2020 is right around the corner and many investors are trying to determine which companies are the best positioned to capitalize on the changing landscape of the cannabis industry.
The last few months have been rough on the cannabis sector with valuations having plummeted during this time. Although the trend has been to the downside, several companies have reported impressive growth so far this year and this is a trend that is expected to become more significant in 2020 and beyond.
During the last two months, several leading cannabis companies have reported impressive quarterly financial results and we were surprised by the negative response from the market. We are focused on companies that are executing on a path to profitability and want to highlight 11 businesses that we are following.
- ManifestSeven is California’s first omnichannel model for legal cannabis, servicing both business-to- business (B2B) and business-to-consumer (B2C) markets. The ancillary cannabis company is comprised of MDelivers, a leading California delivery service, MyJane, a curated subscription service for women, and 1-800-CANNABIS, the phone and online gateways for the retail experience. Over the next year, we expect to see M7 recognize significant value from these businesses and will monitor how the management team is able to further integrate and advance these assets. In the near future, M7 will complete a go-public transaction and commence trading on the Canadian Stock Exchange. The private company represents an advanced play on the California market that is generating substantial revenues and executing on a path to profitability.
- Aleafia Health (ALEF.TO) (ALEAF) represents an underappreciated Canadian cannabis producer that has substantial growth prospects. From a significantly larger medical cannabis patient base to emerging international markets, the company has been executing at a high level and we find the risk-reward profile to be compelling. Over the next year, we expect Aleafia Health to report ramping revenues and for the launching of cannabis derivative products, the growing patient base, and the entering into international markets to be the primary drivers. Aleafia Health has been laser focused on increasing production capacity and on that has been nothing short of an execution story. At current levels, the company is trading at a discount to its peers and we find this to be significant. Aleafia Health has a strong balance sheet and has fully funded its expansion. This leaves the business with visible growth prospects and we are bullish on this opportunity as we head into 2020.
- Fire and Flower (FAF.TO) represents an attractive way to play the Canadian cannabis retail market and we continue to closely follow the opportunity. During the last year, Fire & Flower has been executing on a strategy to increase the number of cannabis retail operations. The company has been driving this aspect of the story and we expect to see several additional outlets open over the coming months. Although the last few months have been significant for the business, the recent trend has been to the downside and we will monitor how the story continues to advance. We are favorable on the long-term growth prospects associated with the cannabis retail landscape and this is an opportunity to watch.
- Medicine Man Technologies (MDCL) has been highly focused on consolidating the Colorado cannabis market and we have been closely following this process. When looking at the acquisitions announced by the company, there is a lot to be excited about. Once Medicine Man secures the funding to complete these acquisitions, the growth prospects will become more visible and this is an opportunity we are excited about. We believe that Medicine Man will have to raise a substantial amount of capital and significantly dilute the stock to complete these acquisitions, but the payoff could be worth it. This is a story that we are excited about and one positioned to record strong growth.
- MediPharm Labs (LABS.TO) (MEDIF) was an early mover on the cannabis concentrate market in Canada and is an opportunity with substantial catalysts for growth. MediPharm has been nothing short of an execution story and has been securing strategic agreements with leading Canadian cannabis producers. In the most recent quarter, MediPharm reported substantial revenue growth and this is a trend that is expected to continue. In 2020, we expect the company to start recognizing increasing revenues from Australia and we are bullish on the international opportunity when it comes to MediPharm. During the last few months, the Canadian cannabis concentrate company has been under significant pressure and has traded lower with the market. With momentum pointing to the downside, it provides a great opportunity to look at a leading cannabis operation and we will continue to closely follow the story in 2020.
- Canopy Growth Corporation (WEED.TO) (CGC) recently appointed a new CEO and this represents an important development for the Canadian cannabis company. The company is well positioned to capitalize on Cannabis 2.0 in Canada and we expect this aspect of the story to prove to be a major growth driver in 2020 and beyond. Following the firing of Bruce Linton as CEO and Chairman, the company has been under pressure and has been trying to turn things around. The recently reported financial results showed a much larger net loss than expected and the market responded very negatively to this. A few week ago, Bank of America upgraded Canopy Growth to Buy from Hold and the broker-dealer is favorable on the growth prospects associated with its domestic and international operations. We expect Canopy Growth to be a strong performer in 2020 and this is an opportunity that we are watching.
- Cardiol Therapeutics Inc. (CRDL.TO) (CRTPF) is a leading player in the global CBD market and is an opportunity that is well positioned for growth in 2020. The company has been able to differentiate itself from the competition through the development of a proprietary nanotechology for drug formulation and delivery and through the formation of strategic partnerships with world renowned businesses such as Noramco, Inc. and Dalton Pharma Services. A few months ago, Cardiol completed the manufacturing scale-up for the commercialization of its CardiolRx™100 CBD formulation. When looking at the company’s near-term growth prospects, we are most excited about the launch of CardiolRx™ which is expected to be available in Canada in the near future. With the launch of CardiolRx™, a THC-free premium CBD product, Cardiol will be able to capitalize on the $1.2 billion CBD market (according to Prohibition Partners) and we believe that this opportunity is not fully appreciated by the street. 2020 is expected to be a banner year for Cardiol and this is an opportunity to be watching
- Sunniva (SNN.CN) (SNNVF) has been one of the hardest hit cannabis companies so far this year and there seems to be no end in sight. Following the resignation of the company’s president, the market lost its confidence in the operation and this does not come as a surprise. The company has been in shambles after it failed to spin off its Canadian assets and list its operations on the Nasdaq. Most recently, Sunniva tried to sell the Canadian assets for a fraction of its previous value in an effort to raise capital to focus on its California operations. The president’s resignation leaves us cautious with Sunniva and we will monitor how the operation advances from here.
- 1933 Industries (TGIF.CN) (TGIFF) is one of the most exciting growth opportunities in 2020 and we are bullish on the operation for a number of reasons. First, the company is in the middle of transitioning into a much larger facility that should increase production capacity by more than 5x when fully operational. Second, 1933 Industries is expanding into California and we are bullish on the strategy when it comes to executing on this market. Third, the number of stores carrying the company’s CBD product line continues to increase. Finally, we are favorable on the brands that fall under the 1933 umbrella and expect these brands to help drive growth on a going forward basis. During the last few months, the company has traded lower with the market and this is a growth story to be watching.
- Future Farm (FFT.CN) (FFRMF) is highly levered to the hemp opportunity in the US and we are impressed with how the management team continues to drive the story forward. In October, the hemp from the company’s Maine farm passed state-mandated testing for acceptable levels of THC. This was a major milestone for the business and are of the opinion that the market does not fully appreciate this development. We believe that the growth prospects associated with the harvest are significant and expect the company to generate significant revenues from it. In early August, Future Farm refined its strategy to focus resources on existing business operations that are expected to meaningfully increase revenue on a going-forward basis. Going forward, the company will be laser focused on selling the high-value cannabinoids that are extracted from its Maine farm to manufacturers of consumer CBD products. We are favorable on the refined strategy and expect to see Future Farm report ramping revenues and improving margins as a result of it. At current levels, we find the valuation to be compelling and expect Future Farm to report strong growth in 2020.
- Blueberries Medical (BBM.CN) (BBRRF) is one of the few companies to be executing on the cannabis opportunity in Colombia and this is a market that we have been closely following. The economics associated with cultivating cannabis in Colombia are very attractive (costs less than $0.10 per gram to produce) and this provides Blueberries Medical with a considerable competitive advantage. In 2020, we expect to see the company report ramping revenues and this is an opportunity that is flying under the radar. Blueberries Medical is led by a management team that has a proven track record of success and we believe that they have the business well positioned for growth.
Pursuant to an agreement between StoneBridge Partners LLC and Manifest7. (MSVN) we have been hired for a period of 180 days beginning August 1, 2019 and ending February 1, 2020 to publicly disseminate information about (MSVN) including on the Website and other media including Facebook and Twitter. We are being paid $10,000 per month for or were paid “ZERO” shares of unrestricted or restricted common shares. We own zero shares of (MSVN), which we purchased in the open market. We may buy or sell additional shares of (MSVN) in the open market at any time, including before, during or after the Website and Information, provide public dissemination of favorable Information.
Pursuant to an agreement between StoneBridge Partners LLC and Aleafia Health Inc. (ALEF) we have been hired for a period of 90 days beginning August 15, 2019 and ending November 15, 2019 to publicly disseminate information about (ALEF) including on the Website and other media including Facebook and Twitter. We are being paid $8,000 per month (ALEF) for or were paid “ZERO” shares of unrestricted or restricted common shares. We own zero shares of (ALEF), which we purchased in the open market. We plan to sell the “ZERO” shares of (ALEF) that we hold during the time the Website and/or Facebook and Twitter Information recommends that investors or visitors to the website purchase without further notice to you. We may buy or sell additional shares of (ALEF) in the open market at any time, including before, during or after the Website and Information, provide public dissemination of favorable Information.
Pursuant to an agreement between StoneBridge Partners LLC and 1933 Industries we have been hired for a period of 180 days beginning July 15, 2019 and ending January 15, 2020 to publicly disseminate information about (TGIF) including on the Website and other media including Facebook and Twitter. We are being paid $7,500 per month for a period of 6 months. We own zero shares of (TGIF), which we purchased in the open market. We plan to sell the “ZERO” shares of (TGIF) that we hold during the time the Website and/or Facebook and Twitter Information recommends that investors or visitors to the website purchase without further notice to you. We may buy or sell additional shares of (TGIF) in the open market at any time, including before, during or after the Website and Information, provide public dissemination of favorable Information.