In this clip from THE PITCH, we give you an inside look at how a research analyst's high-conviction stock idea becomes a manager's winning position.
Watch below as Consumables analyst Howard Penney pitches Hedgeye CEO Keith McCullough on on TerrAscend (TRSSF), 4Front Ventures (FFNTF) and Trulieve Cannabis (TCNNF) and other cannabis names.
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"Well Keith, we have more multi-year multibaggers. Today we're talking Best Idea Longs in TerrAscend (TRSSF), 4Front Ventures (FFNTF) and Trulieve Cannabis (TCNNF). I want to talk about the Cannabis space this morning; it's a great time to focus here given the catalysts for the industry:
- Congress is moving towards legalization in DC.
- Record M&A driving growth in the industry ($1.8 billion this year).
- Earnings season: TerrAscend (TRSSF) had a killer fourth quarter; this is a company growing its top line revenue +80% and +165% EBITDA in 2021.
- Valuation discrepancy between the Canadian (trading at 19x sales and 126x EV/EBITDA) and U.S. companies (trading at 7x sales and 27x EV/EBITDA).
By the way on TerrAscend's numbers, once New Jersey flips the switch and legalizes recreational, $TRSSF will see significant upside.
We have an $18 billion market in sales this year in the U.S. Canada...? $3 billion in sales. The Canadian market, including illicit, is about $8 billion. That's essentially the size of California's. What we're seeing is probably a $50 billion total addressable market in the U.S., relative to a $5 billion in Canada. Yet we have this massive valuation difference between the two groups.
I'm going to attribute 100% of this difference to the fact that U.S. companies are traded on secondary exchanges.
If we can get some policy changes in Washington, we'll have institutions and retail investors coming in, which is a huge upside opportunity."
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