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Based on pre-market trading, Canadian cannabis stocks look poised for a strong pullback this morning. The move lower follows a period of strength for Canadian Licensed Producers (LPs).

One of the reasons we were surprised by the recent trend is because the sector really started to surge higher after the 2020 US general election. Many Canadian LPs have performed better than US multi-state operators (MSOs) which is surprising since the legislations that were passed are beneficial for US cannabis industry.

Although we have seen a wide variety of Canadian LPs enter the US market via acquisitions and investments, most of these assets are levered to the CBD market. We believe that the logic behind this strategy is based on these operators being positioned to capitalize on a change in cannabis legislation at the federal level.

The US cannabis industry represents the most attractive cannabis market over the long-term and MSOs have reported impressive growth on a quarter-over-quarter basis. This is a trend that we expect to become more significant after four additional states legalized recreational cannabis in the 2020 US general election.

The post-performance of the Canadian LPs that we follow has been volatile. Some operators have rallied more than 100% since the election, while others are up a couple of percent. Today, we want to highlight 3 of the top performers in a post-election market and will continue to closely follow the trend from here.

HEXO is in Rally Mode and Beverages Could be the Reason as to Why

 HEXO Corporation (HEXO.TO) (HEXO) has rallied more than 65% off its November lows and has been a major beneficiary of the recent trend. During the last two quarters, the Canadian cannabis producer has started to communicate much better with the market, especially as it relates to the relationship that it has with Molson Coors (TAP) (TAP.CN) to capitalize on the cannabis beverage market under the brand Truss Beverages.

Through Truss Beverages, the companies are selling THC infused products in Canada and CBD infused beverages. We believe that the recent rally is related to the Truss developments and will monitor how this vertical impacts HEXO in the near and long-term.

Sundial Growers has rallied More than 200% since the Election

Sundial Growers Inc. (SNDL) has been the biggest beneficiary of the recent trend and the shares have rallied more than 250% (as of December 4th). The last month has been very volatile for Sundial and the chart looks like roller coaster from hell. Due to the volatility, we are cautious with the Canadian LP and will monitor the trend from here.

Aurora Cannabis

Aurora Cannabis Inc. (ACB.TO) (ACB) is another Canadian LP that has rallied more than 100% since the election and this is a trend that we continue to closely follow. Like Sundial, the recent trend has been volatile, and we are cautious with the opportunity in the near and long-term.

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