Some are ready to call it quits on cannabis. But the Green Revolution has only just gotten started. The big plays — Canopy Growth Corp, Aurora, Cronos Group — saw big gains in 2017 but slowed down in 2018 and seem to have stalled in 2019. Mentioned in today’s commentary includes: OrganiGram Holdings (NASDAQ: OGI) (TSX-V: OGI), CannTrust Holdings Inc. (NYSE: CTST) (TSX: TRST), Aleafia Health Inc (OTCQX: ALEAF) (TSX: ALEF), THC Biomed International (OTCQX: THCBF) (CSE: THC), Cronos Group (NASDAQ: CRON) (TSX: CRON).
Some worry that it’s just a big bubble — but they’re not looking closely enough. There are plenty of opportunities for investors looking to cash in on the cannabis boom.
From companies out for mega-deals, changing the face of cannabis branding as we know it, to obscure tech plays completely transforming the marijuana supply chain, smart investors know where to look as the industry continues to weed out the weak hands.
Cannabis produced $6 billion in deal value between 2015 and 2018. And that’s nothing compared to what’s next. Estimates peg the legal cannabis market at $66 billion by 2025. But it could be much, much bigger.
Legislation, from Canada to Uruguay to the United Kingdom, has made cannabis more accessible. But most cannabis consumption is still managed through the illegal market — which could be much, much bigger than the current retail market.
What is happening is quite literally a once-in-a-lifetime investment opportunity. And while a few big names have dominated the conversation, the real profit lies beneath the hype in companies with solid fundamentals, diversified portfolios and a strong vision.
Here are six companies looking to take cannabis mainstream in 2019:
OrganiGram Holdings (NASDAQ: OGI) (TSX-V: OGI)
OrganiGram is a Canadian holdings company looking to take the burgeoning cannabis industry to the next level. With numerous subsidiaries from which it produces and distributes recreational and medical marijuana, OrganiGram is well positioned to ride the next Green Wave into profits.
OrganiGram has carved out its place in cannabis royalty by securing deals across Canada, from Saskatchewan to British Columbia. In addition to its in-person sales strategy, OrganiGram also offers another unique method of distribution. Online and over-the-phone options. More than that, however, OrganiGram and its partners knows how to manage the surging Canadian demand that has left other distributors without product for periods of time.
Not only is OrganiGram racing ahead in distribution and production, it’s also leveraging technology to gain an edge on its competition in the adult recreational beverage and edible markets. In a recent press release, the company announced a brand-new rapid-onset nano-emulsion technique which is set to revolutionize how recreational products are created.
“This is an exciting time for cannabis product development,” says Greg Engel, CEO, Organigram. “We know that predictability and reliability are important to adult consumers of cannabinoid-infused products. We also believe that a powder additive will offer consumers a unique and differentiated offering, along with convenience and discretion. Allowing consumers to make their own choice as to which beverage they will infuse opens up a new consumption experience for Canadian cannabis consumers.”
TruTrace Technologies (TTT.V, TTTSF)
TruTrace is unique. It doesn’t deal in cannabis – it deals in information. Big Data that could help transform how the cannabis industry is viewed by the wider marketplace.
The company has two businesses. First, there’s the company’s supply chain innovation: indexing and searching through a huge database that includes information from across the cannabis world. Right now, every jurisdiction manages cannabis a little differently. The legal market is tightly regulated.
In California, for instance, there’s the California Cannabis Portal – a system for tracking changes in regulatory patterns that could affect California’s pot market — which will be worth $5 billion by 2020.
It’s no secret that companies and customers love this kind of service – it makes managing risks much easier, it protects the IP of different strains, and it makes sure there’s a level playing field, cutting out the black market. But TruTrace is going one step further.
In 2018, the company created a software platform for tracking the origins and quality of different cannabis strains, bringing accountability and authenticity to the market. TruTrace’s platform, StrainSecure, uses sophisticated security protocols to collate and manage a large amount of cannabis data – from strain info to regulatory measures to consumer protection.
StrainSecure certifies and verifies all the information it collects and protects products from being tampered with. The platform also serves regulators and customers by offering “seed to sale” breakdowns of every cannabis strain – protecting IP while offering authorities and customers the chance to see exactly where each product originates, and what it can do.
The StrainSecure platform incorporates elements of social media. Customers have the chance to verify and critique strains included in the system, offering greater opportunities for brand engagement. The platform also allows retailers to engage customers and build brand loyalty in new ways through the StrainSecure QR Code.
It works like this: anyone who wants to engage the cannabis community can register on the StrainSecure service, providing information to create a profile. That participant – be it a seed farmer, a grower, a regulator or a producer – can then take part in the verification and testing process, ensuring that the information contained within StrainSecure is accurate.
The service is specifically geared towards the medical cannabis market – allowing hospitals, doctors, patients and companies access to key information regarding cannabis products.
CannTrust Holdings Inc. (NYSE:CTST) (TSX:TRST)
Canntrust is another cannabis company focusing on the numerous medical benefits of the plant. The company offers a number of cannabis-derived products, from CBD and THC pills to actual plant matter, making it one of the most pure marijuana plays on the market.
Because of this, however, the company has faced increased regulatory scrutiny, including a seizure of its supply earlier this week after regulators found that its greenhouse facility in Pelham, Ontario was non-compliant with certain regulations. CannTrust did not shy away from responsibility, however.
Peter Aceto, Chief Executive Officer, explained, “Our team has focused on building a culture of transparency, trust and excellence in every aspect of our business, including our interactions with the regulator. We have made many changes to make this right with Health Canada.”
The setback is one many other cannabis companies have faced as the industry continues to find its footing, but it certainly does not take away from its previous – and future – accomplishments.
Back in September, the company made history with the first approved shipment of a cannabis product to Denmark. The company shipped cannabis oils overseas in a breakthrough deal with its Danish joint venture partner, STENOCARE.
“Thanks to CannTrust’s consistent quality and standardized products, we are the first in Denmark to have cannabis oil products approved for the market,” noted Thomas S. Schnegelsberg, CEO of STENOCARE.
Analysts too, have had positive things to say about CannTrust, including Chris Carey of Merrill Lynch, who explained, “Companies with competitive moats in Canada (regulatory, product) or with global strategies become more attractive, here; we see valuation more constricted for others.”
While Owen Bennett of Jefferies noted, “We think CannTrust is a smart, consistent operator that has slipped under the radar,” adding, “It’s one of the strongest medical businesses in Canada, has been performing very well in early rec, is positioned well to capitalize in derivatives, and has made some shrewd moves internationally.”
Despite the company’s recent setbacks, CannTrust has a proven track record of production and operational security. And while it wallows in unfavorable press for the time being, the company is dedicated to pursuing its ambitions in the space.
Aleafia Health Inc (OTCQX:ALEAF) (TSX: ALEF)Aleafia is a relative newcomer into the marijuana market, but has already made some major moves. With a strong focus on innovation, the company maintains a medical cannabis dataset with over 10 million data points to inform proprietary illness-specific product development in order to fine tune its products to a wide variety of consumer needs.
Aleafia Health also maintains the largest national network of medical clinics and education centres staffed by MDs, nurse practitioners and educators and has international operations in three continents. The company’s commitment to health and wellness provides it with a foot into one of the fastest growing industries in the world. Aleafia has its sights set on the big picture – a global market, with health and wellness taking the center stage.
Recently, Aleafia even secured a permit from Health Canada allowing it to dive right in to that market. In early July, Aleafia received the green light from the regulator giving the company the go-ahead to begin shipments of cannabis products to Australia. The company is looking to ship its products to CannaPacfic as soon as the beginning of August.
“The receipt of Health Canada Export Permits enables Aleafia Health to sell high-margin, value-added cannabis products across international borders for the first time, representing a major milestone as we augment our global distribution platform,” said Aleafia Health Chairman Julian Fantino. “We continue to prove the international viability of our highly differentiated cannabis health and wellness ecosystem with products, clinic operations, education and distribution. With among the largest cultivation and extraction footprints in Canada coming online, we will continue to look to new international markets.”
THC Biomed International (OTCQX:THCBF) (CSE:THC)
THC Biomed operates as a licensed producer under Canada’s Marihuana for Medical Purposes Regulations. It is also engaged in the research & development of the products and services to medical marijuana.
THC Biomed’s recently announced a new THC-based beverage, aiming to appeal to a broader range of consumers. John Miller CEO explained, “THC has conducted extensive research on cannabis edibles and beverages and I have found our product to be exclusive in its category.”
Though THC Biomed may be smaller than some of its more well-known competitors, it is just as ambitious. And it’s beginning to pay off.At the end of last year, the company made its first shipment of cannabis products to its Saskatchewan partner, and is rapidly expanding its holdings, with two new strata lot purchases, adding to its growing array of assets.
The company is also leading the charge in ‘pure cannabis cigarettes’ in the Canadian market. As the first Canadian Licensed Producer to automate this process with pre-rolled cannabis products mimicking that of the tobacco industry, THC Biomed is carving a new path for recreational marijuana. The Pure Cannabis Cigarettes will contain biodegradable filters, something that even Big Tobacco hasn’t picked up on.
John Miller, President and CEO of THC BioMed explained, “We promise our Pure Cannabis Cigarettes will offer the same potency as our regular best-selling pre-rolls. I am predicting consumers will gravitate towards this finished type of product and the old way of rolling joints will be something of the past.”
Cronos Group (NASDAQ:CRON) (TSX:CRON)
Marijuana investment firm Cronos Group made history last February after becoming the first pot stock to move from over-the-counter (OTC) trading to the Nasdaq. Doing so is expected to greatly improve visibility and encourage institutional investors who would otherwise not purchase the stock OTC.
From an operational perspective, Cronos holds a 100 percent stake in Peace Naturals and Original BC, two veritable cannabis growers. The company also has a number of smaller investments in other growers.
As one of the bigger companies in the list, Cronos Group stands out as a leader in innovation and regulatory diligence. Thanks to the company’s push for perfection, it has landed deals across the market the market, with its global reach spanning five continents and a portfolio that would make any institutional cannabis investor jealous.
Following its October slump, Cronos Group has seen a surge in trading volume, with a renewed investor interest in the company after rumors were finally confirmed of a deal with tobacco giant Altria.
“Altria’s investment and the services they will provide to Cronos Group will enhance our financial resources and allow us to expand our product development and commercialization capabilities, and regulatory expertise to better position Cronos Group to compete, scale and lead the rapidly growing global cannabis industry. We look forward to the many opportunities we expect this relationship to create.,” said Howard Willard, Altria’s Chairman and Chief Executive Officer.
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