February 28, 2026
Commentary
Summary
In this month’s commentary, we discuss market trends and macro events that have produced higher volatility. This month’s commentary explores a new or revitalized medical market in Texas, where Gov Abbott and the state government have initially approved licenses, expanded formats and increased dosage limits, as well as provided guidance for inclusion of major medical qualifying conditions where cannabis can be dispensed. Given that the state has 30 million people, this market could become a significant addition to not only sales nationwide, but given its Republican Governor, could add influence on the national debate to re-schedule and or potentially legalize. This month we also add to the Re-Scheduling discussion, updating investors on where we are and what potential next steps could be. Finally, we analyze the quarterly results of leading US cannabis operators.
The Ninepoint Cannabis & Alternative Health Fund is focused 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.
Our Equity Market Outlook
YTD to the end of February, the fund was down approx. 6.52%. There has been a mixture of sector-specific issues, such as waiting for the next steps in Re-Scheduling, which has led to impatient selling pressure. From a macro perspective, headline inflation for January measured +2.39% y/y in the US, decelerating 29 bps. The disinflation was broad-based, with all CPI sub-categories decelerating from December. February CPI, release date March 11th, is expected to come with an inflationary bias as the contribution from energy prices in response to the war in Iran will likely have a significant impact on inflation readings from Q4-25. As of the date of writing, WTI has moved from approx. $63/barrel a month ago to the mid $90’s, also suggesting March CPI could be even more inflationary.
Before the U.S. and Israel coordinated strikes on Iran on February 28th, U.S. growth was already cooling, longer-run inflation expectations were easing, and the market was leaning toward gradual US Federal Reserve interest rate policy easing. The March 6th Nonfarm payrolls came in at negative 92,000, missing expectations and were far below February’s 126,000. The unemployment rate ticked up slightly, and retail sales fell 0.2% month over month. All fell in line with the rate cut playbook. However, with the economic releases noted, the US Federal Reserve likely does nothing at their regular meeting on March 17/18.
This remains an exceptionally headline-driven market, and most recently, global equity markets are trading rather sloppily, reflecting elevated anxiety amid uncertainty around Iran and broader geopolitical tensions. President Trump's top policy priorities are to be the "peace president," manage inflation with a downward bias, and lower US gas prices to $2.00 per gallon. A prolonged war with Iran would work in the opposite direction of these key priorities, particularly in the short-term during a crucial midterm election year.
The reality is that risk is always present, even if you can’t always see it, which is why positioning now is so critical. Equity volatility remains investable and supportive of risk assets, but we remain mindful of cross-asset volatility.
Despite short-term negative sentiment, US Cannabis has significant catalyst potential. In addition to our Fund, positioning includes subsectors within health and wellness offering growth as the MAHA (Make America Healthy Again) policy changes provide runway for diagnostics, innovation, as well as changing health regimens.
Re-Scheduling
US MSO valuations peaked mid December when President Trump’s Executive Order to reschedule cannabis was released and have softened to February month end. The weakness is not surprising since this issue has been the main catalyst for 4 years yet without the political will in Washington to bring it home. Two points we must highlight to investors about “this time”. First, this is a different Administration with a focus on the mid-terms. As investors, we would ask the question “Why would President Trump sign an E.O. unless he wanted to make an impact in the mid-terms?”. Second, MSOs are currently trading at roughly half the valuation multiple to when the results of the HHS medical research were released in early 2024. We believe cannabis investors may be pricing in regulatory delay and disappointment rather. The upside is not being priced in.
3 Years of Re-Scheduling Volatility & Investor Sentiment
We believe that, for political necessity, the Trump Administration will be able to get this over the finish line. Markets still value the companies with less enthusiasm as the US MSOs trade at lower multiples (5-6X EBITDA) than the peak multiples (10X EBITDA) during the last 3 years.
Texas Medical Cannabis Update
The potential for a new significant market is taking place where Texas is one step closer to bringing a more fulsome medical cannabis regime to a state of over 30 million people.
The Texas Department of Public Safety (DPS) has begun Phase I of the Texas Compassionate Use Program (TCUP) expansion selection process. Nine new businesses have been selected to move forward for an additional diligence evaluation.
As background, on June 21, 2025, Texas Governor Greg Abbott signed HB 46 into law, which established TX as the 40th state to legalize medical cannabis. The medical cannabis expansion bill contains additions to the Texas Compassionate Use Program (TCUP). The earlier version of TCUP was very limited and restrictive, with only low-THC medical cannabis available in limited formats.
The updated TCUP is drafted to include additional qualifying conditions for medical marijuana, including Crohn’s disease, traumatic brain injury, and chronic pain. There will also be additional formats, including inhalers, vaporizers, lotions, suppositories and patches. The new legislation will also increase the current limit of 1% THC by weight to up to 10 milligrams per dose.
The first nine phase licensees are: Verano, Trulieve, Texas Patient Access, Lonestar Compassionate Care, Lone Star Bioscience, PCTX OPCO LLC (dba PharmaCann), Texa OP dba TexaRx, Story of Texas and Dilatso. Out of this list, only Trulieve and Verano are MSOs with the capital necessary (in our opinion) to build out a network of stores as per the suggested regulations, which call for at least one dispensary in each of the 11 cannabis districts throughout the state. Also encouraging for the new market is that patient enrollment growth is strong at 32% last year, yet still in its nascent phase, by comparison with much fewer enrolled patients than other states with smaller population bases.
If we compare Texas’ medical cannabis enrollment vs other well-populated states, such as Florida and Pennsylvania, which have 890,000 and 444,000 patients, Texas, with 135,000, has significant growth potential.
Trulieve Cannabis: A Strong Finish to 2025
Trulieve Cannabis (TRUL) remains the market leader in Florida, with operational scale that continues to drive costs down, allowing TRUL to generate higher margins despite competitive pressures in its primary market. Revenues for the year reached $1.2 billion, with 94% of revenue from retail sales. Its production scale can be seen in its gross margin of 60%, with gross profit of $711 million. Management noted in its quarterly call with analysts that foot traffic is strong, and unit sales are up 5% YoY. The company detailed that over 50 million branded product units were sold in 2025, up 5% compared to last year, with its loyalty rewards program resulting in high rates of customer retention. President & CEO Kim Rivers has stated on multiple calls that its loyalty rewards program is effective at influencing the buying habits of its most frequent customers, which leads to spending increases of 2.5 times more than regular customers. The loyalty program is a leader in the US MSO space with over 900,000 names as of year-end. When you consider its scale in production, operating efficiency and the implementation of its loyalty rewards program, it is not surprising that TRUL continues to generate strong adjusted EBITDA of $427 million, or 36% of revenue, up $7 million from 2024.
2025 saw TRUL generate record cash flow from operations of $273 million and free cash flow of $229 million. The balance sheet has cash at year's end of $256 million. During Q3, the company was able to refinance its maturing debt a year early. TRUL redeemed $368 million of senior secured notes due in 2026 and repaid $15.8 million in mortgages. The company also closed a $140 million private placement of senior secured notes due 2030. The company continues to expand in the southern US, with TRUL being one of only a select number of operators to be granted conditional approval for a Dispensing Organization license under the new Texas Compassionate Cannabis Use Program. This state market could be significant for the company, both from a sales perspective and from an overall market leadership perspective, as no other Tier 1 MSO was granted a license. The company has suggested it is ready to build and open five new dispensaries in TX in 2026, subject to regulatory approval. As of year-end Trulieve operates 234 retail dispensaries with over 4 million square feet of cultivation and processing capacity. Despite its focus in FL, the company finished the year with 30% of its retail locations outside of the state.
Green Thumb Industries: Steady Financial Results:
In early March, Green Thumb (GTII) Industries released Q4 and full-year 2025 financial results. Revenue for Q4 was $311.1mm outperforming consensus of $295.5mm, an increase of 6.8% q/q and 5.7% y/y. For 2025, revenue reached $1.175 billion, while gross profit was $141.3mm with 400 bp of q/q margin compression to 45.4%. During the latter part of the year, GTI completed transactions whereby GTI transferred brand rights of its Rhythm brand to Agrify, which has impacted margins negatively. However, countering this weakness in gross margin was an increase in adjusted. EBITDA for Q4 of $93.4mm handily beat the consensus of $78.3mm, or 30.0% vs 26.5% consensus. Revenue growth in 2025 was seen in the new rec market in Minnesota, with its adult-use launch going very well for GTI as one of only a few operators approved in the state, while the company also witnessed continued growth in OH, NY, and FL. From a cash flow and tax perspective, we have detailed IS Tax 280E issues in this and previous commentaries. Previously, GTI was a standout relative to other MSOs in maintaining current tax payments related to 280E. GTI announced within its year-end release that it has decided to stop 280E tax payments, which brings them in line with all other operators. At year's end, the company had $285.3mm of cash on its balance sheet and total debt of $244.9mm. Cash flow from operations was $90.1mm, with only $14.7mm and cap exp, resulting in free cash flow (net of lease payments) of $75.5mm. We continue to see strength in GTI with exposure to new and future recreational markets, combined with its strong balance sheet.
Options Strategy
Since the inception of the option writing program in September 2018, the Fund has generated significant income from options premiums 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 FEBRUARY 28, 2026 (SERIES F NPP5421) | INCEPTION DATE - AUGUST 4, 2017
1M |
YTD |
3M |
6M |
1YR |
3YR |
5YR |
Inception |
|
|---|---|---|---|---|---|---|---|---|
Fund |
0.47% |
-6.52% |
3.28% |
-6.02% |
-1.77% |
-6.88% |
-17.83% |
0.60% |
Statistical Analysis
Fund |
|
|---|---|
Cumulative Returns |
5.25% |
Standard Deviation |
26.9% |
Sharpe Ratio |
0.08 |
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