Category Archives: Pot Stocks

Why Aurora Cannabis Stock Needs the U.S. to Make a Comeback

Source: Shutterstock

Aurora Cannabis (NYSE:ACB) has continued its downtrend. Following its principal product achieving legal status across Canada, ACB stock and its peers have seen a brutal selloff.

With ACB losing about 50% of its value over the last six weeks, feelings of hunger for marijuana stocks have given way to paranoia. Legalization might have killed the buzz in Canada. Still, other countries appear poised to loosen their cannabis laws. With that, Aurora could benefit from new rounds of reefer stock madness, particularly if the United States rescinds marijuana’s Schedule I designation.

Legalization Killed the Buzz on ACB Stock

To be sure, official legal status in Canada has become a classic “sell the news” occurrence for ACB stock. ACB along with peers such as Canopy Growth (NYSE:CGC) and Tilray(NASDAQ:TLRY) have sold off over the last six weeks.

This makes little sense on some levels. Canada finds itself in the midst of a shortage of weed that could last months. Interest has also emerged in unexpected places such as the cosmetics industry. Yet, these normally bullish signs have not stopped ACB from falling. As a result, ACB stock has begun to flirt with its 52-week lows.

This offers both good and bad news for owners of cannabis stocks. Investors need to accept the reality that marijuana hype for Canada has ended. Moreover, as more countries loosen regulations on cannabis, more marijuana stocks will emerge. With a greater supply of marijuana stocks, demand for the same few Canadian marijuana equities naturally falls.

Investors should also remember that legalization will make marijuana stocks boring. Their long-term future will probably resemble that of tobacco or alcohol stocks such as Altria (NYSE:MO) or Canopy-investor Constellation Brands (NYSE:STZ). Such a future will likely consist of dividends, slow but steady profit growth and unremarkable price-to-earnings (P/E) ratios.

Countries Like the U.S. Could Bring Back the Hype

That said, every developed country has to first get to this point of legal status. I believe full legalization will sweep the developed world, including the U.S. I also expect this period will inspire a new wave of hype similar to what we saw in Canada before mid-October.

A removal of marijuana’s Schedule I designation in the United States could set that trend afire. Such a move coming from its neighbor to the south would offer a particular benefit to ACB stock and its Canadian peers. With that federal roadblock removed, foreign companies, such as Aurora could participate. This, of course, would probably inspire the interest needed to bring investors back into ACB stock.

So the question becomes when to buy? With the stock still trending downward, now may not serve as the best time. ACB stock currently trades at around $5.50 per share. With 11 Canadian cents (8.3 cents) per share in profit for this year, the stock may appear expensive. Still, the profits speak to the stability of Aurora Cannabis stock.

Also, Wall Street forecasts a profit growth rate of 145.8% for this fiscal year (2019) and 27.3% in 2020. This massive rate of increase lessens the risk of paying a high multiple. Once ACB stops selling off, it should position itself to benefit from the next wave of marijuana hype.

The Bottom Line on ACB Stock

Stock price growth could easily return to ACB stock, especially if the United States chills out on their strict marijuana laws. The massive drop in ACB and other Canadian cannabis stocks following legalization indicates that the stock growth in its home market has lost its buzz. While legalization tends to make cannabis stocks boring across the board, most countries have not yet achieved full legal status.

This brings opportunities for new rounds of reefer stock madness in other countries. With Aurora’s proximity to the U.S. market, this becomes especially true south of the Canadian border. A removal of Schedule I status in the U.S. would open up new production and sales in a nearby market nearly ten times its size. This could set up ACB stock for new highs.

As the stock continues to fall, investors need to watch and wait. However, if ACB forms a floor, or if the U.S. opens up on the federal level, prepare for new highs.

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Buy This Marijuana Stock to Tap Into Legal Pot’s Next Growth Phase

Now that the bloom is off the cryptocurrency rose, investors looking for the latest hot sector have descended upon the pot stock space. Marijuana-related companies look likely to have raised $8 billion from investors in 2018.

And that’s understandable – estimates are that it could be a $150 billion sector within a decade. The growth in the marijuana sector has been greatly aided by recent developments – the legalization of pot by Canada in mid-October and the Democrats winning control of the U.S. House of Representatives. The latter makes it more likely the U.S. will legalize cannabis nationally. Already, a number of states have legalized marijuana, with Michigan being the latest.

From just a $5 billion market in 2015, the legal cannabis industry in North America is expected, in the most conservative estimates, to top $20 billion by 2020. North America is pretty much the global legal pot market at the moment since about 90% of global legal revenues currently come from the U.S. and Canada.

Here though is the most exciting part of the growth story of the legal pot market…

Marijuana-Infused Drinks Coming

Cannabis sales are only a small fraction of alcohol sales, but that is likely to change when major beverage companies enter the market and start replacing alcohol content with cannabis content.

And there is a similar story that looks to be unfolding in the non-alcoholic beverage market also. That growth story is why some of the world’s leading beverage companies have shown interest in the sector.

Some drinks companies are seriously looking at adding CBD (cannabidiol) – the non-psychoactive part of marijuana – into drinks aimed at the mass market. These drinks containing cannabidiol and focused on pain management could become big business. Analysts at Cannacord Genuity estimate that sales of drinks infused with CBD could make up 20% of the edibles market and will reach $600 million in sales in the U.S. by 2022.

Or as a recent Bloomberg article put it, pot has “moved from the black market to the stock market and now appears to be on its way to the supermarket.”

Coca-Cola (NYSE: KO) said it is looking at the possibility of infusing CBD into “functional wellness beverages around the world.” Coke is no doubt looking to broaden the reach of cannabis-infused beverages into functional wellness categories, enabling the company to potentially one day be a major player in the non-recreational cannabis-infused beverage category.

Other drinks companies in the alcoholic beverages space have or are contemplating jumping into the pot sector.

In August, Molson Coors Brewing (NYSE: TAP) jumped in by starting a joint venture with Hexo Corp (OTC: HYYWF)to develop non-alcoholic, cannabis-infused beverages for the Canadian market.

And Diageo (NYSE: DE), the drinks conglomerate behind Johnny Walker whiskey and Guinness beer, has also been exploring investment opportunities in the cannabis sector in recent months. It is thought that Diageo, the world’s biggest alcohol company, has had serious discussions with at least three major Canadian marijuana companies.

The maker of Corona beer and Modelo Especial, Constellation Brands (NYSE: STZ) has taken a giant leap into the sector when it invested just under $4 billion into the Canadian cannabis group Canopy Growth (NYSE: CGC), lifting its stake to 38%. Underlining the company’s bullish projections for cannabis, Constellation CEO Rob Sands acknowledged that the industry could represent “one of the most significant global growth opportunities for the next decade”.

Tread Carefully

However, you must still tread carefully when it comes to investing in the cannabis sector. After all, these companies are still money losers.

Let’s look at three of North America’s largest cannabis companies – Tilray (Nasdaq: TLRY)Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC).

In their latest earnings reports, revenues soared by 85%, 260%, and 33% respectively. But Tilray had a net loss of $18.7 million; Aurora had an operating loss of $112 million; and Canopy Growth had a net loss of $330.6 million.

In other words, these companies have costs that are rising faster than revenue. While some marijuana companies are starting to see the size of their losses slow, not one is profitable, and it could still take some time before they start making money.

Another worrisome item is the fact that the cost-per-gram is falling in Ontario (Canada’s most populous province) as the provincial government is buying product in bulk and at their set prices. (Canada’s cannabis companies can’t sell directly to retailers.) Tilray’s average per-gram price fell to $6.21 from $7.53.

It will still be months too before Canada’s pot companies produce enough to meet the strong demand. Until then, they’ll be spending big money on developing larger greenhouses. For instance, in August, Aurora announced it was starting production on a 1.2 million-square-foot facility, which will take months to build.

Cannabis Investments

These problems are why I do not like a broad play on the industry such as you would get through the ETFMG Alternative Harvest ETF (NYSE: MJ). Instead, I prefer to look for individual opportunities.

One company that is definitely on my list is CannTrust Holdings (OTC: CNTTF), which will be listing soon on the NYSE. It is in active discussions with a number of firms in the beverage, food and cosmetics industries and expects to announce a deal within the next two months.

This strategy is in contrast to that of Canopy Growth, which is tying itself to Constellation Brands. The chairman of CannTrust, Eric Paul, told Bloomberg “Ideally, it would be great to have a bunch of brand partners. We’d like to find the best partner for every one of those verticals [beverages, food, etc.]”

I was impressed too with its third results. Here are some of the highlights:

  • Record revenues of $12.6 million, a 105% increase from the comparable prior year period
  • Operations for the quarter resulted in positive EBITDA and positive net income
  • Active patients increased to more than 50,000, a 61% increase from the comparable prior year period
  • Entered into supply agreements with 9 Canadian provinces to supply recreational cannabis across Canada
  • Made its first shipment of cannabis oil to Denmark – the only cannabis oil accepted in Denmark
  • Partnered with Australia’s Gold Coast University Hospital on a six-month study designed to evaluate the efficacy of CannTrust CBD capsules in slowing the progression of Amyotrophic Lateral Sclerosis (ALS) progression
  • Partnered with McMaster University on medicinal cannabis research for chronic pain and for designing more effective, safer treatment protocols in public health policies

And despite a 20% move up after the earnings announcement, CannTrust stock sells at a much cheaper valuation than its peers.

There is also another cannabis-related company I like a lot that I have recommended to my Growth Stock Confidential subscribers. It is a more conservative way to approach the sector through a REIT that pays regular dividends.

Stay tuned for more on the sector in upcoming articles and special reports.

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Aurora Cannabis Stock Hasn’t Reached Its Peak Yet

marijuana stock

Source: Shutterstock

The marijuana stocks have been smoking hot in 2018. Some of the wildest trades of the year happened in Tilray (NASDA:TLRY) for example. This is a sector that exploded on to the market and has immediately amassed a die-hard fan base. But trading pot stocks has not been for the faint of heart. These are momentum stocks and they move even faster than Amazon(Nasdaq:AMZN) and Netflix (NASDAQ:NFLX). Aurora Cannabis (NYSE:ACB) is no different. ACB stock as seen several moves over 50% in either direction. So it’s never going to give investors an easy point of entries or exits.

For decades, pot was taboo, so it has never was a topic of conversation on Wall Street. But now that legalization of marijuana is becoming more ubiquitous, the concept of commercializing its uses is a valid thesis. There are several companies that have attracted mainstream investments like Constellation Brands (NYSE:STZ) did with Canopy Growth (NYSE:CGC). They invested $4 billion dollars so they can tap into the market.

Canada has been at the forefront of this movement. Some states in the U.S. have also been there but the big one would be at the federal level. Until that happens the risk in those stocks is still high. Therefore, I would only consider investing in ACB as a speculative thesis within a conservative portfolio.

From an evaluation perspective, the company sells at an 82 price-earnings ratio, which is almost Amazon territory. But unlike Amazon, its future is not as set in stone yet. But therein lies the opportunity.

This Canadian-based company is a legitimate competitor in the field. They are well diversified within it and already are in 20 countries. So it’s a matter of time as the legalization expands before they grow into their potential.

There’s not much expert opinion out on these companies, and in any case, I don’t think there are too many experts yet as the field is still too young for Wall Street to entirely grasp. So it’s a matter of picking a few of the potential winners and holding them for the long term.

In lieu of picking winners, one can invest in an ETF like the ETFMG Alternative Harvest ETF (NYSEARCA:MJ). But sometimes a targeted investment in one company or two is perhaps a smarter decision than a blunderbuss approach.

Technically, ACB stock failed at $12 per share but has so far found hard support around $4.5 dollars per share. This is a wide range of short-term pricing. However, the bulk of the action has been around $7 per share with supports the concept that somewhere in the middle of two extremes lies the truth.

When committing to a long-term thesis, I don’t worry about pennies in order to snipe the perfect entry point. I learned long ago that I don’t aim to pick the very best point of entry in momentum stocks. As long as my thesis is correct over the long-term the goal will come.

So if the marijuana trade is a viable one, and if ACB stock market does not crash in the mid-term, Aurora Cannabis stock should be higher in 2019. For now, investors will have to contend with the headline threats that loom.

We have a tariff war between the U.S. and China, we also have a U.S. Fed that’s in a tightening phase, which could hamper equity investments into 2019. But still, the macroeconomic environment looks conducive for more upside.

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36 Reasons Why Today Could Be Marijuana’s Biggest Day in Weeks

Legal cannabis is off to a roaring start in Canada, of course, but the next flood of big-gain potential will come to us courtesy of folks south of the border.

That’s because today, voters in Colorado, Michigan, North Dakota, Utah, Missouri, Ohio, and Wisconsin will head to the polls to vote on no less than 36 major cannabis reform ballot measures.

Now, any one of these could catalyze tremendous pot-stock gains virtually overnight because, as we’ve seen time and again since 2014, “when laws pass, stocks soar.”

But I’m most excited about the biggest of them…

Change Is in the Cards Across the Country

In Ohio, voters in six cities – Dayton is the biggest one – are deciding on whether to decriminalize cannabis. If passed, these initiatives would reduce the penalty for misdemeanor marijuana offenses to the lowest penalties allowed by law.

And in Wisconsin, voters in several counties are deciding whether to legalize medical marijuana. Other counties are voting on full adult legalization.

In Colorado, one of the nation’s most important “adult use” markets, voters are deciding on an amendment that would redefine industrial hemp so it aligns with the federal definition. If it passes, Colorado farmers would be at a huge advantage – and continue to lead the country’s hemp industry. Right now, Colorado produces half of the hemp in the United States.

In Utah and Missouri, citizens will be voting on whether to legalize medical marijuana. Both these states sport deep red, profoundly anti-marijuana electorates, so these two, specifically, are monumental votes, testing exactly how mainstream legal cannabis has become.

And finally, Michigan and North Dakota voters will be deciding on adult-use recreational marijuana. The proposed laws would not only legalize the sale of certain amounts of marijuana, but also change how law enforcement prosecutes marijuana drug infractions. In some cases, the violations would be changed from criminal to civil; in others, marijuana convicts’ records would be expunged entirely.

Six of the seven states will also be voting on taxes and other legal cannabis regulations. For example, Michigan and North Dakota are looking to enact marijuana laws and taxes that would mimic those of alcohol sales.

So what does this mean for the states that are looking to legalize? Fortunately, we have a pretty good example to look at as a jumping-off point.

The Centennial State Gives Us a Road Map

When Colorado legalized marijuana, it raked in $70 million in tax revenue annually. Michigan’s population is twice the size of Colorado’s 5 million residents. So, if it follows a similar tax plan, Michigan is, in theory, looking at as much as $140 million in annual tax revenue if its ballot initiative passes.

North Dakota is also looking to go fully legal, but its population is much smaller than Colorado’s. It’s home to just 750,000 people, but even that many could generate up to $10 million in tax revenue per year.

Wisconsin, meanwhile, has roughly the same population as Colorado. So it could generate just as much tax revenue through cannabis tourism, medical marijuana, and recreational legalization.

And these numbers just reflect the beginning. Today, Colorado nets about $247 million – a 250% increase from since it went fully legal – in taxes and other fees.

If even a few of these states pass laws, they’re looking at a massive influx of cash… and that’s just in taxes, which go right to the state to help improve things like infrastructure, roads, and schools.

And these election results also will bolster the bottom line of the best cannabis firms – the sort we talk about here all the time.

That will, in turn, lead to higher share prices.

Because, again, “when laws pass, stocks soar,” and we’re looking at as many as 36 passing by the time polls close tonight.

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Is Aurora Cannabis the Best Pot Stock to Buy Now?

You Can Do so Much Better in the Pot Sector Than CRON Stock

Source: Shutterstock

There’s no sugar coating it: Cannabis stocks have had a tough ride in the second half of October. Collectively, the group was hammered as the overall markets took a hit. Surprisingly though, many cannabis names held up fairly well — Aurora Cannabis (NYSE:ACB) included.

That’s as recreational marijuana became legal in Canada in mid-October. Several stocks broke out just ahead of the event, only to reverse lower and join the major selling theme of the market. It set up as one great sell-the-news event, something we weren’t surprised about when we looked at Canopy Growth (NYSE:CGC) earlier in the month.

With many cannabis stocks making major moves lower, it no doubt brought some investors back to the table. They want to know, is it time to buy cannabis stocks, and specifically, is ACB stock a good one to buy?

Valuing Aurora Cannabis Stock

The company’s growth is actually pretty solid, with ACB stock racking up $55 million in sales for fiscal 2018, which ended on June 30. That was a tripling from the prior year’s $18 million in sales.

While that’s great from a sales perspective, I worry about cost control in getting to that point. For instance, cost of goods sold (COGS) increased nearly 6-fold, from $2 million to $11.7 million. SG&A expenses swelled from $17 million to $72 million and total operating expenses increased from $27.7 million to $135.3 million.

Because of “other income” on the income statement, it skews net income to the positive side, implying the company earned almost $72 million last year. On the surface, that looks like 46% net profit margins, but that’s not the case by any means. So investors need to be aware of that before they take these surface numbers at face value.

Between 2017 and 2018, total debt went from $63 million to over $200 million while total cash went the opposite direction, from $159 million to $89 million. However, current assets of $219.7 million do trump current liabilities by quite a bit, with the latter standing at $75.1 million.

So where does that leave us? With ACB stock commanding $6.7 billion market cap, it’s not cheap. Coca-Cola (NYSE:KO) has said it’s out as a buyer or partner to the industry right now, but could PepsiCo (NYSE:PEP) be into cannabis? How about other alcohol giants like Boston Beer(NYSE:SAM), Molson Coors (NYSE:TAP) and others, the way Constellation Brands(NYSE:STZtook a massive stake in Canopy Growth?

For me, Canopy is the “surest” bet in the business and that’s why if I had to bet on one, it would be with them. But that doesn’t mean others can’t buy or take stakes in ABC, Tilray(NASDAQ:TLRY) and others.

Trading the ACB Stock Price

chart of ACBFF stock
Click to Enlarge

Even before the legalization pop in mid-October and even after the bounce from sub-$6 a few days ago, ACB stock is still down from early October. So where does that leave us?

Since it’s bumping into the underside of the 100-day and 200-day moving average, now may not be the best time to go long Aurora Cannabis if you are bullish. However, I would feel more comfortable stepping into this name in the mid-$5 range.

From there, the risk-reward is much, much better. First, there’s the backside of downtrend resistance (blue line), which has been significant over the past year. There’s also uptrend support (purple line) and a notable level of support between $5.50 and $5.75. Losing all three levels would be a sign that investors need to bail on their long position. Above all three major moving averages and the $10 mark is back in sight.

Thus, there is attractive risk/reward between $5.50 and $6.

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3 Pot Stocks to Consider on the Dip

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It took pot stocks just a few weeks in August and September to become the hottest investments on Wall Street. Likewise, it has taken just a few weeks in October to make them some of the coldest investments.

In August and September, pot stocks went crazy. Almost all of them rallied by more than 50%. Some doubled. Some tripled. One rose by more 1,000%. The fundamental backdrop was that pot stocks were gearing up for their biggest catalyst yet — the legalization of cannabis in Canada on Oct. 17. Everyone wanted exposure to weed prior to that catalyst.

But, as was largely expected, the legalization of weed throughout Canada became a “sell the news” event. It has been a bumpy roll-out characterized by supply shortages and consumers turning to the black market. Pot stocks, which were priced for a perfect roll out, have dropped into bear market territory as the roll out has been far from perfect.

Indeed, most pot stocks are well into bear market territory now. As of this writing, most widely followed pot stocks are down more than 30% from recent highs.

But, the long-term growth narrative remains positive. Cannabis is becoming increasingly legal on a worldwide basis, and consumer trends indicate that once legal, recreational pot could be as widely consumed as alcoholic beverages. Throw in the medical applications of cannabis, and you are talking about a market that promises to be huge.

So, is it time to buy the dip in pot stocks?

Maybe. Because the momentum is gone and the focus is back on fundamentals, you should only buy into pot stocks when the valuation makes sense. For some of these names, the valuation is starting to make sense. For others, not so much.

With that in mind, here’s a list of three pot stocks investors should be watching during this selloff.

Canopy Growth (CGC)

pot stocks Canopy Growth (CGC)

Source: Shutterstock

Time and time again, I’ve claimed the best investment in the cannabis sector is Canopy Growth(NYSE:CGC).

Due to its early market leadership, distinguished track record, biggest production capacity, widest portfolio of brands and billion dollar partnership with alcoholic beverage giant Constellation Brands (NYSE:STZ), CGC stock is head-and-shoulders above other pot stocks when it comes to investment attractiveness. But, that didn’t make CGC stock immune to broad cannabis sector weakness. As I warned in mid-October, all pot stocks — CGC included — are due for weakness in the near term.

Fast forward a week. CGC stock has dropped more than 30% since then. Time to buy the dip?

I think so. There may be more weakness ahead as the Canadian cannabis roll out continues to be bumpy. But, CGC stock is now nearing levels it was at just after the STZ investment. Those levels seem fundamentally supported by STZ’s $4 billion investment, and as such, I don’t see the market sending CGC stock below the low $30’s any time soon.

Meanwhile, reasonably optimistic growth assumptions point to healthy long-term upside for CGC stock.

As such, now looks like a good time to start gradually buying the dip in CGC stock.

Tilray (TLRY)

pot stocks Tilray (TLRY)

Source: Shutterstock

Just as I’ve reiterated time and time again that Canopy Growth was the best investment in the cannabis sector, I have also warned time and time again that Tilray (NSDSAQ:TLRY) is the most overvalued.

Despite having lower sales than CGC, a less distinguished track record, smaller production capacity, a more narrow portfolio of brands and no billion dollar partnership, TLRY stock has been rewarded in the stock market with a bigger valuation than CGC stock. This discrepancy doesn’t make sense, and it’s why TLRY stock fell the hardest during this recent correction. Over the past few weeks, TLRY stock is down more than 35%. It’s also more than 50% off September highs.

Unfortunately, this valuation disconnect still hasn’t fixed itself. As of this writing, Canopy has a market cap of $7.5 billion. Tilray has a market cap of over $9 billion. That relative valuation disconnect shouldn’t exist, and so long as it does, Tilray stock will struggle.

As such, I don’t think this recent dip in TLRY is worth buying. The company has healthy long-term growth drivers. But, at a $9 billion-plus valuation with smaller market share than peers, all that growth is already priced in, and then some. With momentum now favoring the bears, investors can afford to wait for TLRY stock to come down further before speculating on long-term upside.

Cronos (CRON)

pot stocks Cronos (CRON)

Source: Shutterstock

Next to Canopy, my second-favorite pot stock is Cronos (NASDAQ:CRON). But, even though I’ve favored this name over peers, I also warned in mid-October that buying then was dangerous.

Since then, CRON stock has come down about 30% to levels not seen since shortly after the big Constellation Brands investment into Canopy. That is a big wipe-out in a short amount of time. And, it has left CRON stock undervalued.

Cronos has a market cap of just $1.3 billion, versus $5 billion-plus market caps at Tilray and Canopy. A big reason for the lower valuation is lower production capacity. CRON has planned production capacity of roughly 1.2 million square feet, versus 3.8 million square feet for TLRY and 5.6 million for CGC.

But, each square foot of Cronos production capacity is being undervalued relative to Tilray and Canopy’s. The market cap per square foot of planned production is about $2,350 at TLRY and $1,350 at CGC. At CRON, it is just $1,100.

That doesn’t make much sense, especially considering Cronos is projecting yield of 110,000 kilograms of cannabis on those 1.2 million square feet. That equates to almost 100 grams of weed per square foot, which is a very attractive yield.

As such, once pot stocks stabilize from recent volatility, CRON stock could be a buy. I still think CGC stock is the best in class, but CRON stock offers relative valuation upside that is quite attractive.

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Buy These 3 Stocks to Profit From Marijuana Legalization

For many years, both the large beverage companies and the large tobacco companies have been in search of growth. That’s because, in both cases, their main products – tobacco, alcohol and sugary drinks – have been deemed to be unhealthy and therefore fewer consumers are using their products.

But now there is a FOMO (fear of missing out) phenomena going on in those sectors, all thanks to the legalization of marijuana. Canada will legalize recreational cannabis use today, October 17. More than a dozen countries have legalized pot for medical purposes, including Germany and Australia, and several others are evaluating decriminalization.

Here in the U.S., pot has been legalized in more than half of the 50 states, despite cannabis still being illegal under federal law. Nine states, including California, Colorado and Massachusetts, as well as Washington D.C., have approved recreational marijuana use.

The Marijuana Market – a Big Pot

The trend toward legalization is opening a very big market. Analysts at ArcView as well as BDS Analytics expect spending on cannabis globally to reach $32 billion in 2022 from just $9.5 billion in 2017 and about $11 billion this year.

What caught my interest was a recent report from analysts at Cannacord Genuity estimated that sales of drinks infused with THC or CBD, will make up 20% of the edibles market and will reach $600 million in sales in the U.S. by 2022. In Colorado, which became the first state to legalize recreational marijuana in 2014, sales of cannabis drinks almost doubled in 2017 and are up an additional 18% in the first half of this year, according to Flowhub, which tracks marijuana sales data.

This points to the vast opportunities in using various parts of the cannabis plant. There are a myriad number of different flavors, aromas and psychological effects offered by different parts of the plants. In fact, those in the industry say that the chemical which produces feelings of euphoria is only one of more than 100 cannabinoids or active compounds in the plant. Other cannabinoids offer mellower effects ranging from mild relaxation to reduction of inflammation.

Some of the drinks companies, in particular, are very excited about adding CBD (cannabidiol) – the non-psychoactive part of marijuana – into drinks aimed at the mass market. These drinks containing cannabidiol and focused on pain management, could become big business.

Coke Says It’s the Real Thing

While Pepsi has no such plans, Coca-Cola (NYSE: KO) said it was looking at the possibility of infusing CBD into “functional wellness beverages around the world.”

The interest of Coke is a major validation for the rapidly growing cannabis industry. As a Bloomberg article said, pot has moved from the black market to the stock market and now appears to be on its way to the supermarket.”

Coke is no doubt looking to broaden the reach of cannabis-infused beverages into functional wellness categories, enabling the company to potentially one day ‘own’ the non-recreational cannabis-infused beverage category”.

Other drinks companies, known for alcoholic beverages, are also jumping into the pot sector. Managements at these firms believe that millennials may swap out their wine or craft beer for some pot-infused water and other similar drinks instead.

The maker of Corona beer and Modelo Especial, Constellation Brands (NYSE: STZ) really got the ball rolling in August on the recent marijuana madness when it invested just under $4 billion into the Canadian cannabis group Canopy Growth (NYSE: CGC), lifting its stake to 38%.

Also in August, Molson Coors Brewing (NYSE: TAP) also jumped in by starting a joint venture with Hydropothecary (OTC: HYYDF) to develop non-alcoholic, cannabis-infused beverages for the Canadian market. Hydropthecary is to soon change its name to HEXO Corporation.

And Diageo (NYSE:DE), the drinks conglomerate behind Johnny Walker whiskey and Guinness beer, has also been exploring investment opportunities in the cannabis sector in recent weeks. It is thought that Diageo, the world’s biggest alcohol company, has had serious discussions with at least three major Canadian marijuana companies, but will wait until marijuana is officially legal in Canada to finalize any deals.

Big Tobacco Moves In Too

Finally, we have Big Tobacco moving into the marijuana space also. The biggest U.S. cigarette company, Altria Group (NYSE: MO) is reportedly in talks to buy a stake in Aphria (OTC: APHQF).

The only surprise here is that Altria waited so long to make a move into the cannabis industry. Legalization of pot for recreational use will come sooner or later here in the U.S. And what industry is more skilled at navigating the morass of regulation and lobbying in Washington D.C. than a tobacco company like Altria?

When and if the deal is consummated, it will be major news. After all, Altria has only done one deal worth over $100 million in the last decade!

The upshot of all these deals in the cannabis sector is that the same companies that dominate the consumer vices sector now will still be major players in the future offerings of pot-infused products to the consumer.

Should You Let Your Portfolio Go to Pot?

This will inject some life into these companies and their stocks. But the real serious money will be made by investors that own the right companies in the marijuana sector.

Picking the right companies though is no easy task. That’s because there’s usually a land rush with everyone piling in, which is where we are at the moment. After that happens, there is a long period of separating the winners from the losers. The final result is you get a few respectable players, with all the rest being rubbish that shouldn’t be touched with a 10-foot pole.

So which one of these pot companies look okay to invest into today?

You have to include the largest player in the sector, Canopy Growth, which bought rival Hiku Brands a few months ago. And it just recently said it was buying pot research firm Ebbu so that it can grow “better” pot.

The company has also been working on cannabis drinks for the past couple of years in an area of its Ontario campus known as the Section 56 Exemption lab. It’s trying to sort out how much of it to put into beverages, how long it will take for effects to be felt, and how long they take to wear off.

But with Constellation Brands owning 38% of the company, I question how much life is left in the stock for the rest of the shareholders. Although a takeover is a possibility.

A better choice is Canada’s second-biggest marijuana company, Aurora Cannabis (OTC: ACBFF), which is the company Coke is believed to talking to about a deal. Its $2 billion deal to take over rival MedReLeaf in May was the largest deal in the sector at the time.

In addition to cannabis-infused drinks, Aurora is working on the medical aspects of marijuana. The company does do clinical trials, but they are much smaller than those conducted by the pharma giants. Nonetheless, Aurora hopes it can succeed in patenting forms of cannabis that are consistently high in some specific cannabinoids and low in others. Or as Cam Battley of Aurora told the Financial Times, “What you really need to do is master the agricultural science and supercharge the plant.”

The company is also building high-tech facilities, known as “Aurora Sky” farms, to automate the growing and harvesting process as far as possible and to regulate the plants’ environment, protecting them from pests. Its biggest farm at the moment is 1.2 million square feet.

Another company I would consider is CannTrust Holdings (OTC: CNTTF), which will be listing soon also on a major U.S. stock exchange. It is in active discussions with a number of firms in the beverage, food and cosmetics industries and expects to announce a deal within the next two months.

That strategy is in contrast to that of Canopy Growth. The chairman of CannTrust, Eric Paul, told Bloomberg “Ideally, it would be great to have a bunch of brand partners. We’d like to find the best partner for every one of those verticals [beverages, food, etc.]”

And the company’s stock has not reached the sky-high valuations of its peers. It has a price to 2019 sales ratio of just 6.17 compared to 89.53 for Tilray, according to data compiled by Bloomberg. And its market cap of less than $1 billion is dwarfed by Tilray’s $14.66 billion. That leaves a lot of room for capital gains here.

Stay tuned as I bring you more insights in this sector in the near future.

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Source: Investors Alley 

3 Pot Stocks that Stand Out in the Crowd

Source: Shutterstock

Pot stocks are as hot in 2018 as bitcoin was in 2017.

Advocates insist, however, that marijuana will not suffer the same fate because there is a real market to be served — and a real product to sell. Canadian legalization alone is expected to result in sales of $5-7 billion next year, and many U.S. states are looking enviously at Colorado, the first state to legalize recreational marijuana.

Thus, valuations in the cannabis sector are extremely high, and they have recently been correcting.

The Canadian market officially opens Wednesday, so speculation and excitement over pot stocks are at a fever pitch. It’s not just about smoking. Edibles, oils and the possibility of pharmaceuticals are also driving money into the market.

And in this still very speculative space, every pot stock has to have a gimmick, which lets it stand out and convinces investors that it’s less risky than those other marijuana stocks. This gimmick could be a corporate investment, it could be technology or it could be raw distribution power waiting for the U.S. market to open up.

Here are 3 pot stocks with less risk.

Canopy Growth (CGC)

Source: Shutterstock

What makes Canopy Growth (NASDAQ:CGC) stand out among pot stocks is the $4 billion Constellation Brands (NYSE:STZ) put into the company a few months ago.

Constellation is one of the largest — and smartest — liquor companies in the world, having begun as a small New York wine producer and grown into a giant with beer brands such as Modelo and liquor brands such as Svedka vodka.

Constellation is a legitimate player, with $7.5 billion in revenue, a dividend of nearly $3 per year, and a market cap of $42.66 billion. Their willingness to put a big portion of that into Canopy, for a 38% stake, put the whole sector into overdrive.

CGC stock’s $11.46 billion market cap, however, is built on sales of $77 million in 2017, $48 million for the first six months of 2018, and a lot of hype. On October 15, Canopy paid about $330 million to acquire the assets of Ebbu, a hemp research company in Colorado.

Cronos Group (CRON)

Drug Company Partnerships Set Cronos Stock Apart, but Not Enough

Source: Shutterstock

What sets Cronos Group (NASDAQ:CRON) apart — besides its partnerships with pharmaceutical companies like Gingko Bioworks, which wants to produce cannabinoids through fermentation — is the fact that it was the first pot company to list on the Nasdaq. Also, since listing in Canada in 2016, CRON’s value has grown 6,500%.

CRON’s valuation is not built on sales, however. Cronos reported revenue of just over $4 million in 2017, and about $6 million for the first six months of 2018. The balance sheet showed just $5.3 million in debt in June, against $9.2 million in cash, and operating cash flow was approaching balance.

By pushing the idea of marijuana as a pharmaceutical, and as a raw material from which drugs can be extracted, Cronos hopes to enter the U.S. market with products before mass legalization, and thus gain scale it can use to grow into the market as it matures.

Of five analysts following the stock, two currently have it on their buy lists.

MedMen (MMNFF)

Wait for the Next Big Correction to Jump on Canopy Growth Stock

Source: Shutterstock

MedMen Enterprises (OTCMKTS:MMNFF), based in Culver City, CA, makes no pretense to being anything than what it is: a marijuana dispensary. It’s not a Canadian company, and it’s not a pharmaceutical company. It sells pot to medical marijuana patients who need it and recreational users — in locations where recreational use is legal.

The goal of MedMen is to gain distribution in the medical pot business that will let it expand into the recreational side as it develops. It has dispensaries in 4 U.S. states, including high-profile locations like Manhattan and Las Vegas.

MedMen went public in May but the stock didn’t see much action until last week. MedMen announced an acquisition of PharmaCann for a reported $682 million in stock. Buying medical will add licensed dispensaries in other states, mainly in the Midwest, to its network, giving it a total of 79 cannabis facilities in 12 states.

The deal sent MMNFF stock rocketing. Since the announcement, the stock is up 51%. While other pot stocks have been falling lately, MedMen is powering ahead.

CEO Adam Bierman said that the acquisition makes MedMen “the largest U.S. cannabis company in the world’s largest cannabis market” — and that sounds like a good place to be in as more U.S. states move toward full legalization.

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What is it?
It's not gold, crypto or any mainstream investment. But these mega-billionaires have bet the farm it's about to be the most valuable asset on Earth. Wall Street and the financial media have no clue what's about to happen...And if you act fast, you could earn as much as 2,524% before the year is up.
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4 Medical Marijuana Stocks to Buy as the U.S. Chills Out

Source: Shutterstock

Even in America’s reddest states, favorable conditions for medical marijuana stocks could emerge soon. A permissive medical marijuana law received voter approval in Oklahoma earlier this year. Also, Republicans in Texas recently approved medical marijuana in their party platform. Cannabis’ days as a Schedule I drug are likely numbered. When this status changes, investing in medically-related marijuana stocks could reach a fever pitch in the fourth quarter and beyond.

Right now, most pot stocks trade on the OTC market and base themselves in Canada. The thirst for American investment has led more marijuana stocks to list on the NYSE and Nasdaq already, but more will likely join them when cannabis’ Schedule I designation ceases to exist. Both the designation swith and increased U.S. listing should flood more investment capital into the marijuana industry, driving stock prices higher. While many of these marijuana stocks have already achieved high valuations, investors could still more gains.

These four medical marijuana stocks are perfect to get into now before the interest in pot stocks becomes even bigger:

CannTrust Holdings, Inc. (CNTTF)

Source: Shutterstock

Vaughan, Ontario-based CannTrust (OTCMKTS:CNTTF) exists as a federally-regulated medical marijuana producer within Canada. It produces a 100% pesticide-free medical-grade cannabis and cannabis oils. The company also conducts medical research on marijuana-related drug products. CannTrust partnered with McMaster University and Hamilton Health Sciences on medical research trials.

CannTrust just completed their first overseas shipment of cannabis oil to Denmark-based StenoCare. CannTrust’s cannabis oil is the first and only to gain acceptance on the Danish Medicine List thus far. Incidentally, StenoCare will launch Europe’s first IPO by a medical marijuana company next month. Such a move will likely expand CannTrust’s reach within Europe.

From a financial perspective, CannTrust outshines most other marijuana stocks in one area — making a profit. Analysts forecast it will earn 11 cents CAD (8.5 cents U.S.) per share in 2018. They expect that to grow to 38 cents CAD (29 cents) per share in 2019. While that brings the forward price-to-earnings (P/E) ratio to 115, CNTTF still compares well to other profitable peers. Moreover, if the stock price were to stay the same over the next year, that P/E would fall to just over 33.

This marijuana stock’s profit should rise as its recreational brands also gain traction. With supply agreements in place in the Atlantic provinces, CannTrust now can sell across Canada. And with a schedule change in the U.S., its medical products could move south of the border. With the high growth potential and the financial stability, CNTTF one of the few cannabis stocks that will prosper under any conditions.

Hexo Corp. (HYYDF)

Source: Shutterstock

Hexo Corp. (OTCMKTS:HYYDF) develops and produces medical marijuana products for the Canadian market. Formerly known as Hydropothecary, this company offers a wide variety of cannabis-based products to treat various conditions.

Hexo has taken a slower approach than most of its peers. Unlike others, it has kept its focus to its core region, in this case, Quebec. However, that creates advantages. Through supply agreements, this should give the company a market share of about 34% within Quebec. Quebec also happens to border four pot-friendly U.S. states. If the U.S. market were to become available, Hexo could expand to New York and New England while keeping to its regional market.

Despite its smaller footprint, investors still need to look at HYYDF stock. It makes 24 different products ranging from tried products like cannabis flowers and cannabis powder to a fine cannabis mist. The company also works in conjunction with Molson Coors (NYSE:TAP) on cannabis-infused drinks.

Since the company has not spent heavily on expansion, analysts expect the company will break even next quarter. This should make the company profitable by the fourth quarter of this year. Consensus estimates for 2019 place profits at five cents CAD (3.9 cents) per share.

That gives the company a 2019 forward P/E ratio of about 129. This ratio should come down in future years, and it still compares favorably to most marijuana stocks. With its forecasted profits and its go-it-slow approach, I think HYYDF will not only survive, but thrive.

MariMed Inc. (MRMD)

Wait for the Next Big Correction to Jump on Canopy Growth Stock

 

MariMed (OTCMKTS:MRMD) specializes in medical-marijuana consulting. As a company, it helps others optimize production and sales for both the medical and legal cannabis firms. It helps to design production facilities to grow safe medical cannabis. It also offers business planning services to cannabis companies. Additionally, MariMed produces its own proprietary products that it sells under the MariMed brand name.

Such a business could help medical marijuana companies in Canada bring product into the U.S. once marijuana ceases to be a Schedule I drug. Moreover, it should help cannabis enterprises produce more medical marijuana as legal roadblocks gradually disappear. According to their last quarterly report, the company has initiated plans to operate in Florida, Michigan, New Jersey, Pennsylvania and Ohio.

Also, when non-cash charges are excluded, MRMD could call itself one of the profitable marijuana stocks. The company earned $530,000 in the first six months of the year. Due to stock option issuance and payment of debt via stock sales, the company reported an $8.1 million loss.

However, this shows MariMed can earn money. Profits should move much higher once more markets open up as well. With its own product line and its consulting business positioned in multiple states, MRMD should grow along with the U.S.’s weed industry.

OrganiGram Holdings, Inc. (OGRMF)

Source: Shutterstock

Unlike its peers, OrganiGram (OTCMKTS:OGRMF) takes a unique approach to medical pot. It focuses on treatments for conditions such as PTSD and chronic pain.

The firm also emphasizes partnerships. The company will invest in Eviana Health Corporation, a European, cannabinoid-focused hemp company. With Europe more ready than ever to embrace legalization, this gives OrganiGram an early advantage.

OrganiGram also signed a deal with Canopy Growth (NYSE:CGC). Under terms of the agreement, OrganiGram will provide Canopy’s Tweed retail locations in Newfoundland and Labrador with branded cannabis products. Since Canopy also made a deal with Constellation Brands (NYSE:STZ), this creates that much-needed U.S. connection. This agreement could lead to a medical marijuana agreement in the U.S. whenever the government permits Canadian medical cannabis products.

Analysts also expect OrganiGram to begin reporting profitability beginning in the fourth quarter. For 2019, consensus earnings stand at 14 cents CAD (11 cents) per share.

At current prices, this takes the 2019 forward P/E ratio to about 48.6. Given where other marijuana stocks trade, this makes OGRMF a safer bet than most. Also, with its connections to Europe and now, an indirect contact in the U.S., OrganiGram should place itself in a strong market position once sales in the U.S. and Europe take off.

As of this writing, Will Healy is long CNTTF stock.

Buffett just went all-in on THIS new asset. Will you?
Buffett could see this new asset run 2,524% in 2018. And he's not the only one... Mark Cuban says "it's the most exciting thing I've ever seen." Mark Zuckerberg threw down $19 billion to get a piece... Bill Gates wagered $26 billion trying to control it...
What is it?
It's not gold, crypto or any mainstream investment. But these mega-billionaires have bet the farm it's about to be the most valuable asset on Earth. Wall Street and the financial media have no clue what's about to happen...And if you act fast, you could earn as much as 2,524% before the year is up.
Click here to find out what it is.

Source: Investor Place 

Cash Runs to Quality in This Growing $1.5 Billion Cannabis Niche

Every investor should understand how the market for cannabis is developing – now and over the coming weeks, months, and years.

Choosing the companies best positioned to profit in the emerging market helps you gain an edge over those who simply “throw darts at a list of stocks” and pick cannabis companies without regard to industry realities.

But as legalization becomes more widespread throughout the United States and across the whole of Canada investors still face questions about what the realities of a mature cannabis market might be.

For some answers, we can look at Colorado – the first U.S. state to make recreational cannabis easily available.

That made some realities evident.

We know, for example, that in places where vaporizing (aka “vaping”) cannabis concentrate is legal, that form quickly takes over a significant part of the market.

Vaporizable concentrates are a value-added product, but they’re also fairly commoditized, meaning customers shop by product attributes, such as how rigorously it’s been tested, say, or the ratio of tetrahydrocannabinol (THC) to cannabidiol (CBD), as opposed to shopping by brand.

The traditional marijuana bud, or “flower,” market, which in Canada is worth about $1.5 billion today, is still fragmented. Customers there are still experimenting with different strains, different growers and brands, and different cannabinoids and THC to CBD ratios. In other words, there are a lot of questions.

One big question facing the market – both in Colorado and worldwide – is whether consumers are willing to pay up for “super-premium” cannabis. That is, cannabis that is more expensive to produce… but that produces a better smoking experience.

There are many producers claiming to make such cannabis – that’s why it’s such a big question. After all, no one is going to advertise that they make the lowest-end cannabis on the market any more than Busch admits that its beer is lower-end than a craft brewer’s.

So how can an investor tell when a company is really producing super-premium cannabis… or merely claiming to grow it?

That’s a very important question because, naturally, the investment case for the genuine super-premium product tends to be much stronger than it might be for the pretenders.

One company last week gave us the answer loud and clear…

So Good, Even Competitors Are Racing to This Company’s Product

Last week, Supreme Cannabis Co. Inc. (OTC: SPRWF) signed a deal that serves as an important indicator of the direction of the market for cannabis “flower” – cannabis meant for smoking.

Supreme is a Canadian grower that started when a father began growing cannabis to treat his daughter’s chronic pain. All along, the company has claimed that its brand, 7ACRES, is superior to other cannabis.

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And lately it’s been proving it.

As Canada moves toward recreational use on Oct. 17, we’ve seen a variety of go-to-market strategies, but none quite like that of Supreme and its 7ACRES brand.

In addition to selling to retailers in Canada’s provinces, Supreme is selling its product to other producers. The idea is that these companies, primarily producers of commodity-grade cannabis, want a super-premium product to round out their product lines. Until recently, 7ACRES struck up these partnerships primarily with other smaller growers.

The company looks to be scaling up in the partnership department, though. Supreme recently signed a deal with one of Canada’s largest producers, Tilray Inc. (NASDAQ: TLRY). That puts Supreme in partnership with two of Canada’s giant producers; it previously signed a deal with Aurora Cannabis Inc. (OTC: ACBFF).

That these giants felt they needed 7ACRES product to supplement their own massive capacity is as clear an indicator as can be imagined that super-premium cannabis will be part of the sales mix in Canada – and that 7ACRES is producing real super-premium product.

The deals tell us investors two things:

  • There will be significant market segmentation in the cannabis market as it matures. Even as branding increases, there will be price-differentiated products targeted to different markets. This makes sense – the alcohol markets work the same way. In fact, the big beer producers have been acquiring craft brewers to gain access to all price and quality points in their markets. Similarly, a company like Diagio Plc. (NYSE: DEO), itself heavily rumored to be considering the purchase of a Canadian cannabis asset, sells whiskeys at price points from $15 all the way up to $500.
  • And there will be room for specialty growers in the long run. Right now, just about all cannabis producers are also growers. That’s actually an unusual industry model. High-end wine growers grow their own grapes, but lower-end producers purchase their grapes from independent farmers. Similarly, the beer and liquor companies don’t generally grow their own barley, corn, wheat, and rye.

In the long run, it’s clear that the cannabis industry will work like the wine industry. Most of the huge producers will sell off their greenhouses to commodity farmers if they can. Over time and with regulatory change, cannabis production will move outdoors and to low-cost areas in South America and Africa. However, there will still be room for specialty growers, whether indoors or outdoors.

As an investor, these facts will not be important – or baked into share prices – for a few years yet… which makes right now a smart time to move and make the most of our early advantage.

The bottom line right now: When a company claims to be producing a premium product, the best indicator of whether it’s telling the truth is if its competitors endorse that claim… with their wallets.

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Source: Money Morning