October 31, 2025
Commentary
Summary
October witnessed choppy trading and volatility shocks, given uncertainties caused by global trade tensions and the US government shutdown. In our commentary, we review the negotiations to reopen the US government and the implications of those negotiations on sub-sectors within our fund mandate. First, we look at the hemp-derived beverage industry and the impact it potentially faces from congressional negotiations. We also examine potential cost constraints faced by healthcare providers as a result of those same negotiations. Managed care/insurance companies may experience weakness post-government shutdowns. Our report also covers the top fund holdings that released Q3 results. Trulieve (TRUL) announced very strong Q3 results with leading gross margin and EBITDA results. The company is also announcing early debt repayment of over $300 million in debentures originally scheduled to mature late in 2026. On the US cannabis front, we also discuss Green Thumb Industries (GTII) results and highlight its continued share buyback program. Amazon (AMZN) Q3 results feature industry-leading retail growth that stands out relative to the weak consumer sentiment seen in many retail names, and finally, we note how Microsoft is leading its AI innovation into health, with digital diagnostics.
Our Equity Market View
Markets remain preoccupied with trade tensions, inflation data, labor market health, and the US Federal Reserve’s policy path. On October 29, the FED cut rates by 25 basis points to a range of 3.75% - 4.00% and said it will stop shrinking its balance sheet on December 1. It appears the Fed is giving up on controlling the inflation narrative and focusing on the economy to ensure the funding markets continue to operate. The message is that Fed tightening is complete, and now it appears to be about keeping the system flowing, allowing for the economy to catch up. Key upcoming catalysts for market participants include the November 13 inflation report for October, initial jobless claims on November 13, and the next FOMC minutes release on November 19 from the October 28/29 meeting.
Markets appear to be anticipating that the FED will continue to lower interest rates, which could further boost borrowing, investment, and the keep the US economy’s momentum for the balance of 2025 and into 2026. Simultaneously, global fiscal policies amongst major economies are loosening, increasing global liquidity. Canada continues to lack responsible economic leadership, and we are risk‑managing that scenario. Going forward, a more dovish policy from the FED in the way of lower interest rates and a resumption of balance sheet growth will be mildly beneficial for risk assets. Other macro factors such as global liquidity (M2), real yields, and the U.S. Dollar Index, also play significant roles, highlighting that a confluence of factors affects risk assets, not just the specter of inflation. We still view this as a broadly favorable environment for risk assets.
October witnessed choppy trading and volatility shocks notwithstanding solid gains for various health related names in the portfolio. From a top-down perspective, equity markets continue to grind higher despite worries on jobs, tariffs and the strength of the US dollar. For healthcare investors, the beginning of the year saw rising fears related to the new administration and the policy direction to come from Health & Human Services Secretary Robert F. Kennedy Jr. The initial fears drove healthcare equities lower, forecasting challenges in pharmaceuticals, diagnostic testing and clinical research. Over the last six months we have seen healthcare sub-sectors rebound nicely.
The Ninepoint Cannabis & Alternative Health Fund is focussed on the key drivers affecting cannabis, health and wellness, pharma and consumer health sectors. We invest in companies that are embracing new modalities, innovative technology and effective distribution. We believe that people globally are becoming more aware of alternative treatments and seeking out the best providers of select services. Our goal is to invest in those companies best positioned to take advantage of these macro changes.
Update on Hemp Derived Beverages: Kentucky is the Front Line
The US hemp-derived THC market is growing, with more companies involved in cultivation, processing, interstate distribution and production of beverages. Investors may wonder how hemp-derived THC beverages have been growing despite federal challenges and state regulatory hurdles. Recall that starting in 2018, the passage of the Farm Bill legalized hemp across the US, leading to the production of intoxicating hemp-derived THC beverages in many states where cannabis remains illegal. To date, there has been a lack of resolve to address a “loophole” that was created by the Farm Bill. Senator Mitch McConnell, the previous Senate Majority Leader from Kentucky, brought the Farm Bill to a successful vote to help his KY farmers with a commercial crop that could replace the state’s historical reliance on tobacco, which has been declining for decades. Fibre from hemp stalks can be used to make everything from paper products, textiles, rope and construction materials. Grain from industrial hemp can be used in food products, cosmetics and plastics.
Recently, senators who voted in favour of the Farm Bill back in 2018 have voiced discomfort with the unintended allowances with respect to hemp cultivation, allowing for various advantages such as inter-state distribution of intoxicating hemp-derived beverages without oversight, regulation or age-gating.. Currently, hemp producers enjoy operational and tax benefits that are not available to cannabis companies. Hemp production and related products do not face IRS Tax Code 280E and its punitive taxes that cannabis related products attract. Due to the coverage from the Farm Bill, products can be shipped across state lines, allowing vertically integrated producers to create a national market. Congress’s approval of the Farm Bill allows companies to have access to the FDIC banking system and credit card processing associations. In addition, hemp-based companies can list their securities on US stock exchanges. Overall, hemp-derived THC products and their producers can enjoy access to select state markets and resulting profits that are off limits to cannabis companies.
Recently, we have seen two retail chains announce that they are stocking hemp-derived beverages in select stores. The two chains are Circle K and Target. Sales growth could be positively impacted by the new distribution opportunity these stores offer. We have written about leading Fund positions such as GTI, TRUL and GLASF that have established hemp-derived THC product lines to exploit these opportunities. And with federal legal standing, even Canadian cannabis companies can compete in the US with their hemp-derived THC product lines. Companies such as OGI, WEED, TLRY and VFF are all getting involved. The risks for hemp producers are interpreting the state-by-state regulatory environment.
Circle K has stated its goal is to distribute hemp-based products in up to 3,000 stores by the end of 2026. The launch involves THC beverages marketed/promoted by NBA star Allen Iverson in North Carolina & South Carolina, and Florida. Circle K has tried to distribute cannabis and hemp-based products since 2022, when it announced a partnership with GTI to distribute in Florida, ultimately blocked by the FL state regulators. Circle K has already completed initial test market sales in Georgia and Florida early in 2025. If successful, Circle K and its parent Alimentation Couche Tard (ATD), could see hemp-derived THC products distributed through many of its approx. 10,000 locations in North America. In early October, another large retail chain, Target (TGT) announced it would begin selling hemp-derived THC beverages at its stores in Minnesota, where state law allows hemp products to be sold.
These two national retail chains are a major step forward for the hemp THC business. CBS reports these beverages can be legally sold in 44 states, 37 of which allow sales outside of the marijuana dispensary systems.
US Government Shutdown: Impact on Hemp and Healthcare
At the date of writing, the US is experiencing the longest government shutdown in its history. Services have been delayed, government wages have been unpaid, and many workers are being furloughed. As a way to bring about a resolution, Senate Republicans attempted to break the impasse, successfully gathering the necessary 60 votes to at a minimum bring back some furloughed government workers, then getting services up and running. One of the casualties of the negotiations appears to be an extension of subsidies allocated to the Affordable Care Act that were set to expire at the end of 2025.
Democrats have been demanding that the subsidies become permanent; however costs of the program do not seem to be sustainable. In addition, many Americans who were earning well above (400%+) the poverty level were receiving benefits. This is untenable when the government is focused on reigning in deficits. The impact will be felt over the next year as managed care providers remove price-sensitive plan participants who have not paid premiums. This will impact the delivery of healthcare services, as Republicans would prefer to send tax cuts or health rebates directly to consumers so they can choose how to spend their health dollars. This disintermediates the managed care companies out of their central positions within the ACA. The President on Truth Social stated “"I am recommending to Senate Republicans that the Hundreds of Billions of Dollars currently being sent to money sucking Insurance Companies in order to save the bad Healthcare provided by ObamaCare, BE SENT DIRECTLY TO THE PEOPLE SO THAT THEY CAN PURCHASE THEIR OWN, MUCH BETTER, HEALTHCARE, and have money left over," Trump said in the post. More to follow in the coming weeks ahead.
As part of the negotiation to bring Democrats and Republicans to an agreement to end the shutdown, Republican Senator McConnell of KY, who is retiring from the Senate, is attempting to close the loophole created by the 2018 Farm Bill to eliminate intoxicating hemp-derived THC beverages. However, his fellow KY Senator Rand Paul, also a Republican, has stated he will not support any reconciliation bill that negatively impacts the hemp industry. Sen Paul recently stated, “I’ll vote no.” He argued his fellow Senate Republicans were pushing policies that would “kill an entire industry.” As at the date of writing, negotiations to reopen the US government are ongoing, but the shutdown negotiations are far-reaching and could have significant impacts on the sectors within our mandate. Greater regulation of the hemp industry could help level the playing field for cannabis companies, particularly in states where adult use is legal.
Earnings Reports
Trulieve Cannabis Exceeds Expectations
Trulieve Cannabis (TRUL) exceeded analyst expectations, providing industry-leading margins for Q3. Revenues reached $288 million primarily from the company’s 232 retail stores, of which 30% are outside the state of Florida. With a home base in the vertically integrated Florida market, TRUL has scale and competitive advantages over its competition that continue to improve margins. For the quarter, despite pricing pressure and product mix adjustments to mid and value-based products, gross margin still reached 59% or $170 million. In addition, the company reduced SG&A expenses by $9 million, resulting in adj EBITDA of $103 million or 36% of revenue, up 7% YoY. Cash at quarter end was $458 million, and the company announced that it is repaying its $368 million maturing debt in early December, 9 months earlier than maturity. This is a sign of confidence that TRUL is on track to continue to generate strong cash flows.
What is also encouraging is that during the first month of Q4, management noted that October traffic continues to improve in all state markets. For the quarter, the company sold 12 million units with branded products representing 50% of all products sold. The company continues to add new offerings, and during Q3, a new all-in-one vape hit the market and was sold out in weeks, illustrating creativity and sound client insights to know what sells in its key market. We have also discussed how US cannabis companies are exploring hemp-derived beverages and TRUL is among the leaders, with expanded distribution of what it terms “Farm Bill Compliant Beverages”. The company has direct-to-consumer sales online in addition to having its product on shelf in 440 stores in FL and IL. Adding strength to its new line of hemp-derived THC beverages, the company announced distribution of its hemp-derived beverage lines via Anheuser Busch in FL.
TRUL is also leading the industry in its deployment of technology through its rewards program as it attempts to add personalization and focus to its customer outreach plans. In Q3, the Trulieve rewards program reached 820,000 members, with loyalty members accounting for 77% of transactions during the third quarter. Subsequent to quarter end, the company announced a new app for residents of Florida to further enhance the customer experience with mobile purchases, loyalty offerings and convenient location pick up choices, all to further enhance the customer experience. We continue to see upside for this name as it executes on its business plans both inside its home state of Fl and in its various state markets.
Green Thumb Industries Extends Share Buyback
Fund top ten holding Green Thumb Industries (GTII) announced results that illustrated a more cautious US cannabis picture, with flat revenue growth as well as price compression that negatively impacted margins. GTII is considered by many to have the strongest balance sheet and operates in a more conservative, organically grown way, with current consumer constraints weighing on its results.
Revenue for the quarter was $291.4 million, an increase of 1.6% YoY. Wholesale (Consumer Packaged Goods-CPG) revenue increased 8% YoY from expansion in New York and Ohio. Retail (Rise Dispensaries) revenue declined by 1% YoY, with management suggesting price compression as the primary factor in markets such as Illinois, Pennsylvania and New Jersey. State market growth was seen in Minnesota, where the company launched, and after quarter-end end opened 7 new RISE dispensaries. Q3 same store sales growth (stores open at least 12 months) decreased 7.1% YoY on a base of 93 stores.
During Q3, gross profit was $144 million or 49.4% margin vs slightly higher consensus of 49.7%. Adj. EBITDA was $80.2 million (consensus: $81.9mm). Cash flow from operations was $74.1 million. One standout that continues to differentiate GTI is its share buyback program, now entering its third year, the company's Board announced a $50 million for the repurchase of shares from September 23, 2025 to September 22, 2026. The company has a healthy cash position at quarter end $226.2 million, with total debt of $247 million. Green Thumb has 20 manufacturing facilities and 108 retail stores across 14 U.S. markets, employing approximately 4,800 people.
Amazon Q3-25 Beats on Retail and AWS
The top ten Fund position AMZN reported Q3 results that were closely watched by investors after a disappointing Q2 where AWS divisional results decelerated. This time AMZN did not disappoint. Revenues in the quarter were up 20.2% to $180 billion, beating analyst estimates of $177.8 billion by over 200 basis points (est 18%). That acceleration helped to generate EPS of $1.98 vs estimates at $1.57. After the announcement on 10-30-25, the stock was up 15% at its peak in after-hours trading. Operating cash flow was flat net of a $2.5 billion legal settlement, which if backed out meant operating cash flow was up 24%. Retail revenues also beat expectations with North American sales up 11% YoY, while international sales were up 14%. The company specifically mentioned the growth in everyday essentials (pantry, grocery, clothes) growing twice as fast as the rest of AMZN which is an interesting read at a time where consumers are stretched and retailers need to offer compelling value to attract buyers. To further distance AMZN from its competition, AMZN has spent $4 billion in US rural infrastructure upgrades to reach its goal of same day delivery for a greater portion of its primary market.
Amazon’s AWS division had impressive growth of approx. 20% generating revenues of $33 billion in the quarter off a base of $28 billion in revenues. Putting that into perspective, Google recently posted 33% growth off only $11 billion base, AWS continues to grow its ubiquitous global infrastructure services offering. On Monday Nov 3rd, AWS announced that it had signed a $38 billion with Open AI to provide access to Nvidia’s graphics processing units. This is a major achievement for AWS services now working with a company that has a significant infrastructure and exclusive cloud sharing agreements with Microsoft.
Amazon continues to expand its reach in both logistics and technology, including AI, allowing it to be a central player in a number of industries as well as being a leader in retail distribution.
Quest Diagnostics Beats Expectations & Grows Diagnostics through Collaboration
Quest Diagnostics (DGX) is a top fund holding that released strong results and raised full-year guidance. DGX provides diagnostics from laboratory testing. The company serves one in three adult Americans and half the physicians and hospitals in the United States and continues to strengthen its position as a leader in the diagnostic testing market. For Q3, revenues were $2.82 billion, an increase of 13.1% YoY, with adjusted operating income of $458 million, or 16.3% of net revenues and adjusted diluted earnings per share up 13% YoY to $2.60/share. Year-to-date cash from operations to the end of Q3 was $1.4 billion, up 63.1% from 2024, emphasizing strong demand for clinical testing. One of the key drivers of revenue growth is DGX’s ability to work with hospitals to integrate its lab testing services into hospital organizations. During Q3, DGX announced its latest agreement with a hospital network, Corewell Health, to provide testing and diagnostic services to its hospital network in Michigan. Management anticipates that the Corewell collaboration could generate annual revenues of approximately $1 billion next year as services scale across 21 Corewell hospitals. Aided by the annual growth and its Corewell announcement, DGX increased full-year guidance for 2025, with adjusted diluted EPS expected to be between $9.76 and $9.84.
Microsoft – Integration of AI in Healthcare
MSFT is a top fund position that we believe is a leader in the convergence of healthcare and AI. Q1-26 financial results released at the end of October provided sound financial results with revenues of $77.7 billion, beating analyst estimates of $75.3 billion, top line increasing 18% YoY. Operating income for Q1-26 was $38.0 billion, up 24% YoY vs Q1-25, while earnings per share were $4.1,3 beating Wall Street estimates of $3.67/share.
Over the past several months, we have been adding to our position in MSFT specifically as it relates to AI in healthcare. MSFT has positioned AI as a cornerstone of its healthcare strategy, investing heavily in research, cloud infrastructure, and partnerships to address challenges like clinician burnout, diagnostic delays, and data silos. Through platforms like Azure AI and Microsoft Cloud for Healthcare, AI is embedded across the care continuum—from diagnostics and administrative workflows to research and patient engagement.
Microsoft's record of solid earnings and sales growth, a 20-year history of dividend growth, its $60 billion share repurchase program, and a strong outlook from its Azure platform result in it being a core holding that we continue to add to on an opportunistic basis.
Options Strategy
Since the inception of the option writing program in September 2018, the Fund has generated significant income from options premium of approximately CAD$5.27 million. We will continue to utilize our options program to look for attractive opportunities, given the volatility in the sector and to assist in rebalancing the portfolio in favor of names we prefer as we strongly believe that option writing can continue to add incremental value going forward.
Ninepoint Cannabis & Alternative Health Fund - Compounded Returns* as of October 31, 2025 (Series F NPP5421) | Inception Date - August 4, 2017
1M |
YTD |
3M |
6M |
1YR |
3YR |
5YR |
Inception |
|
|---|---|---|---|---|---|---|---|---|
Fund |
-3.76% |
-3.34% |
11.42% |
6.79% |
-19.74% |
-12.48% |
-10.55% |
0.75% |
Statistical Analysis
Fund |
|
|---|---|
Cumulative Returns |
6.35% |
Standard Deviation |
27.08% |
Sharpe Ratio |
0.09 |
The Ninepoint Cannabis & Alternative Health Fund, launched in March of 2017 is Canada’s first actively managed mutual fund with a focus on the cannabis sector and remains open to new investors, available for purchase daily.
Charles Taerk & Douglas Waterson
The Portfolio Team
Faircourt Asset Management
Sub-Advisor to the Ninepoint Cannabis & Alternative Health Fund