Mindset Value Cannabis Fund, an investment management firm, published its fourth-quarter 2021 investor letter – a copy of which can be seen here. The fund fell 15% in less than two months during the last quarter of 2021, and then instead of a January bounce, it fell another 7%. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022.
Mindset Value Cannabis Fund, in its Q4 2021 investor letter, mentioned Verano Holdings Corp. (NYSE:VRNOF) and discussed its stance on the firm. Founded in 2014, Verano Holdings Corp. (NYSE:VRNOF) is a Chicago, Illinois-based vertically integrated, multi-state cannabis operator with a $1.9 billion market capitalization, and is currently spearheaded by its CEO, George Archos. The stock closed at $9.55 per share on March 16, 2022.
Here is what Mindset Value Cannabis Fund’s Fund has to say about Verano Holdings Corp. (NYSE:VRNOF) in its Q4 2021 investor letter:
“While we experienced a short-term pop, the deal is even better for Verano. Goodness was a company with little access to capital but some very valuable licenses. I think when all is said and done that by 2024, Verano might be paying just 2 times EBITDA for Goodness’s licenses and in a very optimistic scenario, 1 times EBITDA.
This acquisition crowns Verano as having the best footprint in the cannabis industry. I think Verano could hit a $1 billion EBITDA run-rate by the end of 2024, up from $500 million this year. And the most amazing part is that its entire enterprise value is slightly more than $4 billion.
That’s right, we own and are about to own even more of (thanks to the Goodness Growth merger) the best run company in the sector with the best footprint and with a valuation of a little more than four times what they could be earning in 2024 EBITDA.
For comparison, alcohol companies regularly trade at 20 times or more with 5-10% revenue growth. Verano has and continues to grow at 40% a year with a long tailwind behind it.
While most investors are focused on legislative headlines, I’m more interested in the incredible advantages that a company like Verano possesses. Within the capital starved cannabis sector, there are few companies that have access to capital. And instead of competing with Big Tobacco, Alcohol, CPG behemoths, or Private Equity firms, Verano and its peers can establish their footprints and build their moats free of traditional competition.
In other words, the longer that legalization takes, the stronger Verano becomes and the more impenetrable its moat gets. That’s why it is so absurd to see it and other leading multi-state operators trade down when their competitive advantages, strategic positions and cash flows continue to grow.
And it’s not just Verano we own, but other companies not in any index or that are misunderstood or not followed. I’m like a kid in a candy store and if we can be patient and focus on fundamentals, this partnership, volatility notwithstanding, will do just fine.”
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Our calculations show that Verano Holdings Corp. (NYSE:VRNOF) failed to obtain a mark on our list of the 30 Most Popular Stocks Among Hedge Funds. You can find other letters from hedge funds and prominent investors on our hedge fund investor letters 2021 Q4 page.
Disclosure: None. This article is originally published at Insider Monkey.