The cannabis industry is booming. With broad legalization for medical use in the United States, and legalization for adult-recreational use in Canada, this emerging industry is creating incredible opportunities.
While the industry is already booming, it’s also emerging, giving those that get involved now the ability to take the lion’s share of the market later. Compelling growth opportunities are leading to an incredible amount of investor interest.
However, investing in cannabis is just like investing in any other emerging industry. Putting your money in the wrong place can lead to significant losses, while making strong investments now can make sizeable gains. In my view, the stocks below have strong potential for growth ahead.
Canopy Growth Corporation (NYSE: CGC): A Clear Winner In Multiple Markets
Read around the web and you will see that 8 out of 10 times, Canopy Growth Corporation is in the top two, and for good reason. The company is the largest in the cannabis space by market cap.
The company is centered around growing, processing, and selling medical and recreational cannabis. The majority of the company’s business takes place in Canada, but its footprint on a global scale is growing quickly.
Canopy Growth was also the first of the larger Canadian cannabis companies to make an entrance into the United States hemp market – a market that just opened up with the passing of the 2018 Farm Bill. In fact, the company is currently in the process of building a large-scale production facility in New York, as it’s one of the first to receive a license in the state to produce products derived from hemp, including CBD.
It’s also worth mentioning that Canopy is sitting on a ton of cash that came from Constellation Brands, Inc. (NYSE: STZ). At the end of the last quarter, the company had over $3 billion in cash on hand. Moreover, last year, Constellation Brands increased its ownership stake in the company to 38%, piling on yet another $4 billion in cash.
At the moment, Canopy and Constellation are working to develop cannabis-infused beverages. This is great news, as cannabis infusion into food and drink is expected to be approved in Canada by the end of 2019.
As Canopy works to enter into the $22 billion CBD market, maintains its leadership in the cannabis market in Canada, and moves toward the cannabis market once legalized recreationally in the United States, the stock is becoming harder and harder to resist.
Veritas Farms: Making Waves With Recent Kroger Co (NYSE: KR) Agreement
Veritas Farms is a relatively small company when discussing cannabis plays. While the stock only has a market cap of around $160 million, it is making waves in the CBD market. The company is addressing the big-box store opportunities early on, setting the foundation for a leadership role in the long run.
In fact, Veritas Farms was the first publicly traded cannabis company to make an announcement that it had made its way onto the big-box scene. This announcement came via press release on April 3, 2019. While the release was more about product packaging and labeling, the company also said that its products were featured at select CVS locations.
More recently, Veritas Farms announced that it has reached an agreement with Kroger. Under the terms of the agreement, the company’s branded topical full-spectrum CBD products would be featured on shelves at 945 store locations within the Kroger family.
The allure the company has among big-box stores is simple. Veritas Farms is one of the few companies that handles the entire process from seed to sale. It grows the hemp, extracts the CBD, manufactures the products, and sends them out to sale, giving it complete control over access to basic materials and quality of product being sold. Ultimately, this cuts down on the risk of production delays while delivering a strong product to the end consumer.
With its foot in the door with multiple big box store brands, Veritas Farms is making the types of early moves that we see among long-term winners in emerging markets. The company is leaps and bounds ahead of most companies in the CBD sector and will likely continue to expand within a market that many believe will grow to be worth more than billion per year in the near term.
GW Pharmaceuticals (NASDAQ: GWPH): Newly Approved Cannabis Drug Is A Big Win
GW Pharmaceuticals is a company that operates on the medical side of cannabis. In fact, the company is the first to win approval from the FDA for a cannabis derived medication. That medication, known as Epidiolex, is indicated for the treatment of severe forms of epilepsy and was approved just last year.
Nonetheless, chances are that the FDA approval won’t be the only good news surrounding the drug. In fact, management is expecting that a European advisory group will weigh in with an official recommendation on the treatment in the current quarter.
According to data from clinical studies of the drug, Epidiolex has the potential to reduce seizures in patients with Lennox-Gastaut syndrome (LGS) and with Dravet Syndrome by 40% or more. Considering the FDA approval and the clinical data that supports it, a positive recommendation in Europe is highly likely, which could act as a value building catalyst.
As the company moves into the commercialization stages of Epidiolex, the market potential here is incredible. In fact, Dravet syndrome and LGS are some of the hardest to treat forms of epilepsy and can cause 50 or more seizures per month.
Unfortunately, many patients do not respond to current treatment options. As a result, there is a high unmet medical need for Epidiolex.
The high demand can be seen in the sales of the drug in the United States. While the drug was only approved about 6 months ago, it’s already generating nine-figure revenue. In fact, in the first quarter of 2019, sales came in at $33.5 million.
Moreover, demand in Europe could be higher. In the United States, it is estimated that only about 14,000 to 18,500 patients live with LGS. In Europe, it is estimated that there are between 23,000 and 31,000 patients living with the condition. And while Dravet Syndrome is particularly rare, the numbers in LGS suggest that demand in Europe could be far higher than demand in the United States, leading to explosive potential revenue growth. As such, this is a stock that all cannabis investors should be paying attention to.
Aurora Cannabis Inc (NYSE: ACB): A Leader Making Big Investments
Aurora Cannabis is another Cannadian cannabis giant. While the company already has a very strong market cap, sitting at nearly $8 billion, many (including analysts) argue that it is poised for strong growth ahead. There are a couple of reasons for this.
With the legalization of adult use recreational cannabis in Canada, the biggest hurdle for the company was taken out of the way. Now, the company’s growing production capacity gives it a strong competitive advantage in its sector.
In fact, the company is working on a massive expansion of its 92,000 square foot operation. Back in April of 2018, Aurora announced that it would be expanding its facility by adding a 1.1 million square foot greenhouse.
While most cannabis producers in Canada have a strong focus on the recreational sector, Aurora Cannabis seems to be taking a different approach. The company is focused primarily on the medical side of the cannabis sector. While the medical side of the sector offers a smaller overall revenue opportunity, the company’s leadership and larger margins than seen in recreational cannabis make this a strong choice.
All in all, Aurora Cannabis seems to have made the right moves at the right times to date and continues to do just that. As such, if you’re interested in the cannabis sector, this is one to watch.
First Foods Group Inc: Moving Into CBD With A Bang
First Foods Group is a relatively small company, but they are entering the market with a big bang. The company is focused on the production of cannabis-infused chocolates, offering luxury products for both the CBD and the THC markets.
Following along the same playbook that Veritas Farms has followed, the company has its sights set on the big-box store market. In my view, this is a crucial move. After all, big-box stores will only carry generally trusted products. As such, those that make their way into the big-box space early have the strongest potential to become industry leaders in the long run.
The allure of the company’s products among big-box retailers is simple. First Foods Group only uses the highest quality materials in the production of their chocolates. As such, it offers one of very few luxury brands in the CBD and THC markets.
It seems as though this focus on a luxury product is paying off. In fact, the company recently announced that it completed its first relatively large order. Moreover, it is expecting more orders to come in throughout the third quarter.
All in all, while First Foods Group is a relatively small player, it is making some of the biggest early moves that we’ve seen across the CBD market. So, this is a stock that’s well worth paying attention to.
The takeaway here is a simple one. At the moment, the cannabis and CBD industry is an emerging one, offering the opportunity for those that make big moves early to become leaders in the long run. In my view, the stocks mentioned above have the most potential to produce significant growth ahead.
The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.
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