Taken from an article we wrote recently that will be published in a global newsletter.....note this does NOT represent investment advice. Blah blah blah, I've been awful at recommending stocks since the cobalt meltdown so I really shouldn't be, but the guy I works for is good at his job and these are his choices (out of a growing sea of over 350 publicly traded pot stocks - THANKS CANADA!).
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Abacus Health (ABCS CN) $14 CAD
The company has first mover advantage with an FDA-registered product that is essentially Bengay or Icy Hot (active ingredients camphor and menthol) infused with CBD. Chronic pain affects 100M Americans and the global topical pain relief market is USD $7.4B. The company is cashed up and recently received orders from CVS, Weis Markets and Pharmacare. The valuation doesn’t appear challenged and we hear CVS can’t keep it on their shelves. The stock actually trades at a large discount to its peers which should not be confused with cheap. It is critically important that this one establish brand quickly and we think they have a year to do it before the competition absent CBD (which is probably apoplectic in fear about losing share) either buys them or introduces their own look alike. Management here has spent 20 years in the space, they know what they are doing.
Altria (MO) $56 USD
Yields 5.6%, big, liquid, hauls the well-deserved taint of tobacco and manufactures a product that is designed to addict and kill their customers, but cleverly enough, the former quickly and latter, slowly. It has recently invested in both e-cigarette maker Juul and Cronos (CRON) giving it exposure to sexy growth markets. Meanwhile, the company’s cigarette sales, like its customers, have been dying for 40 years while its stock for the last 30 years has returned 18.9% a year compounded.
Khiron Life Sciences (KHRN CN) $3 CAD
Khiron Life Sciences is a medical cannabis company with a first mover advantage in Latin America. With more than 620 Million people in LATAM, there are very few publicly traded pure-plays solely focused on this target market and even fewer who are fully licensed to cultivate, produce, distribute and export medical cannabis there. Vicente Fox (former President of Mexico) is on the Board and has been extremely busy educating governments, citizens and the general public of the positive effects of cannabis regulation not only for health and wellness benefits, but also to drive out corruption, drug cartels, and loss of taxable revenues. With core operations in Columbia, the company enjoys some of the lowest cost production in the world and combined with diverse distribution channels spanning clinics, hospitals, pharmacies, patient associations and CPG joint ventures, Khiron is primed to capitalize on this multi-billion dollar market.
Valens Groworks (VGW CN) $3.45 CAD
Extraction companies act as middle-men, purchasing dried cannabis, extracting the oily substance containing THC or CBD from the plant and selling it back to the same producers, or to other customers that need extract. This company’s yield is meaningfully superior to others and they have attracted Thermo Fisher Scientific (TMO) as a partner. We hear they have rebuffed numerous suitors, in part because they are about throw off 50% EBITDA margins and management apparently feels staying independent is best course of action, for now.
