📢 @mayortoby is a must follow twitter account if you’re interested in Cannabis stocks. He’ll also host occasional Spaces on twitter with other investors and industry executives.

🔊 Listen Here

Tweets from @mayortoby:

Toby Channabis 🇺🇸🌿 @mayortoby

Capital Appreciation = Earnings Growth + Multiple Expansion. Multiple expansion = market valuing earnings more bc of perceived growth, quality and durability. Often biggest source of upside for emerging sectors. 🇺🇸 cannabis multiples can⬆️from 8x '23 EBITDA to 25-40x. $MSOS

Toby Channabis 🇺🇸🌿 @mayortoby

“Cannabis is a commodity.” So are beer, burgers, clothing and cloud computing. Still >$100b co’s like BUD, MCD, NKE and AMZN. Winning MSO’s will succeed in these areas: Scale, Innovation, Branding & Distribution. $CURLF $GTBIF $TCNNF $CRLBF $VRNOF $TRSSF $AYRWF $MSOS

Toby Channabis 🇺🇸🌿 @mayortoby

After MSO's are uplisted, banks likely pivot to targets based on Sales. Jefferies rationalizing buying $CELH valuation at 15x sales and 100x EBITDA. $CELH grew sales $15m q/q w/ 11% EBITDA margins. Same logic implies MSO's targets have significant upside. $MSOS

Toby Channabis 🇺🇸🌿 @mayortoby

Risk/reward for 🇺🇸 cannabis has never looked better. Upside⬆️as more states legalizing + visibility into federal catalysts. Downside⬇️due to increased scale/profitability. The more you zoom out the more obvious it is.🌿 $CURLF $GTBIF $TCNNF $CRLBF $VRNOF $TRSSF $AYRWF $MSOS

Toby Channabis 🇺🇸🌿 @mayortoby

Investment banks emphasize MSO's geographic diversity when pitching to institutional clients. Wider footprint➡️multiple expansion. Already visible in current multiples (T 1/2 > 3/4). $TRSSF valuation should⬆️on Gage deal. $CURLF $GTBIF $TCNNF $CRLBF $VRNOF $AYRWF $MSOS

📖Always Learning. Toby believes in thematic investing, before SaaS was a high multiple sector in the early 2010s, he was buying SaaS companies at ~3x revenue and selling around ~6x revenue (which is now ~23x revenue on average). One of his larger bets was Five9 (which we spoke about when the Zoom acquisition was still on..Toby had written a memo on this acquisition making sense two years ago), which went from small cap to large cap over the lifetime of his investment. He believe you make the most money when there’s multiple expansion (perception and sustainability of profits).

♟Simple strategy. As a long-term investor, he keeps a simple strategy — buy good/great companies and hold. His criteria includes large and growing TAM, strong management teams, high margins, high return on capital (ROC), capital efficiency and have moats. He looks at Cannabis as a generational opportunity, where the expected returns are 300-500%+ return opportunities. The fundamentals are there and he’s comfortable buying and holding U.S. Cannabis stocks.

🎁 Which Institutional Investors can own Cannabis stocks. While most large institutional investors ($1B+ AUM) can’t invest in cannabis today, smaller funds that are closer to their LPs and/or can buy companies that can trade with lower daily volumes (i.e. hard to invests in companies with $10M average daily trading volume when requirements are $50M+). It’s not about getting into names, but rather liquidity/getting out. Toby views this as a gift right now, where you can own these names before 90%+ of institutional investors are allowed to. Compliance departments play a huge role in funds being able to own Cannabis stocks.

🏀Fundamentals. The fundamentals remain strong, earning estimates continue to go up and while it doesn’t make sense, there are structural reasons why.

👣Own Tier 1 MSOs. Toby is a big believer in owning the Tier 1 MSOs (Curaleaf, GTI, Cresco Labs, Trulieve, Verano) as those companies are at or close to $1B in annual revenue, still growing, and trade at attractive multiples. He believes the risk/reward profiles of those names are very attractive. In an emerging space like Cannabis, bigger is better is the philosophy that he subscribes to. We discussed how the market leader in Cannabis is likely to be a $100B+ company.

Tier 2 MSOs. Although he believe most investors are best suited to own the Tier 1 MSOs, he does mention owning a few Tier 2 Cannabis companies — Ayr Wellness, TerrAscend, and Columbia Care. He likes the management team and believes in their strategies.

👋 The Highly Objective Podcast is hosted by Dai Truong. Third-party information presented here and links to third-party content are for informational purposes only and are not intended as a recommendation, offer or solicitation for the purchase or sale of any financial instrument, security or investment. The information provided is not warranted as to completeness or accuracy and is subject to change without notice. Linking to third-party sites in no way implies an endorsement or affiliation of any kind between Arlington Capital Advisors, LLC, or its affiliates and any third party. The information in this blog constitutes my own opinions (and any opinions posted by guest bloggers from time to time) and it should not be regarded as a description of services provided by Arlington Capital Advisors, LLC or any affiliate.

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🎙️ Podcast: Toby Chanudomchok (@mayortoby) …