RESOURCES | Cannabis Data | Cannabis Security | Cannabis Securities News

CRB Monitor Announces Cannabis-Linked Sector (CLS) Classification System
Published on May 28, 2021

4
James B. Francis, CFA, Managing Director of Securities Product and Research, CRB Monitor

As medical and recreational cannabis inch ever-closer toward US federal legalization/decriminalization, investors are increasingly seeing cannabis-linked securities as less of a novelty and more of a viable and attractive investment. We see cannabis making its way into our mainstream psyche, and stocks that provide exposure to the cannabis ecosystem have quietly been added to many investors’ portfolios as well as a number of publicly-traded funds (we will be writing about this in an upcoming blog post). With that said, investors in cannabis-linked securities are seeking new measures of investment risk that are not generic, but specific to the cannabis ecosystem.  

This is why CRB Monitor is pleased to announce the creation and addition of our Cannabis-Linked Sector Classification System (CLS) to our global universe of 1,300+ publicly-traded issuers and their 1,500+ securities listed on six continents. 

CRB Monitor Cannabis Linked Sectors

Below are the 22 Sectors into which CRB Monitor is categorizing all publicly-traded, cannabis-related issuers.  Generally, the Sectors “Licensed CRB”, “Owner/Investor”, “ETF” and “Index” relate to Tier 1 CRBs, while the remainder relate to Tier 2 and Tier 3 CRBs.  We plan to release more detailed documentation regarding the Sectors, including long-form definitions, but the following provides a high level summary.

CLS Sector

# of Issuers

 

CLS Sector

# of Issuers

Agricultural & Farm Machinery

40

 

IT Services & Software

101

Construction Materials

7

 

Licensed CRB

99

Containers & Packaging

7

 

Media & Publishing

18

Electronic Equipment

33

 

Online Wholesale & Retail

44

ETF - Cannabis Themed

21

 

Owner/Investor

539

ETF - non-Cannabis Themed

62

 

 

 

Fertilizers & Agricultural Chemicals

20

 

Personal Products

100

Financial Services

53

 

Pharma & Biotech

139

Food, Beverage & Tobacco

93

 

Professional Services

85

Health Care Equipment, Devices & Supplies

48

 

Real Estate

23

Index

27

 

Textiles, Apparel & Retail Goods

9

Industrial Machinery

23

 

Traditional Retail

20


CLS Classification Methodology

CRB Monitor developed its CLS sector classification system in response to the perceived inadequacies presented by the “standard” sector classification systems.  

For the purposes of this article, we use the Global Industry Classification System [GICS] as a comparison to CLS.) The widely-used GICS system does not mention the word “cannabis” in its current methodology, in either its sectors (top level), industries, or sub-industries, and over-generalizes CRBs into incorrect or even irrelevant sectors. CRB Monitor’s Cannabis-Linked Sector classification methodology places every issuer in our CRB universe into the cannabis-specific sector that best defines its connection to the industry. 

CRB Monitor’s Securities Research team performed the following due diligence in the development of the CLS Methodology: 

  1. Closely reviewed the descriptions and operations of the 1,300+ issuers to develop ~50 potential “sectors” that would be a meaningful expression of the specific function of each business relative to the cannabis industry. This information is derived from the original research that CRB MOnitor performs as we identify and qualify issuers for inclusion in our cannabis-linked securities universe.
  2. Refined and distilled the initial ~50 potential “sectors” down to 22 that CRB Monitor feels could adequately and accurately be applied to all Tier 1 (aka “Direct”) and Tier 2 / Tier 3 (aka “Indirect”) CRBs.
  3. Composed and refined clear “cannabis-focused” definitions for each of the 22 sectors.
  4. Applied a CLS sector to each issuer based on the issuer’s cannabis-related activities and revenues, regardless of what the issuer's main and/or historical business line(s) may be. 

CLS Sectors - Tier 1A & 1B CRBs

GICS tends to place all “Pure Play” CRBs into its Health Care sector, in spite of the fact that (A) many Pure Play CRBs are often a portion or largely “recreational” and (B) many CRBs have diverse, multi-industry risk exposure. Generally, “Health Care” is not remotely helpful for investors broadly, let alone cannabis-focused investors. CRB Monitor defines all “Direct” (generally “Pure Play”) CRBs as “Tier 1” and categorizes them into one of two sectors: Tier 1A issuers into the “Licensed CRB” sector and Tier 1Bs into the “Owner/Investor” sector. Cannabis-themed ETFs and indexes, which are also included on the CRB Monitor cannabis-linked securities data, are classified in the “ETF” and “Index” sectors, respectively.

Here is the breakdown, as of 4/30/2021:

Source: CRB Monitor

In addition to applying a “sector” to each Tier 1 CRB, for further granularity, CRB Monitor also includes cannabis licensing details for every Tier 1 CRB including: Type (Cultivation, Processing, Retail/Dispensary, etc.); Medical/Recreational/Hemp Classification, Cannabis License Status (Pending, Active, Inactive, etc.), and Jurisdiction (ie, the State/Province/Country as applicable). By combining the sector and underlying license details, the CLS classification system ensures that CRB Monitor subscribers are able to maximize and customize their utilization of the CRB Monitor database for their own specific compliance and investment use cases. CRB Monitor is the only data company in the world that can provide this information, given its underlying database of 45,000+ licensed CRBs and 86,000+ cannabis business licenses.

For example, here are ten of the largest “Pure Play” CRBs, which are all considered by GICS to be in the Health Care sector. By contrast, CRB Monitor’s breakdown by license type* indicates that their revenues are generated from a diverse set of cannabis-related business lines (including medical and recreational). For example, Canopy Growth Corporation (TSX: WEED), the largest pure play CRB by market cap, has subsidiaries whose licenses cover a broad swath of the cannabis ecosystem.

Company Name

Ticker Symbol

CRBM Tier

GICS Sector

CRB Monitor CLS Sector

CRB Monitor License Type(s)*

Canopy Growth Corporation

TSX: WEED

1A

Health Care

Licensed CRB

Retail/Dispensary, Cultivation, Vertically Integrated, Owner/Investor, Manufacturer/Processor, Testing, Wholesale/Distribution, Research

Curaleaf Holdings, Inc.

CSE: CURA

1A

Health Care

Licensed CRB

Owner/Investor, Retail/Dispensary, Cultivation, CBD, Manufacturer/Processor, Vertically Integrated, Wholesale/Distribution, Research, Delivery/Transporter

Green Thumb Industries Inc.

CSE: GTII

1B

Health Care

Owner/Investor

Retail/Dispensary, Cultivation, Vertically Integrated, Manufacturer/Processor, Wholesale/Distribution

Tilray, Inc.

NASDAQ: TLRY

1B

Health Care

Owner/Investor

Retail/Dispensary, Cultivation, Manufacturer/Processor, Owner/Investor, Wholesale/Distribution, Vertically Integrated, Testing

GW Pharmaceuticals plc

NASDAQ: GWPH

1A

Health Care

Licensed CRB

CBD

Trulieve Cannabis Corp.

CSE: TRUL

1B

Health Care

Owner/Investor

Retail/Dispensary, Vertically Integrated, Manufacturer/Processor, Cultivation

Aphria Inc.

TSX: APHA

1A

Health Care

Licensed CRB

Retail/Dispensary, Cultivation, Manufacturer/Processor, Vertically Integrated, Wholesale/Distribution, Owner/Investor, Testing

Cresco Labs Inc.

CSE: CL

1B

Health Care

Owner/Investor

Cultivation, Vertically Integrated, Retail/Dispensary, Manufacturer/Processor, Wholesale/Distribution, Event Organizer

Cronos Group Inc.

TSX: CRON

1B

Health Care

Owner/Investor

Retail/Dispensary, Cultivation, Manufacturer/Processor, Vertically Integrated, Owner/Investor, Testing, Wholesale/Distribution, Research, Event Organizer, Management Company

Sundial Growers Inc.

NASDAQ: SNDL

1A

Health Care

Licensed CRB

Retail/Dispensary, Cultivation, Manufacturer/Processor

Source: CRB Monitor, * "License Type” includes all licenses that are issued to the parent company and/or all of its underlying subsidiaries.

CLS Sectors - Tier 2 & Tier 3 CRBs

While four CLS sectors apply to Tier 1 CRBs, eighteen CLS sectors apply to Tier 2 and Tier 3 (aka “Indirect”) CRBs.

Here is the breakdown, as of 4/30/2021:

CRBMonitor_CLSSector%Tier2&3Securities_PieChart_May2021_updated

One interesting case is that of Tier 3 CRB Philip Morris International (NYSE: PM). While PM is widely known as a Consumer Staples (ie, tobacco) company, its connection to the cannabis space is via an investment in Syqe Medical, which has developed a metered-dose vaporizer. Given Philip Morris’s exposure to the cannabis industry is via the development of an electronic drug delivery device, we have assigned PM to the CLS sector “Electronic Equipment.” The following is a partial list of some of the largest Tier 2 and Tier 3 CRBs by market capitalization, with their GICS sector side-by-side with their CRB Monitor CLS sector:

Company Name

Primary Symbol

CRBM Tier

GICS Sector

CRB Monitor CLS Sector

Innovative Industrial Properties, Inc.

NYSE: IIPR

2

Real Estate

Real Estate

Hydrofarm Holdings Group, Inc.

NASDAQ: HYFM

2

Industrials

Agricultural & Farm Machinery

cbdMD, Inc.

NYSE Amex: YCBD

2

Health Care

Personal Products

Zynerba Pharmaceuticals Inc.

NASDAQ: ZYNE

2

Health Care

Pharma & Biotech

KushCo Holdings, Inc.

OTCQX: KSHB

2

Industrials

Containers & Packaging

MyMD Pharmaceuticals, Inc.

NASDAQ: MYMD

2

Health Care

Pharma & Biotech

Amazon.com, Inc.

NASDAQ: AMZN

3

Consumer Discretionary

Online Wholesale & Retail

Novartis AG

NYSE: NVS

3

Health Care

Pharma & Biotech

Costco Wholesale Corporation

NASDAQ: COST

3

Consumer Staples

Pharma & Biotech

Shopify Inc.

NYSE: SHOP

3

Information Technology

Online Wholesale & Retail

Unilever Plc

NYSE: UN

3

Consumer Staples

Personal Products

Philip Morris International Inc.

NYSE: PM

3

Consumer Staples

Electronic Equipment

Anheuser-Busch InBev SA/NV

NYSE: BUD

3

Consumer Staples

Food, Beverage & Tobacco

Sanofi

NASDAQ: SNY

3

Health Care

Pharma & Biotech

Estee Lauder Companies Inc.

NASDAQ: EL

3

Consumer Staples

Personal Products

Square, Inc.

NYSE: SQ

3

Information Technology

Financial Services

3M Co.

NYSE: MMM

3

Industrials

Construction Materials

Source: CRB Monitor

Conclusion

The global cannabis ecosystem is a complex, diverse space with vast growth potential for investors. And essential to the success of a cannabis investment strategy is an understanding of 1) the definition of a cannabis-related business; 2) validation for a company’s inclusion as a cannabis-related business, and 3) the degree to which each cannabis-related business is exposed to the cannabis industry.  CRB Monitor’s addition of the CLS sector classification system provides a new degree of clarity into the connection between Tier 1, 2, and 3 CRBs and the cannabis ecosystem.

CRB Monitor – The Gold Standard in Cannabis Market Intelligence

As the CRB Monitor securities database has grown, so has the number of use cases for its data. Investment professionals are now utilizing CRB Monitor as a reliable source of universe of data for:

  • Benchmarks/Indexing
  • ESG/SRI Investment Policy
  • Portfolio Construction
  • Risk Modeling
  • Portfolio Analytics
  • Performance Attribution/Reporting

We provide front, middle, and back office professionals with critical details of cannabis-linked securities listed on six continents.  CRB Monitor has become an essential source of information for financial institutions, including:

  • Proprietary Cannabis Risk Tier
  • Underlying Corporate Structure for Tier 1 CRBs, including plant-touching subsidiaries
  • Underlying Cannabis License Classification (Medical, Recreational, Hemp)
  • Underlying Cannabis License Type (Cultivation, Dispensary, Extraction, etc.)
  • Geographic exposure for Tier 1 CRBs
  • CUSIP/ISIN/CINS codes
  • Primary, secondary, tertiary exchange listings and tickers
  • Complete directory of ETFs and market indexes
  • And now, Cannabis-Linked Sector (CLS) Classification 

To always be updated on the latest cannabis market intelligence, please be sure to stay tuned to the CRB Monitor website.

Wondering what a Tier 1, Tier 2 or Tier 3 CRB is?

See our seminal ACAMS Today white paper Defining "Marijuana-Related Business" and its update Defining "Cannabis-Related Business"

 

Most Popular

Subscribe For Updates

Explore how CRBMonitor can simplify your cannabis-related compliance challenges.