If I were only allowed to choose one stock, right now, that I think is the best value in the entire cannabis industry, it would be CannTrust Holdings (NYSE: CTST). Of course, you should take that statement with a grain of salt given that it's one of two marijuana stocks that I currently own.
CannTrust has lost half of its value over the past three months, partly because its fourth-quarter operating loss was wider than expected, and the company signaled that near-term costs would keep it in the red for at least a few quarters. The other reason for weakness ties into the company's shelf offering at $5.50 a share that raised $170 million. This offering was priced at an almost 15% discount to where the company's share were trading the day before it was announced.
That's the bad news. Now, here's the exciting news.
With its newfound capital, CannTrust is planning to acquire up to 200 acres of land, and utilize this land for outdoor growing purposes. This cash will also aid in the phase 3 expansion of its flagship Niagara campus, which focuses on hydroponic growing methods. Most of this outdoor crop, which should total 100,000 to 200,000 kilos a year, will be used for extraction purposes to create high-margin derivative products, such as edibles, infused beverages, concentrates, or vapes. A full gamut of derivative options will get the green light from Health Canada by no later than mid-October, paving the way for CannTrust to substantially boost its margins.
At a market cap of just over $700 million, CannTrust is one of the cheapest growers on the basis of full-capacity production. Add in the fact that its hydroponic Niagara campus should produce marijuana at a below-industry average cost per gram, as well as the fact that it's on track for recurring profitability in 2020, and it looks to be the industry's top cannabis stock to buy in the second half of 2019.
A vape pen next to neatly arranged piles of dried cannabis flower.
Image source: Getty Images.
I'm a firm believer that every marijuana stock investor should diversify their portfolio with an ancillary player (i.e., a company that isn't directly involved in touching the cannabis plant). I can think of no better buy in the ancillary space than KushCo Holdings (NASDAQOTH: KSHB), the other pot stock I own.
KushCo has been running in place for much of 2019 as the result of ongoing operating losses, weaker-than-expected gross margin, and an accounting snafu that led to a restatement of the company's 2017 and 2018 full-year results. This statement boosted operating income slightly in 2017, but led to a much wider net loss in 2018.
While these are, indeed, bad-news events, nothing is particularly worrisome about any of these adverse events. The accounting error had no impact on revenue, cash on hand, or cash flows, so simple governance changes will resolve the issue. Likewise, lower gross margin was primarily the result of tariffs being implemented on its Chinese-based vape product imports. With the company now passing along these higher costs to consumers, rather than KushCo eating this higher cost, margins will improve.
What I see in KushCo is a company that's at the center of three niche trends. It's a key player in the packaging and branding solutions space, with more than 5,000 growers in 25 countries as clients. KushCo ensures that its clients remain compliant with federal, state, and local laws, and should see a steady uptick in demand as legalizations continue around the world.
KushCo also expects significant growth from its vape business. With Canada set to wave the green flag on derivative products within the next couple of months, and the company no longer eating tariff costs, KushCo's vape business could be a serious moneymaker in the years to come.
Third and finally, the company provides hydrocarbon gases and solvents used in the respective manufacture of cannabis oils and concentrates. Not to sound like a broken record, but the expected surge in derivative sales later this year places KushCo in the right place at the right time.
At far less than two times next year's sales projections, KushCo looks like a major bargain in the cannabis space.
A large dispensary store sign with a cannabis leaf and the word dispensary written underneath it.
Image source: Getty Images.
The old investing adage is that cheap stocks are often cheap for a reason. But if you can find a valid reason why U.S.-based vertically integrated dispensary operator Trulieve Cannabis (NASDAQOTH: TCNNF) is trading at less than 12 times next year's profit projections, feel free to pass that information my way.
To be sure, Trulieve does have its negatives. For example, a number of new players are set to enter its home market in Florida, including MedMen Enterprises. It's also possible that Trulieve's margins could decline as it aims to make a name for itself in markets outside of Florida, such as California, Connecticut, and Massachusetts. However, none of these concerns appears crippling to Trulieve's bottom line, and that's all that really matters.
Unlike its peers that control the seed-to-sale process in the U.S., Trulieve Cannabis isn't trying to infiltrate more than a dozen states at once. Trying to tackle multiple markets at once is a big reason why companies like MedMen have been losing money hand over fist on an operating basis. Rather, Trulieve has focused almost entirely on Florida, opening 28 of its 30 dispensaries in the Sunshine State. Even though Florida is legal for medical marijuana purposes only, Trulieve's breadth throughout the state has placed it at the top of the pack in terms of market share.
As of the company's most recent quarterly report, it's expecting full-year sales to more than double to a range of $220 million to $240 million in 2019, up from $102.8 million last year, and then make a run at $380 million to $400 million in revenue in 2020.
Until Trulieve Cannabis gives investors a real reason to be worried about its future, its forward price-to-earnings ratio of less than 12 looks like a steal.
Marijuana stocks have shown a massive amount of potential for the future as companies continue to grow large quantities of the substance in conjunction with putting out new and groundbreaking ideas. Because there is so much going on in the industry, it can at times be difficult to keep up with where cannabis is headed. Despite this, marijuana is undoubtedly here to stay for the present and in the near future. With projections showing large growth over the next three years, the most important thing to do is to do the research and ensure that one knows everything about a given company before investing.
Leafbuyer Technologies, Inc. (LBUY) is one of the leading online platforms for all things related to the world of purchasing cannabis. The company operates by showing a user the nearest location to purchase weed to them, where they can then order ahead or simply browse a menu. Because of their high functionality, Leafbuyer has quickly become one of the leaders in this category overall.
Their commitment to improving the site has also helped to increase customer acquisition as well as customer retention. Leafbuyer Technologies has also made a number of improvements to the site recently including a delivery function as well as an order-ahead ability. In combination with their various partnerships across the nation, Leafbuyer is well positioned to stay one of the larger players in the online cannabis space.
Leafbuyer Technologies recently announced that they have added additional enhancements to their site including a CBD location page that should help consumers to find the nearest and best CBD-based products to them. With CBD being one of the newest and most hotly anticipated products on the market, it seems as though Leafbuyer is a step ahead of the competition. The CBD market is also subject to hit as much as $22 billion by the end of 2022.
Kurt Rossner, CEO of Leafbuyer Technologies stated that “The number of Leafbuyer CBD customers has grown exponentially – more than 330% – over the last year. After experiencing increased demand, we decided to provide additional value for our CBD company clients and help streamline consumer interaction with the brands. Previously, we focused on dispensary locations and online CBD operations. There is huge opportunity to cater to the hundreds of brick and mortar CBD locations across the country and provide this untapped market with valuable marketing and advertising solutions.”
CannTrust Holdings (NYSE:CTST) is a company that had remained relatively unknown until their listing on the NYSE. The company did, unfortunately, have a loss during their fourth-quarter report, but this is something that many cannabis businesses have had to deal with. CannTrust, however, has the potential to grow as much as 200,000 kilograms of cannabis when operating at full capacity at their outdoor grow operation.
This quantity of cannabis should help them to see some profits in the near future as they continue on their path to growing more and more of the substance. Many companies have combated00
their losses by working to build bigger grow operations, but it is undoubtedly capital intensive. All in all, CannTrust Holdings remains one of the more interesting companies to keep an eye on.
Four marijuana stocks are now on the list of 20 most-held stocks on Robinhood, a millennial-friendly investing app, after failing to crack the list at all a year ago.
Cannabis investing emerged as a clear trend in the past year, and now marijuana stocks Aurora Cannabis (ACB), Cronos Group (CRON), Canopy Growth (CGC) and Hexo (HEXO) are crowding Robinhood's list of most popular stocks.
In fact, Aurora is even No. 1 on the list, displacing Apple (AAPL), which topped the millennial stocks list a year ago. Advanced Micro Devices (AMD) and Square (SQ) fell off the top 20 list entirely, while chip stock Nvidia (NVDA) dropped from No. 13 to the tail end of Robinhood's current top-20 stock rankings.
Now in the lead among millennial investors? After Aurora Cannabis stock, stodgy General Electric (GE) and Ford Motor (F) maintained their No. 2 and No. 3 spots, respectively, followed by Apple. Microsoft (MSFT) slipped a spot to No. 5.
The average age of Robinhood app's 6 million users is 32 as of May, according to a company spokesperson, who provided Investor's Business Daily with an updated list of holdings.
Beginning investors tend to buy stocks that are less than $10, some experts say, an observation borne out by the top three most-held Robinhood holdings.
Aurora Cannabis, Ford and GE all traded in Tuesday's stock market for $10 per share or less. So did Hexo, a relatively overlooked marijuana stock, which made its U.S. debut earlier this year. It was rated a "top pick" in cannabis investing by Bank of America analysts.
Among FANG stocks, Facebook (FB) and Amazon.com (AMZN) slipped a few spots, while Netflix (NFLX) lost its place in the top 20, and Google parent Alphabet (GOOGL) continues to get shut out. All four tech-oriented stocks are relatively pricey, ranging in cost from around a couple hundred to a couple thousand bucks a share.
Investing apps like Robinhood, Acorns, Stash and Stockpile are gaining traction among millennial investors, thanks to their account minimums of $5 or less and free trades.
So, what other stocks are popular with millennial investors? Here's a list of top 20 most widely held stocks on Robinhood, which also offers free cryptocurrency trading for millennial investors.
1. Aurora Cannabis
6. Cronos Group
11. Canopy Growth
18. Plug Power