Recent legalization across Canada and parts of the U.S. has sparked growth and stabilization for several cannabis-related companies. Today we look through the smoke and beyond the hype at two top players to consider for your portfolio this year.
Over the past several years there has certainly been a lot of noise coming from the media and investment writers with headlines like ‘Pot stocks are making people rich’ and articles about ‘marijuanna millionaires’. Headlines like these are causing young people in their 20s to suddenly consider opening brokerage accounts to ‘get rich’ by investing in their favorite party past-time without doing their due diligence. Not all pot stocks are going to be winners but now that more laws are passing, more doctors are recommending, and the stigma is fading, we are beginning to see which small companies are emerging as leaders positioned for even greater success going forward. Here’s two with strong foundations and bright futures.
Canopy Growth Corp.
Canadas biggest cannabis grower and the first to be listed on the New York Stock Exchange, Canopy has shown returns of nearly 200% over the last 12 months, but it’s been a bumpy ride. Cannabis related stocks can be extremely volatile, and Canopy is no different.
Their business results, however, are solid and the numbers don’t lie. In 2017 Canopy’s revenues doubled, and it’s sales from oils, concentrates and consumables grew 9% –and it’s this area that has an enormous upside.
The popular use of Cannabidiol (CBD) oil is set to grow exponentially over the next two years from $7.7 billion to $31 billion by 2021. It’s used by some cancer patients and people with chronic pain. Made from cannabis, CBD is a cannabinoid (compound found in hemp and marijuana plants) and can reduce inflammation and pain without the high you normally associate with smoking the plant which comes from THC. Unlike habit forming meds such as opioids CBD can provide some relief without the side effects. People want relief and to still be able to function in their daily life.
Aside from it’s already strong distribution position in the US and Canada, Canopy also has already completed export agreements with at least six other countries.
ACTION: Buy shares of Canopy Growth Corp. (NYSE: CGC) on next dip below $27.
All these buds and oils have to move to the consumer in safe packaging and Kush Bottles has emerged as the first major player in this area. Kush has a giant head start on the medical marijuana (food grade) packaging competition, as well as “about a dozen provisional patents” filed for new products according to Nick Kovacevich, Kush Bottles CEO.
Established in 2010 in California, Kush has been able to quickly grow as more states and countries pass legalization. Over 240% year over year revenue growth has allowed Kush to invest and grow it’s business. They acquired a company called Summit Innovations which distributes hydrocarbon gases that help turn cannabis plants into oils. Kush also opened a new division for the veterinary and pharmaceutical industries to aid in diversification of their business model.
Certainly, more competition will come after Kush, but with a strong start out of the gate, this is the one to own if bought at the right price.
ACTION: Buy shares of Kush Bottles (OTC: KSHB) below $4.75