CA - Organigram: Operating In A Structurally Challenged Industry

2024-04-20 12:11:24 ET

Summary

• Organigram Holdings Inc. is a leading producer of medical and recreational cannabis products in Canada.
• The cannabis industry faces structural challenges, including low gross margins and intense competition from both legal and illegal sources.
• Until the structural problems are fixed, I recommend staying away from cannabis investments except as a short-term momentum trade.

As a Canadian investor, one of my biggest regrets in the past decade has been not buying into the Great Canadian Cannabis hype cycle in the 2010s. Many fortunes were made in the sector, as early investors saw 10x-20x gains.

One of the cannabis stocks that I missed out on was Organigram Holdings Inc. ( OGI ). Measured from June 11, 2015, when the Supreme Court of Canada released its landmark decision allowing private individuals to possess marijuana and its derivatives without risk of prosecution, Organigram's stock rallied more than 2,400% to its peak in 2019 at over C$45 / share (Figure 1)....

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