Friday, March 26, 2021

Buying Trulieve Cannabis (TCNNF) @ $47.86

 Trulieve Cannabis cultivates, produces in-house and distributes it's products to Trulieve branded stores (dispensaries) in Florida, California, Massachusetts, Connecticut, Pennsylvania and West Virginia, as well as directly to patients via home delivery.

I've been following this company for a while. 

The core of it's business is in Florida where Cannabis is only legal for medical use. As the Biden administration is ushered in and with Democrats controlling the entire legislative process it seems next to certain that full state legalisation will follow Federal legalisation. This is tremendous news for the industry and my main basic thesis for increasing my Cannabis investments. 

It should also be considered that states all across the US are going to be struggling with their budgets as Covid has shocked their economies. To find new revenue, states will be legalising (and taxing) Cannabis, in my opinion.

- Cannabis is now 8% of my portfolio.

- Florida is a big weed state and Trulieve has already got 78 dispensaries set up. When weed goes legal, they will have an entire infrastructure already set up.

- The company is well run and profitable (!!) showing me that management is not selling pipe dreams but actually building a viable brand today.

- 4th Quarter revenue grew 23.6% yoy to $168.4M.

- Finished 2020 profitable with net income of $63M

- Management predicts sales will climb to $85M in 2021 compared with $525M in 2020 = 63% growth.

- The company has recently acquired Mountaineer Holdings, giving Trulieve two additional dispensary licensers in West Virginia.  

- The company is in a position to fund it's own growth (Without having to borrow) with $100M in cash from operating activities in 2020.

- Price to Sales ratio is at 11 - fair enough for such a high growth profitable business.

- The stock has risen 640% in the last 12 months so you can expect a bumpy ride, but if the company executes on it's plans and legislation goes favourably as I assume - this should make for a great investment in the following years.

- As usual, starting a position at 2% of total portfolio value.


1 comment:

  1. i suspect you have a typo on "Management predicts sales will climb to $85M in 2021". do you mean 850M?
    seems like an interesting company