important communications from public companies by viewing upcoming cannabis investor earnings conference calls.

Discover upcoming new listings with the curated Cannabis Stock IPOs and New Issues Tracker.

Sincerely,

Alan & Joel

Alan Brochstein, CFA
Based in Houston, Alan leverages his experience as founder of online community 420 Investor, the first and still largest due diligence platform focused on the publicly-traded stocks in the cannabis industry. With his extensive network in the cannabis community, Alan continues to find new ways to connect the industry and facilitate its sustainable growth. At New Cannabis Ventures, he is responsible for content development and strategic alliances. Before shifting his focus to the cannabis industry in early 2013, Alan, who began his career on Wall Street in 1986, worked as an independent research analyst following over two decades in research and portfolio management. A prolific writer, with over 650 articles published since 2007 at Seeking Alpha, where he has 70,000 followers, Alan is a frequent speaker at industry conferences and a frequent source to the media, including the NY Times, the Wall Street Journal, Fox Business, and Bloomberg TV. Contact Alan: Twitter | Facebook | LinkedIn | Email

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