Earlier this year, I wrote about Whitney Tilson’s top picks for 2022, and as I explained in that post, one of the main sectors he’s bullish on right now is cannabis.
Fast forward to today, and I just finished looking into a presentation dubbed the “Market Reversal Summit,” where Whitney Tilson teased a “historic reversal opportunity” in the cannabis sector that he believes could produce a “four-bagger” return.
“… I expect this reversal opportunity I’ve zeroed in on to produce not just a double but a four-bagger – and it could happen fast…”Source: https://secure.empirefinancialresearch.com/?cid=MKT652988&eid=MKT658652&assetId=AST252503&page=2
What is he pitching?
In short, Tilson is teasing a beaten-down pot stock that he suggests could “reverse” in the years ahead. During the presentation, he referred to this as his “favorite stock” and said that it could become “the world’s largest company” in the “booming” cannabis sector.
Tilson didn’t reveal his pick in the presentation. Instead, he reveals it in a report called “My Next Reversal Trade Could Be the Biggest Windfall of my Entire 25-Year Career,” which comes with a $2k subscription to his service, Empire Investment Report.
But I looked into his clues to see if I could figure out what cannabis stock he was teasing. And in this post, I’ll show you what I found.
Unpacking the “Market Reversal Summit” Pitch
The Market Reversal Summit is a recently released (July 2022) interview-style presentation featuring Glenn Tongue and Whitney Tilson of Empire Financial Research, which centers around Tilson’s so-called “reversal trade” strategy.
According to Tilson, a “reversal trade” is where he buys a stock he once shorted, which he has apparently only done a “handful of times” throughout his career.
And in the context of this presentation, Tilson says he’s not just “reversing course” on one stock but an entire industry.
“And I’m making a bold declaration right here, right now:
“I am not reversing course on just one cannabis stock, but the entire industry…”
What’s the big deal?
The gist is that Tilson has used this strategy to make money in the markets before, and he sees a similar opportunity unfolding in the cannabis space right now.
In the presentation, he cited numerous examples of companies he has shorted (bet against) for various reasons, and after each one sold off and he exited that position, he flipped bullish by taking a long position.
One example he shared was Netflix, another was Lumber Liquidators, and a third was Fairfax Financial, but there were several others.
Long story short, as he was citing these “reversal” trade examples, Tilson discussed various “reversal catalysts” that he looks for when identifying these types of opportunities, which he says that the cannabis company he’s bullish on has.
Why is Whitney Tilson so bullish on the cannabis sector?
Regarding his bullishness on pot stocks, one of the main factors Tilson cited is growing support in the U.S. for legalization. He didn’t make an exact prediction on when he thinks it’ll be legalized nationwide but more or less said that it’s only a matter of time until it happens and that when it does, this could have a positive impact on cannabis stocks.
“Because for me, it’s not ‘if’ but ‘when’ the government removes marijuana from the list of Schedule 1 narcotics…”
“… I believe cannabis should not be criminalized, but it should be a federally regulated substance just like alcohol…
“When this happens, cannabis stocks could easily double or triple in short order.”
Tilson also talked about how this “commodity” could add billions of dollars to the economy across different industries, including healthcare, hospitality, tourism, and agriculture.
And he suggested that pot stocks could have bottomed, given that some companies in the space are generating EBITDA, a widely used measure of corporate profitability.
“As you can see, there’s a major shift happening…
Companies are now generating EBITDA, which means long-term value-oriented investors like you and I can finally invest with much greater confidence…
Not only can we now value stocks with much greater precision…
It’s also a good sign that cannabis stocks have bottomed.”
What company is he teasing?
Whitney Tilson said in the presentation that he has found his “first-ever cannabis opportunity” that meets his “specific reversal criteria to a T.” And he believes this stock “could deliver a 300% gain in the next couple of years,” even before federal legalization.
“I think it could deliver a 300% gain in the next couple of years…
“Even before federal legalization occurs.”
As mentioned, he didn’t reveal his pick in the presentation but based on the clues he shared; I think I know exactly what company he’s talking about.
Tilson’s “Reversal” Cannabis Pick Revealed
The first lot of clues Whitney Tilson shared about his pick centered around the company’s revenue and operating income.
“My reversal company’s management and margins are looking better and better every day…
“Not only has the CEO done everything in his power to grow the company over the past 9 years…
“It has strong revenue growth as well as positive operating cash flow, too.”
“And its operating income finally turned positive last year…”
“Which is one of the major things I was waiting on…
“Add it all up, and I think this stock’s poised for huge growth over the next couple of years.”
What else did he say about the company?
Aside from what I cited above, one of the main clues Tilson shared was that Ricky Sandler has “one very attractive long” position in the company he’s teasing, which helped me narrow it down to one of four possible companies.
“Hedge fund billionaire Ricky Sandler has jumped on the cannabis bandwagon, too.
“He’s backing the entire industry…
“As well as one very attractive long, which happens to be the one I’ve zeroed in on, too…
“This cannabis stock is what I’m declaring as my reversal play… right now…”
The reason that clue helped me narrow it down is that, according to an April 2022 benzinga.com article, Sandler is currently invested in four publicly traded cannabis companies: GTBIF, VRNOF, TRSSF, and CRLBF.
“Sandler said he is currently invested in four publicly traded cannabis companies: Green Thumb Industries Inc GTBIF, Verano Holdings Corp VRNOF, TerrAscend Corp TRSSF and Cresco Labs Inc CRLBF.”Source: https://www.benzinga.com/markets/cannabis/22/04/26797129/exclusive-ricky-sandler-sees-incredible-opportunity-in-cannabis-especially-these-4-pot-stocks
So, of the four cannabis companies, we’re looking for the one that was founded in 2013 and that lines up with the charts Tilson shared (above).
And after digging into those charts, the closest match is Cresco Labs Inc. (ticker: CRLBF), which, full disclosure, I am an investor in and have been since 2019.
What does the company do?
Cresco Labs is an Illinois-based publicly traded cannabis company that, according to its website, is “one of the largest multi-state, vertically integrated cannabis companies” in the U.S. and is involved “at every point in the seed-to-sales process.”
How do Tilson’s clues match Cresco?
Aside from the company having been founded in 2013 and that it’s one of Sandler’s current investments, it comes down to the two charts I shared earlier.
For starters, Cresco’s Operating Cash Flow (as of writing this in August 2022) lines up pretty well with the first chart Tilson shared above. And second, the revenue figures shown on this Yahoo Finance page roughly line up with the second chart Tilson shared.
There are a couple of caveats to that, though.
One is that Tilson’s charts are pretty vague and don’t show exact numbers.
And the other is that, while the 2021 Operating Income Tilson shared seems to match what’s shown on Yahoo Finance, this press release about Cresco’s 2021 results shows that it reported a loss for its “income from operations” (aka operating income) for 2021.
So I’m admittedly a bit stumped on that specific clue.
That said, the same press release shows that Cresco reported a positive operating income for the last quarter of 2021. So, while I’m still not 100% sure how Tilson’s chart matches this company’s Operating Income, based on the company’s Q4 2021 results, you could argue that its operating income “turned positive last year.”
In any case, based on how closely Cresco matches the other clues, I think it’s a match. And there are a couple of other pieces to the puzzle that make me think that.
- After looking into the clues I just mentioned, I decided to dig a little deeper to see what else I could find. And eventually, my sleuthing led me to this Cannabis Investing Network podcast, where Tilson referred to Cresco as “the biggest, cheapest company in the space” in a section at around the one-hour and six-minute mark (01:06:00). So, while that doesn’t prove Cresco is his “reversal” pick, it does suggest he’s bullish on it.
- At the very beginning of the “reversal summit” pitch, the host (Glenn Tongue) shared a chart depicting Tilson’s pick, which suggests that it went from around $11 mid-last year to about $3 in June of this year. And that lines up with Cresco Labs’ OTC stock (CRLBF).
So, while I can’t guarantee I’m right, this appears to be his top cannabis stock pick.
Assuming that’s the case, why is Tilson bullish on this stock?
According to Whitney Tilson, the company he’s recommending meets his “specific reversal criteria,” which he detailed in the presentation.
Aside from that, Tilson referred to his pick as one of the biggest, cheapest companies in the cannabis space, which seems to fit in with his overall strategy of buying solid companies that he believes are trading at a “massive discount.”
“Buying solid, profitable companies at a massive discount is my favorite way to invest…”
How can you find out more?
The simplest way to find out more about Tilson’s pick would be to see his report called “My Next Reversal Trade Could Be the Biggest Windfall of my Entire 25-Year Career.”
However, the only way to access that research report is to join a service he runs called Empire Investment Report, which costs $2,000 per year.
If you don’t want to fork out $2k, though, there are some decent free articles online about Cresco that might help you further your research. For example, this article on Motley Fool discusses Cresco’s operations and its recent acquisition of Columbia Care. And there’s a recent in-depth article about Cresco on Seeking Alpha that you might find helpful.
Recommended: Go here to see my #1 rated stock advisory of 2023
What Is the Empire Investment Report?
Empire Investment Report is a stock advisory service run by Whitney Tilson of Empire Financial Research, which he launched in 2019. And according to Tilson, this is where he shares his top recommendations, predictions, and warnings.
“Each month in my Empire Investment Report, I share my top investment recommendations, ideas, predictions, and warnings…
“In short, I give folks everything they need to know to beat the markets right now as well as in the coming months and years.”
What do you get if you join?
Aside from monthly recommendations and insights from Whitney Tilson, subscribers get the research report I mentioned earlier and a second report called “My Top Five Stocks for the Rest of 2022.”
Also, as part of the “Market Reversal Summit” pitch, Tilson’s throwing in a year’s access to a different service run by his colleague, Enrique Abeyta, called Empire Elite Trader.
Is it worth it?
I’m not a member of the Empire Investment Report service, so I can only speculate as to whether or not it’s worth it. But based on everything I’ve seen, Whitney Tilson, who’s a former hedge fund manager, is one of the few “gurus” in the space that I pay more attention to. Not because all his picks are winners, but because he seems knowledgable, shares interesting insights, and his presentations aren’t as overhyped as some.
Of course, that doesn’t mean you’ll make money following his recommendations. And I’m sure he’s recommended his fair share of losing stocks, like anyone else in the space.
Not to mention, the service costs $2,000 for 12 months, and if you change your mind after buying, the site says it’s not possible to get a cash refund. Instead, they offer you a 30-day refund credit to use on another Empire Financial Research service.
So if you are considering joining, it might be worth checking out his entry-level service (Empire Stock Investor) or free newsletter (Whitney Tilson’s Daily) first.
Whitney Tilson’s latest stock teaser centers around the legal cannabis sector, and one company that he believes could be a “four-bagger” or more in the years ahead.
Based on my research, the company he’s pitching is Cresco Labs.
I have no idea if this company’s stock will go up or down in price. But this appears to be the closest match to the clues Tilson shared. And if I’m right, it means that this is his top cannabis stock pick right now, while MSOS is his top cannabis ETF.
What other companies has he recommended?
I’ve written about numerous Whitney Tilson presentations on this site, and I recently published a breakdown of his 2022 picks. So if you want to know what other companies he has pitched recently, across numerous sectors, you might find that helpful.
Anyway, that’s it from me. Feel free to chime in below if you feel like adding your two cents, and either way, thanks for reading.