Cannabis stocks surged 51.8% in December after a 58.3% gain in November. For the full year, the Cannabis Stock Index rose from 74.10 to 142.10, an increase of 91.8%:
Like 2016, when a late-in-the year rally related to the elections in the United States and then a rotation into Canadian LPs fueled a full-year gain of 88.8%, the gains in 2017 came at the end of the year. On October 27th, the index was at 56.85, down 23.3% year-to-date, but news of the landmark investment by alcohol giant Constellation Brands (NYSE: STZ) into Canopy Growth (TSX: WEED) (OTC: TWMJF) set off a 150% rally into year-end that included nine consecutive weekly gains. More recently, the fuel for the rally has been optimism related to California legalizing on January 1st.
Strength in the Canadian LPs was one of the biggest drivers of the sector performance this year. Excluding Mettrum, which was trading publicly at the end of 2016 but in the process of being acquired by Canopy Growth, there were ten publicly-traded LPs entering the year, including Aurora Cannabis (TSX: ACB) (OTC: ACBFF), Aphria (TSX: APH) (OTC: APHQF), CanniMed Therapeutics (TSX: CMED) (OTC: CMMDF), Emblem (TSXV: EMC) (OTC: EMMBF), Emerald Health (TSXV: EMH) (OTC: EMHTF), Supreme Cannabis Company (TSXV: FIRE) (OTC: SPRWF), Cronos Group (TSXV: MJN) OTC: PRMCF), Organigram (TSXV: OGI) (OTC: OGRMF), THC Biomed (CSE: THC) (OTC: THCBF) and Canopy Growth. The average stock returned 183.9%, with most of the gains occuring in November and December:
My proprietary Canadian Cannabis LP index, which is rebalanced monthly and now includes 27 publicly-traded LPs at year-end, increased 146.4% during the year, producing a total return for the past two years of 1011.8% after a 351.2% gain in 2016. Interestingly, the first half of the year left the Canadian LP stocks down 18.9%