British Pot Stocks and Global “Green Chips”

Matthew Carr By Matthew Carr
Emerging Trends Strategist

Beyond the Bong
This is individual research and does not constitute investment advice.

Election Day is tomorrow!

And with cannabis measures on the ballots in four states, November 6 could add more than $2 billion to the U.S. cannabis market.

In reality, almost all of that will come from one state…

In fact, if adult-use is approved in Michigan, that could add between $1.4 billion and $1.7 billion in sales alone.

The other states would be victories for consumers, patients and the markets. But the financial impact on the larger U.S. cannabis market would be more muted.

For example, the possibility of a North Dakota adult-use market passing is up in the air. The state only recently passed medical marijuana in 2016. And it’s expected to be worth less than $80 million.

Missouri’s medical cannabis initiative is worth more than twice that. Marijuana Business Daily calculates between $175 million and $275 million in annual sales.

Meanwhile, if Utah’s medical marijuana measure passes, the result will likely mean less than $25 million in annual sales.

Speaking of legislation and cannabis…

Great Britain Goes Green

Last week, the U.K. added medical marijuana to the list of medicines available to patients through the National Health Service.

The move was sparked by ire over epileptic children having their illicit cannabis medications confiscated.

No one’s quite sure how often medical marijuana will be prescribed. But the European map is starting to fill in green…

British Pot Stocks… Kinda

  • GW Pharmaceuticals (Nasdaq: GWPH): It’s a British pharmaceutical company and producer of Epidiolex, the first cannabis drug passed by the FDA; the drug treats epileptic seizures in children.
  • Associated British Foods (OTC: ASBFY): British Sugar is a cannabis cultivator for GW Pharmaceuticals.

You Were Warned!

We’ve been telling investors here to be wary and steer clear of India Globalization Capital for more than a month.

Last week, it was delisted by the New York Stock Exchange.

Coca-Cola (NYSE: KO) also announced it wasn’t interested in moving into the cannabis space. That hurts all those takeover rumors of other cannabidiol-infused beverage makers.

Now, what about those pot stocks to own…

A Handful of Green Chips

I’m often asked what my “Green Chips” – my cannabis blue chip stocks – are.

I feel investors are often bored by my answer… but that’s precisely why they’re Green Chips.

Green Chips and Market Movers

  • Canopy Growth Corp. (NYSE: CGC)
  • Aurora Cannabis (NYSE: ACB)
  • Cronos Group (Nasdaq: CRON)
  • Aphria (NYSE: APHA) (Aphria started trading on the NYSE on Friday.)

Knowing When There’s Too Much

I think one of the most often overlooked metrics is shares outstanding.

This is especially important for new industries – such as legal cannabis – and the number of companies that will come onto the markets in the months and years ahead.

For example, let’s take one of the companies readers have asked for my thoughts on: Medical Marijuana Inc. (OTC: MJNA).

Now, the company is the first publicly traded cannabis stock, dating all the way back to late April 2009. Back then, it was trading around $0.50.

Today, Medical Marijuana Inc. has a market cap of $270.8 million and trades for roughly $0.08.

The biggest problem I see is it has more than 3.31 billion shares outstanding and 5 billion authorized shares.

Regardless of how excellent the company may be, that – to me – is an issue. It’s overly liquid.

This is why it’s very hard for penny stocks to make the transition. Sure, there are the unicorns, like Monster Beverage (Nasdaq: MNST). But most stocks aren’t the exception.

Let me put it this way…

Apple (Nasdaq: AAPL) has 4.83 billion shares outstanding. That’s the sixth most on the S&P 500. But it’s the largest company in the world, with a market cap of approximately $1 trillion. And several years ago, it had a big 7-for-1 split.

Now, let’s compare Medical Marijuana’s shares outstanding with those of some other notable cannabis companies…

Tilray (Nasdaq: TLRY) has a mere 76.5 million shares outstanding…

Cronos Group (Nasdaq: CRON) has 177.15 million…

Canopy Growth Corp. (NYSE: CGC) has just 201.6 million…

And Aurora Cannabis (NYSE: ACB) has roughly 961 million shares outstanding…

Medical Marijuana’s revenue growth is fine. But it’s operating at a loss and has an enormous number of shares outstanding. There’s a reason shares have gone counter to the rest of the cannabis industry. Not just in 2018 but over the last several years.

Other Pot Stocks Drowning in Shares

  • American Green (OTC: ERBB): 23.75 billion shares outstanding
  • Notis Global (OTC: NGBL): 9.9 billion shares outstanding
  • FutureWorld Corp. (OTC: FWDG): 7.25 billion shares outstanding
  • Smart Cannabis (OTC: SCNA): 4.86 billion shares outstanding

It was another exciting week in the world of cannabis investing!

Companies were delisted. Others were uplisted.

The markets sparked back to life. And expect another ripple to spread through the sector tomorrow. Voters will decide whether it’ll be a good or bad move.

If you have a pot stock in mind that you’d like me to discuss here, leave the ticker symbol in the comments section. I’ll always try to touch on as many as possible.

Until next week!

Good investing,

Matthew