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5 Cannabis And CBD Stocks That Aren't Blowing Smoke

March 8, 2019 7:50 am
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The cannabis sector is one that is driving incredible amounts of investor interest. Over the past year, we’ve seen regulatory changes around the world that are opening the door to an emerging market that many speculate to be a massive one.

As a result, we’ve seen announcements from a countless number of publicly traded companies that they are working to get into the space, whether on the CBD side or the cannabis side. While there are several investment options in the space, there are few that have the potential to become a cornerstone in the industry.

Moreover, several stocks have seen strong gains after announcing plans to enter the space. Unfortunately, a large percentage are just blowing smoke. Without a real product, many of these companies are behind the curve and best to avoid.

Considering this, here are five cannabis and CBD stocks that stand out as real opportunities, with real products, and foundations laid that give them the potential to take a decent share of the cannabis and/or CBD market.

1. Canopy Growth

Canopy Growth Corporation (NYSE:CGC) is one of the most talked about stocks in the space, and for several good reasons. First and foremost, the company was one of the early adopters in the medical cannabis space in Canada. This gave the company the opportunity to build a strong foundation over years, from which it is now able to grow within the Canadian adult-use cannabis space.

In fact, Canopy Growth’s work hasn’t just attracted the attention of your standard mom and pop investor. The company was the center of one of the biggest investments made in the space; Back in 2018, Constellation Brands (NYSE:STZ) announced it made a CA$5 billion ($4 billion USD) investment in the company.

When making the investment, Constellation Brands pointed to more than 30 countries seeking regulatory changes for the acceptance of medical cannabis and a growing trend of recreational cannabis legalization around the world as the reasons for the investment. All of which, Constellation Brands believes, Canopy is well positioned to take advantage of.

Finally, while the company’s claim to fame has been cannabis, it is quickly moving to take advantage of the emerging CBD market in the United States. In fact, the company recently announced a partnership with Martha Stewart that will lead to various CBD-related lifestyle brands. With a strong and growing global footprint, a deep understanding of the regulatory environment in the cannabis space, and a brand that is already becoming recognized, Canopy Growth has the potential to become a long-term winner in the cannabis space.

The Cannabis Capital Conference returns to Toronto April 17-18!

2. Veritas Farms

Veritas Farms (OTC:VFRM) is a lesser-known CBD play that offers quite a strong opportunity. The company was founded in 2015 and has quickly become a contender in the CBD space. The work that the company has done over the years has given it a strong foundation to take advantage of the CBD market in the United States that’s emerging as a result of the 2018 Farm Bill.

There are a few key reasons that the company is well positioned for growth within the U.S. CBD market. The first of these reasons is its location. Most of the companies that we see in cannabis and CBD are Canadian. As a result, if they want to tap into the U.S. CBD market, they will either have to partner with U.S.-based companies, deal with a complex import process, or set up shop in the United States to produce their products.

This is not a problem for VFRM. The company is headquartered in Colorado. So, import struggles or a need to set up shop, or a need to partner with a company in another country, are off of the table. Moreover, the company has dealt with and has a deep understanding for the regulatory process in this market.

Another key benefit that the company has over its competitors is that it is a seed to sale player. While there are other U.S.-based companies in the CBD space, few handle the process from seed to sale.

The company owns and operates a 140-acre production facility. It has its own clones, cultivates its own hemp, processes the hemp into high-quality CBD and uses the CBD to produce products that are represented by more than 20 skus currently on the market. This allows Veritas Farms the ability to have full control over quality as well as cut out middle-man costs associated with the purchase of hemp or CBD for use in CBD-infused products that are already being used in spas and sold in stores.

All in all, while the company is a relatively small player, it has set the foundation for one of two things to happen. First and foremost, the company could experience strong organic growth as the US CBD market emerges. With a market cap of under $50 million, combined with the foundation that it has set as a full-spectrum player in the CBD space, makes it a potential takeover target for larger players that are looking to enter this space.

3. Arcadia Biosciences

Two weeks ago, when you said Arcadia Biosciences (NASDAQ:RKDA), no one would have thought about cannabis or CBD. The company is most well known for its work in biotechnology, developing chemicals for various markets including health care and agriculture.

On Feb. 28, Arcadia announced the establishment of Arcadia Specialty Genomics. The new company would focus on the optimization and standardization of cannabis plant content, quality, climate resistance and yield.

While the company is just stepping into the space, it is hitting the ground running. Less than a week after announcing the establishment of Arcadia Specialty Genomics, the company announced that it had received its first commercial hemp cultivation license. As a result, the company will soon commence its first growth of industrial hemp on a 10-acre piece of land in Hawaii.

In general, it is always suggested to advise against investing in a company that doesn’t already have a product on the market in CBD. However, RKDA is a stock in its own class. Investors have some protection as a result of the company’s strong presence in the development of various chemicals for various industries that are already on the market.

Moreover, there is no other company that has been able to find that is focused specifically on the optimization of the cannabis plant. As the demand for hemp-derived CBD- and cannabis-related products grows, it will be important for farmers to be able to identify stable yield amounts and grow climate-resistant plants without fear of a cold or heat snap killing their entire crop.

Considering the unique niche in the cannabis/CBD space in which Arcadia is working, the company’s past success in the healthcare, consumer goods, and agriculture markets, and the fast pace at which the company intends on conducting business in the cannabis/CBD space, RKDA represents a unique opportunity in the emerging cannabis/CBD space.

4. Pyramid Technology Group

Pyramid Technology Group (OTC:PYTG) is another little-known CBD stock with a pretty big story. The company was founded in 1997. It’s focus has historically been on the general defense sector, where it has had success with clients like the Federal Aviation Administration, the U.S. Customs Service, and more.

On Aug. 2, 2018, Pyramid Technology Group announced that it intended on entering the CBD space as the prospect of the emerging market opened the door to strong potential growth. Since then, the company has issued 17 press releases associated with its movement in the CBD space, announcing acquisitions, partnerships, marketing campaigns and more.

Moreover, the company is already an active player in the CBD space. Through its subsidiary, LeafyWell, the company sells a wide array of branded CBD-infused products that have been developed to promote health and relaxation in both humans and pets.

With a strong history in the general defense sector providing a foundation from which to build, ambitious activity in the CBD space over the past 7 months, various products already on the market and continued work to become a leader in the space, I believe that Pyramid Technology Group is one to watch.

The Cannabis Capital Conference is coming back to Toronto! Click here to learn how you can join Tim Seymour, Jon Najarian, Alan Brochstein and many others.

5. GW Pharmaceuticals

GW Pharmaceuticals (NASDAQ:GWPH) is a well-established company in the medical cannabis space. First and foremost, the company has a product known as Sativex, which is one of the few approved cannabis-derived treatments within the European market.

Sativex is approved for commercialization in 20 other countries around the world. Moreover, the company is in the process of late stage development of the treatment as an option for MS Spasticity and Phase 2 development of the treatment as an option for neuropathic pain and other neurological symptoms. These development programs have been designed to support the potential approval of Sativex in the United States.

However, Sativex isn’t the only value proposition posed by GW Pharmaceuticals. The GW Pharmaceuticals team is also the company behind Epidolex, the first FDA-approved cannabidiol.

The treatment has been approved for use in patients with Dravet Syndrome and Lennox-Gastaut Syndrome. Both of these are severe, difficult-to-treat forms of epilepsy. The company is also in the late stage development of Epidiolex as an option for Tuberous Sclerosis and Phase 2 development of the treatment as an option for Rett Syndrome.

With a proven ability to bring treatment options through development and into commercialization, a strong pipeline of products that are yet to hit the market and development of new indications for already-approved treatments, and a global footprint in the medical cannabis space, that GWPH has the potential for growth ahead.

Final Thoughts

While there are several investment options in the cannabis and CBD space, a select few have set the foundation that provides the potential for strong growth as the global cannabis and CBD market continues to emerge. The five stocks mentioned above represent strong potential for growth ahead as we continue to see global regulatory changes that open the door to the emergence of what the experts suggest will be a multibillion dollar industry.

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