5 Cannabis Stocks That Should Be On The Value Investors Radar
The cannabis sector was under significant pressure yesterday and investors are closely monitoring how these stocks trade from here.
Although this weakness is concerning, we have a favorable long-term outlook and expect cannabis stocks to rally off its recent lows. Over the last year, the legal cannabis industry has seen incredible growth and we are excited by this trend as well as the impact it will have on cannabis stocks.
Today, we want to highlight 5 Canadian stocks that have recorded significant movements over the last week. We are favorable on these opportunities and continue to closely monitor trading activity.
Phivida: A Stock to Watch Following a 20% Drop
Although many investors are focused on medical marijuana producers, the cannabidiol (CBD) market offers significant opportunities for companies and investors. One company capitalizing on this opportunity is Phivida Holdings Inc. (CSE: VIDA) (OTC: PHVAF), which is an emerging leader in the burgeoning medical CBD and hemp oil extract market.
Phivida has been nothing short of an execution story and continues to advance the fundamental story. The company is focused on the development and distribution of hemp-derived CBD products and continues to focus on expanding its product line.
Earlier this month, Phivida announced a strategic partnership with WeedMD (WMD.V) (WDDMF) that is focused on producing and selling cannabis-infused beverages to the medical and recreational market in Canada. The joint venture, Cannabis Beverages Inc., plans to develop a production facility at WeedMD’s greenhouse and will operate one of Canada’s first cannabis-infused beverage production facilities. WeedMD will be the exclusive cannabis supplier and distributor for CanBev and will provide production space at its 610,000 sq. ft. facility for CanBev’s operation.
During the last week, Phivida has been under pressure and the shares have fallen 20% during this time. We think this sell-off is overdone and we are monitoring trading activity closely as momentum is near oversold levels. This pullback has created a great opportunity for investors looking for a way to capitalize on the CBD market and we will keep an eye on how Phivida trades from here.
High Hampton: Capitalizing on California
Many cannabis investors are actively looking for marijuana stocks that are levered to California, the world’s largest legal marijuana market. Although these investors have been primarily focused on Canadian producers, the opportunity in California is significant.
In 1996, California legalized medical marijuana and has approx. 1 million registered patients; almost 5x bigger than Canada’s medical marijuana market. We are favorable on this opportunity especially after the state legalized recreational marijuana on January 1st.
One company focused on this burgeoning opportunity is High Hampton Holdings (CSE: HC) (OTC:HHPHF), which is laser focused on becoming a leading global distributor of cannabis products. High Hampton has been increasing market share in California through a variety of strategic initiatives and we are monitoring how the company continues to execute.
Last year, High Hampton acquired a 10.8 acre piece of property for less than $2 million that is strategically located in Coachella, California. The company is pursuing Conditional Use Permits (CUP) for cultivation and manufacturing and submitted applications in late 2017.
We are favorable on this initiative since the granting of a CUP would significantly increase the property’s value (comparable properties cost approx. $5.5 million). We view this opportunity as a potential catalyst and expect a positive outcome after High Hampton engaged strategic partners to make sure there are no issues with the buildout.
This represents an attractive opportunity for investors and will monitor how High Hampton continues to execute. During the last week, the shares have fallen more than 5% and we are bullish on the California cannabis market as well as High Hampton’s leverage to it.
Harvest One: An Oversold and Undervalued Opportunity
Recreational marijuana represents a significant opportunity and we have watched how this has been a benefit to companies in states like California, Colorado, Nevada, and more!
Although we have seen the impact of recreational marijuana at the state level, we have not seen the impact at the national level. This is about to change and we are excited by Canada’s plan to legalize recreational marijuana this year. The legalization of recreational marijuana in Canada will be a major catalyst for the companies levered to this market and we are very excited by this opportunity.
One company focused on capitalizing on this opportunity is Harvest One (HVT.V) (HRVOF). The company operates a unique and attractive business model that controls operations across the entire cannabis value chain through three business units. Harvest One has a number of potential catalysts for growth and we are monitoring how the company continues to execute after its subsidiary, United Greeneries, started selling medical marijuana to the retail market.
We are favorable on Harvest One’s leverage to international markets and believe that the stock has been flying under the radar. The recent developments have significantly advanced the company’s fundamental story and we are favorable on these moves.
Harvest One has several major growth catalysts and we are bullish on the shares. One of the biggest potential catalysts will be Health Canada granting a Dealer’s License, which would be a major milestone that significantly enhances the company’s fundamental story.
Although Harvest One continues to execute, the shares have been under pressure and are trading at oversold levels. During the last week, the shares have fallen almost 15% and have dropped 30% in 2018. The recent pullback has improved the valuation and investors should keep an eye on this one.
CROP: An Underappreciated Cannabis REIT
Canada has become a global cannabis leader and this opportunity has caught the eyes of investors and business owners. The emergence of Canada as the global leader has led to a significant increase in the number of companies focused on this burgeoning market, which has caused some companies to fly under the radar.
One company that has been flying under the radar is CROP Infrastructure Corp. (CROP.CN), which is structured similarly to a Real Estate Investment Trust (REIT). The company invests in income-producing property and agricultural equipment to service the growth of the cannabis industry.
CROP is focused on leasing real estate and providing equipment as well as its expertise in exchange for a 30% management fee. The cannabis REIT is focused on increasing market share in Colorado, California, Washington and Canada, which represent attractive growth markets. The company plans to pursue opportunities throughout North America and we are favorable on these growth initiatives.
CROP is focused on rapidly growing the size of its property portfolio which currently consists of 45,000 square feet of revenue-generating canopy and has built the blueprint and framework for an aggressive expansion this year. When compared to its peers, the shares seem to be significantly undervalued and we think the market cap underappreciates the company’s growth potential.
The cannabis real estate company is led by a management team that has a proven track record of success and we think this stock is flying under the radar. As the company continues to execute, this will change and believe that the company is in the early innings of a major growth cycle.
Isodiol: An Execution Story
Over the last year, Isodiol International Inc. (ISOL:CNX) (ISOLF) has been executing flawlessly and has been laser focused on securing strategic partners and making accretive acquisitions.
The global Bioactive Phytoceutical innovator has been able to significantly advance its fundamental story by partnering with leading cannabis companies like Canopy Growth (WEED:APH) (TWMJF), Nuuvera (NUU:APH) and Namaste Technologies (N:CNX) (NXTTF). We are excited by these partnerships and believe that they will help support growth in 2018 and beyond.
Last month, Isodiol released third quarter financial results and recorded almost $6 million in revenue which is incrementally higher than the same period last year. Isodiol attributed the growth and profit increase to increased distribution, portfolio diversification, and the continued integration of wholly owned subsidiaries.
We are favorable on this growth and will monitor how these numbers continue to improve as Isodiol executes on organic and inorganic growth initiatives. We are favorable on this multi-faceted growth strategy and will monitor the impact it has on revenue numbers over the coming quarters.
Isodiol continues to execute on previously announced initiatives and is led by a management team with a proven track record. We are excited by the continued execution and believe the company is well positioned to report strong growth on a quarter-over-quarter basis going forward.
Although Isodiol continues to advance and improve the fundamental story, the shares have been under pressure and we are monitoring this decline. Momentum is approaching oversold levels after the shares fell more than 10% in the last week and investors need to keep an eye on this global leader.