Cannabis Investing Set to Have High Growth

Matthew Carr By Matthew Carr
Emerging Trends Strategist

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

We’re back from the long Thanksgiving weekend feeling in dire need of a run!

Even though it was a short, low-volume week for U.S. markets, that didn’t mean there was a lack of cannabis news…

Come on in, the Water’s Fine!

Few industries are changing as rapidly as cannabis.

And as I mentioned last week, the pace is about to pick up. There’s a record number of companies waiting to wade into the public market waters.

When Emerald Health Sciences Executive Chairman Avtar Dhillon was on CannaBiz Now! a couple weeks back, he shared many exciting developments with us.

One was that the company was exploring an uplisting to a major exchange for its publicly traded holdings, Emerald Health Therapeutics (OTC: EMHTF).

Now, due to Emerald Health Sciences’ extremely diversified structure, I think several of its arms will soon be making a splash onto the exchanges… not just Emerald Health Therapeutics.

Last week, Emerald Health Naturals (EHN) received conditional approval to trade on the TSX Venture Exchange (TSXV).

EHN is a joint venture between San Diego-based Emerald Health Bioceuticals and the Canadian Emerald Health Therapeutics. (Of course, Emerald Health Sciences has stakes in both.)

EHN sells nonpsychoactive nutritional supplements that support the body’s endocannabinoid system. This is a sizable opportunity, as 60% of legal cannabis users also use natural health products. So it’s a market to keep an eye on.

Upcoming Listings to Watch:

Going South to Mine for Green

More and more cannabis companies are looking south for opportunities.

Latin America is home to 650 million people. That’s twice the population of the U.S.

Latin America includes the Caribbean, Central America, Mexico and South America. And because of its size, it’s a hot frontier for pot stocks. This is fueling a race to establish beach heads.

Last week, Aurora Cannabis (NYSE: ACB) received final regulatory approval of its $290 million acquisition of ICC Labs (OTC: ICCLF). This is part of Aurora’s strategy to not only create a stronghold in Latin America but also enhance its global expansion.

ICC is based out of Uruguay – the first country in the world to legalize adult-use marijuana. It adds 45,000 kilograms (kg) per year to Aurora’s output in low-cost, high-quality cannabis and hemp.

Just as important, Uruguay is the only country that allows the production of CBD-rich hemp. And licensed growers, like ICC, can grow hemp with concentrations of 1% THC – more than three times the average.

This is a key piece for supplying Aurora with high-margin CBD products to be shipped globally.

Other Sizzling Latin American Assets:

  • Cronos Group (Nasdaq: CRON) – The company has a 50-50 joint venture with Colombia’s Agroidea SAS. It allows Cronos to produce cannabis at a 207-acre facility in Cundinamarca.
  • Khiron Life Sciences (OTC: KHRNF) – The company has operations in Colombia, where it believes there are potentially 6 million medical marijuana patients. In all of Latin America, it believes the opportunity could be around 68 million medical marijuana patients.
  • Aphria (NYSE: APHA) – The company just purchased the Caribbean and Latin American assets of SOL Global Investments (OTC: SOLCF), formerly known as Scythian Biosciences. This gives Aphria a footprint in Argentina, Brazil, Colombia and Jamaica. Meanwhile, SOL will now focus on early-stage U.S. entrance.

This Week’s Company Spotlight…

Year to date, shares of OrganiGram (OTC: OGRMF) have done fairly well.

They’re up more than 17.5%. That’s akin to Canopy Growth Corp. (NYSE: CGC) and better than Aurora, Aphria or Cronos.

But shares are down sharply from their peak of $6.30 back on October 15.

A lot of pot stocks have seen similar declines. So it doesn’t mean the company’s business is in trouble. In fact, I think it offers potential value…

OrganiGram offers a bevy of recreational brands – The Edison Cannabis Company, Ankr Organics, Trailblazer and Trailer Park Buds.

Celebrity endorsement deals and partnerships have been important in the industry for years. And they’re becoming more pivotal in increasing the brand’s awareness through multiple channels.

Like Canopy with Snoop Dogg and Invictus MD Strategies (OTC: IVITF) with Kiss front man Gene Simmons, OrganiGram has partnered with the popular Canadian comedy series Trailer Park Boys for its aptly named “Trailer Park Buds.”

OrganiGram currently has supply agreements with eight of 10 Canadian provinces. That means it can essentially do business coast to coast.

It also has footprints in Australia, Europe and South America – all very key to future growth.

But I’ve always been a fan of OrganiGram’s grow operations. The company uses a three-tier approach that maximizes space and production.

Next year it’ll be producing approximately 113,000 kg from roughly 473,00 square feet. Compare that with companies with 1 million square feet or more in production space.

The bottom line? Those are terrific yields. And we’re seeing yields increase as costs go down…

That pays off financially.

Over the last two quarters, OrganiGram beat expectations on earnings per share. On top of that, the company reported positive earnings – a rarity in the cannabis space.

In its third quarter – reported at the end of July – OrganiGram’s revenue grew 95% to CA$3.7 million. More importantly, sales of oils skyrocketed 452% as sales of dried flower surged 55%. I always like to see oils account for the majority of revenue since they tend to be the most profitable.

Now, we won’t hear fourth quarter results from OrganiGram until December 17.

But what’s not to like about a company with record yields, falling costs, increasing profits, surging revenue and skyrocketing sales of high-margin products like oils?

Be sure to comment below for companies you want me to look at in next week’s Beyond the Bong.

On Deck for the Spotlight:

  • Emblem Corp. (OTC: EMMBF)
  • Maricann Group (OTC: MRRCF)

CannaBiz Now!

In Thursday’s CannaBiz Now! I speak with Lighthouse Strategies CEO Michael Hayford.

There are few sectors more exciting than infused beverages. And Hayford believes current expectations are well short of reality.

So be sure to watch this informative piece from the floor of MJBizCon!

That’s all for this week.

Good investing,

Matthew