Viridian Looks Back On 2016: Why The Marijuana Stock Index Gained 236.1%

Viridian Capital Advisors, one of the world’s leading financial and strategic advisory firms for the cannabis industry, publishes two reports every week. One tracks the performance of its Cannabis Stock Index, and the other one traces the most recent investment and M&A activity in the marijuana space.

In a recent conversation with Benzinga, analyst Harrison Phillips shared a look at the final figures and data for 2016, both on the deals side as well as on the stocks side.

The Cannabis Stock Index

The Viridian Cannabis Stock Index was mostly flatly in the first half of 2016. However, the second half saw quite the opposite, with the Index gaining 30.8 percent in the third quarter and an extra 155 percent in the fourth quarter, finishing the second half of the year with returns of 223.5 percent, and the full year up 236.1 percent.

“We really saw a nice run-up going into the election and then, from there, there was quite a bit of volatility, which you can see going from October onward, but what was good sign was that, after that initial correction, if you will, or selling off, there was almost an immediate resurgence back up to its old high, and even beyond it,” Phillips commented.

Good Technical Signs

“When we’ve seen corrections since the original one, every low that has followed has been higher than the previous low, which is a good technical sign that the Index is rising, or at least that there's buying support,” the expert added. “So, we expect there to continue to be volatility in the space, just because the market has moved so much and there is a lot of interest in the space, and that will drive trading— But, it should level out a bit as people start making more conscious decisions and the election hype goes back down.”

"One of the fascinating things was how the Index popped right before the end of the year,” Phillips went on. “Most of the time you see selling off in the public markets, especially on the small-cap side, as people want to take tax loss selling, but in this space, we actually saw the opposite. So, our index was up 15 percent in the last week of the year.”

Winning Sectors

Going into some of the best performing sectors, Phillips mentioned consulting services (up 737.3 percent), biotech/pharma (up 482.3 percent), and cultivation & retail (up 287 percent). These last two also saw the most capital raised and transactions closed. On the other hand, the worst performers were real estate (down 74.1 percent), infused products & extracts (down 21.3 percent), and software/media (down 6.4 percent).

“Some of the sectors were driven largely by just a few of the companies within,” he moved on to expound. “So, one of the things we try to do with the Index is really create a basket that shows the performance of the overall industry. But then, when you go down to these different sectors— for example, agricultural technology did well, but not quite as well as some of the others; but, many of the agricultural technology firms also deal in non-cannabis sectors, so, they are not really considered a cannabis company sometimes. So, while, if there is a surge in cannabis investing, they may not be caught up in that, at the same time, they are serving the space and still getting the benefits.”