CODI Stock Trims Early Gains After Tilray Deal

The company just sold its hemp foods unit Manitoba Harvest to weed giant Tilray

The investment trust company Compass Diversified Holdings (NYSE:CODI) just announced the sale of its majority-owned hemp foods unit, Manitoba Harvest, to the marijuana concern Tilray Inc (TLRY) for roughly C$419 million. Compass said it plans to use the deal's proceeds to repay debts. As a result, CODI stock shot up roughly 5% out of the gate to a near-four month high of $16.46 before paring its gains.

The equity hasrebounded 38% from its Dec. 24 multi-year closing low of $11.68, and is now pacing for its biggest quarterly gain since September 2009 -- up 29% since the beginning of January. Plus, CODI stock could close above its 126-day moving averagefor the first time since mid-October. At last check, CODI is up 3% at $16.15.

The majority of analysts are betting on more upside for Compass, with four doling out "buy" or better ratings and one saying "hold." Plus, the consensus 12-month price target of $18.30 is a 13.3% premium to current levels.

What's more, the number of shares sold short dropped 33.2% in the most recent reporting period, and short interest now represents only 1.3% of the stock's available float. Plus, CODI's Schaeffer's put/call open interest ratio (SOIR) of 0.18 ranks in the lowest percentile of its annual range, suggesting that short-term options players are favoring calls over puts by an extreme degree.

With plenty of optimism priced into CODI shares already, it's no surprise to see the stock's early momentum already fading. In fact, the stock was up about 12% premarket before more than halving those gains at the open. Meanwhile, TLRY stock is trading 4.4% higher at the session's halfway point.