Hedge Fund Veteran Doug Kass Says Most Cannabis Stocks Are 'Walking Dead,' But These 4 Names Stand Out

Veteran hedge fund manager Doug Kass isn't mincing words about the state of the cannabis industry. In a recent column titled “Picking the Cannabis Winners in an Industry Full of the Walking Dead,” the Seabreeze Partners president outlined why he believes most public cannabis companies are distressed and structurally unsound — but also identified a small group he still considers investable.

‘The Walking Dead’ Of Weed Stocks

According to Kass, a majority of cannabis equities today are effectively "walking dead," their survival contingent on the ability to refinance mounting debt. And even for those that manage to raise capital, significant equity dilution could leave shareholders with little value.

"The cannabis industry now consists of only a handful or two of private and public companies that are healthy and who reside in the land of the living," Kass wrote. "Most of the other public equities are among the walking dead."

He argues the industry's earlier projections for market size, sales and profitability were dramatically overstated, leading to disappointing results and poor investor returns. That disillusionment has been compounded by structural headwinds — oversupply, inconsistent state-level rollouts and sluggish legalization progress — all contributing to weak dispensary unit economics and price compression.

Kass also noted that access to capital has dried up, leading some operators to delay tax payments or take on unmanageable debt.

MSOS ETF In The Crosshairs

Kass reserved particularly harsh criticism for the AdvisorShares Pure U.S. Cannabis ETF MSOS, which he says has become "the tail that wags the cannabis dog."

After years of holding a position in the ETF, Kass said he sold out a couple of weeks ago, citing concerns over its portfolio construction, illiquid holdings, and role in sector volatility.

"Frankly, given that the components of MSOS are illiquid, I do think (though it is hard to prove) that the industry would have been better off if MSOS never existed," he wrote. "MSOS has clearly become the tail that wags the cannabis dog."

He accused the ETF's managers of disposing of stronger companies like Green Thumb Industries in order to fund weaker names, which he believes may have provided exits for insiders at the expense of retail shareholders.

Four Marijuana Stocks Worth Watching

Despite his bearish view of the broader market, Kass said a select few companies remain attractive, particularly for long-term investors with patience. His shortlist includes:

• Trulieve Cannabis Corp. TCNNF
• TerrAscend Corp. TRSSF
• Green Thumb Industries Inc. GTBIF
• Glass House Brands Inc. GLASF

Kass argues that each of these operators is financially and operationally stronger than its peers and could benefit from potential industry consolidation and legislative progress in the coming years.

"While there are other stocks that are investable, their market capitalizations are too small and their liquidity limited," he wrote. "Even the best of the cannabis lot will require patience — but there remains consequential upside (and relatively limited downside) over the next several years."

It should be noted, though, that Kass published his commentary on May 5. Since then, all four companies have reported first-quarter results:

• Trulieve posted $298 million in revenue, 62% gross margin and $51 million in cash flow from operations.
• TerrAscend reported $71 million in revenue and its 11th consecutive quarter of positive operating cash flow.
• Green Thumb delivered $280 million in revenue, $74 million in operating cash flow and $8 million in net income.
• Glass House’s revenue increased 49% year over year to $44.8 million and achieved a 45% gross margin despite declining production costs.

Looking Ahead: Consolidation, Legislation And Distribution Models

Kass believes the next 12 to 18 months could bring widespread receiverships among debt-laden cannabis companies. This "debt maturity cliff," combined with potential M&A activity, may create openings for stronger players to grow through acquisition.

He also raised questions about the future of cannabis distribution:

• If interstate commerce becomes legal, low-cost national cultivators like Glass House may win out.
• If distribution remains intrastate, vertically integrated MSOs with strong local operations could continue dominating — assuming they can survive market dynamics.

Bottom Line

Kass's analysis is a reminder for cannabis investors that selectivity is critical. While the broader sector faces significant headwinds, a few well-capitalized, strategically positioned companies may still present compelling long-term opportunities.

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