3 Small Cannabis Companies To Keep An Eye On
It didn’t take a rocket scientist to figure this one out.
For nearly three years, Canadian cannabis stocks were on fire in anticipation of legalization. It all began after Justin Trudeau became the 23rd Prime Minister of Canada. Trudeau made legalization a cornerstone of his campaign, and after winning the election, the race was on to capitalize on what would ultimately become the biggest legal cannabis market in the world.
Major Canadian cannabis players, such as Canopy Growth Corporation (NYSE:CGC), Aphria Inc (OTC:APHQF) and OrganiGram Holdings Inc (OTC:OGRMF) enjoyed a major run in their respective stocks. Investors who got an early piece of these have enjoyed gains in excess of 1,000 percent.
Now by the time legalization actually kicked in Oct. 17, nearly every major Canadian cannabis stock was trading at valuations that were so high, they just made no sense. Savvy cannabis investors knew this, and unloaded their positions right before legalization began. And they made a fortune.
Today, most of those bigger Canadian cannabis stocks have shed anywhere from 20 percent to 40 percent of their valuations. And the truth is, many are still overvalued. But this doesn’t mean the opportunity to profit from the legal cannabis space is over. Quite the contrary, in fact.
While the big run on Canadian cannabis stocks may be over, the big run in U.S. cannabis stocks has just begun.
In fact, the U.S. cannabis market today looks a lot like the Canadian cannabis market from about three or four years ago: Strong momentum picking up in individual states (or in Canada, provinces) with large amounts of capital beginning to get funneled into the players that are aggressively adding market share in anticipation of federal legalization.
The prohibition on cannabis in the U.S. could be lifted within the next three to five years as more and more states defy federal prohibition and legalize the plant. With so much extra tax revenue up for grabs, not to mention the massive job growth that comes with legalization, it’s an absolute no-brainer. And this is why cannabis investors looking for a repeat of the road to legalization in Canada are now deploying capital in the U.S.
The bottom line is that most of the big money in Canadian cannabis stocks has already been made. But the U.S. market is just getting warmed up. And investors looking to enjoy a repeat of the Canadian cannabis juggernaut would be wise to now focus on the U.S. cannabis market.
Disclosure: The author owns shares of Liberty Health Sciences and iAnthus.
There are only a small number of U.S. cannabis stocks from which you can choose. And some of those are actually quite overvalued already. But there are two that, when you look at where these companies will be three years from now – are absolute bargains.
The first is Liberty Health Sciences Inc (OTC:LHSIF).
Liberty Health Sciences is a U.S. cannabis company with an early-mover advantage in Florida.
Although the roll-out of the Sunshine State’s medical cannabis program has been slow due to prohibitionist interference, Florida’s medical cannabis patient count is one of the fastest-growing in the U.S. market, with thousands of new patients being added every week.
Being a state with a large population of aging baby boomers, this should come as no surprise. And this growth has been observed while the state of Florida continues to move at a snail’s pace in terms of keeping up with demand.
Liberty Health has a large footprint in Florida, with 10 locations stretching from as far north as Jacksonville to as far south as Miami. The company is permitted to have up to 30 retail dispensaries as well as home delivery services.
In addition to Florida, Liberty Health also has extraction and processing licenses in Ohio and a 75 percent interest in a Massachusetts cannabis operation called William Noyes Webster Foundation.
Liberty Health Sciences doesn’t have a massive U.S. footprint, but its coverage of Florida is significant, giving it about 20 percent of the market there. Given the value of the Florida market, this is not trivial. Florida is a sleeping giant, and while it’s easy to get caught up in the California and Colorado markets, it’s really the Florida market that offers some of the most exciting growth opportunities in the coming years.
The stock is trading for less than a dollar a share. On the conservative end, it’s worth at least $1.40.
Another U.S. player with operations in Florida is iAnthus Capital Holdings Inc (OTC:ITHUF).
Earlier this year, iAnthus acquired GrowHealthy Holdings, which gave the company a 200,000 square foot cultivation and processing facility in Polk County, FL and a 4,500 square-foot dispensary in Palm Beach County.
Similar to Liberty Health, its permit allows it to open up to 30 dispensaries in Florida. iAnthus also has exposure to Massachusetts, New York, Colorado, Vermont, and New Mexico.
Just a couple of weeks ago, iAnthus and MPX Bioceutical Corp (OTC:MPXEF) joined forces. As a result, iAnthus now has a footprint that includes its eight cultivation and processing facilities and MPX’s six cultivation and processing facilities. It also adds 10 new dispensaries to the 46 already under the iAnthus umbrella.
With the MPX deal, iAnthus now has additional exposure to Maryland, Nevada, California, and Arizona.
Make no mistake: With this deal in place, iAnthus is now one of the biggest U.S. players with exposure to both recreational and medical markets. This recent deal also greatly expands the company’s already deep pockets. Combined, the two companies have raised a cumulative $252 million.
At time of publication, the stock is trading for less than $5.00 a share.
While iAnthus is rapidly growing throughout the U.S., perhaps the biggest U.S. player is Acreage Holdings.
Acreage Holdings has perhaps the largest and most well-diversified portfolio in the U.S., which includes cultivation, processing, and retail operations. It has a footprint in Oregon, California, Florida, Maine, Iowa, Illinois, Ohio, Pennsylvania, Ohio, Maryland, New Jersey, New York, Connecticut, Massachusetts, and New Hampshire.
The company also has major players on its board, including former Speaker of the House, John Boehner and former governor of Massachusetts, Bill Weld.
Acreage Holdings is set to raise $200 million in an IPO that’s set to launch soon. This would make Acreage the most well-funded cannabis player in the U.S. market. And it won’t likely take long for the company to expand its presence in new U.S. markets while further strengthening its presence in states where it already has exposure.
Those looking to capitalize on the continued growth of the global cannabis market still have plenty of options. There are a few remaining Canadian cannabis stocks that are still good values, including Aleafia Health Inc (OTC:ALEAF). We will see new opportunities over the next couple of years in Mexico, Germany, Poland, Spain, and Australia. But right now, the big money is going to be in the U.S. market.
Photo by Javier Hasse.
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