During the last year, we have seen a significant increase in the number of companies that are focused on the United States cannabis opportunity. This is a market that we have been closely following and believe that this is an opportunity that investors should be watching.
The United States cannabis market represents a significant but complex opportunity. The rules and regulations associated with this market vary on a state-by-state basis and the counties within these states tend to also have their own set of rules and regulations when it comes to the cannabis industry.
Once cannabis is legalized at the federal level, we expect to see significant changes when it comes to the United States cannabis industry and this is an opportunity that could prove to be profitable for the companies that are focused on this market. California is a cannabis market that we have been especially favorable on and this is a market we have been laser focused on.
One of the interesting aspects of the California market is that it was actually significantly smaller in 2018 than it was in 2017. According to BDS Analytics, there were 17% less legal sales of cannabis in 2018 in California when compared to the prior year. The California market was impacted by licensing challenges, regulatory changes, new testing laws, labeling and packaging requirements, and taxes.
High Hampton Holdings (HC.CN) (HHPHF) is a company that has been capitalizing on the California cannabis market and this is an opportunity that has been flying under the radar. During the last few months, the California cannabis company has been in the middle of a major transition and this is something that we have been excited about.
High Hampton has been Flying Under the Radar
One of the reasons why we are favorable on High Hampton is due to the number of catalysts for growth. We are also favorable on the California cannabis company due the recent developments as well as the continued execution, the attractive valuation following the recent decline, the management team and its focus on creating value for shareholders, and the leverage to the California cannabis market.
Earlier this year, High Hampton reported a significant development and announced an evolution of its strategy to properly align with the dynamic legal cannabis market in California. Based on the initial response from the market in regards to this new strategy, we believe this is an important initiative for the company and will monitor how the team executes on this opportunity.
The new vision takes a brand forward approach, whereby High Hampton will focus on four key strategy elements:
- Own and operate the processes that allow the company to manufacture, infuse, and package high quality, branded products for the recreational and medical markets.
- Own and operate the paths to market for branded products through its distribution capabilities in the state’s most lucrative markets in Northern and Southern California.
- Take advantage of the valuable data and insights collected through distribution to understand market needs and solve the needs through the introduction of new products and brands that will be produced by its California manufacturing businesses.
- Control its supply chain, starting with product-focused strains in its Los Angeles (Cudahy) nursery and continuing through the cultivation cycle.
2019 will be the Year of Execution for High Hampton
High Hampton represents a multi-faceted growth opportunity and we are bullish on the growth prospects associated with this new strategy. We expect this refined focus to enhance the company’s operations, increase margins, and take the company down the path of profitability. The California cannabis market represents a massive opportunity for High Hampton and we believe that this new strategy will result in the company having a more significant piece of this market.
Through a series of strategic acquisitions, High Hampton was able to significantly advance its fundamental story in 2018 and this year will be all about execution. The new strategy will leverage the acquisitions made in 2018 and will allow High Hampton to become one of the few truly vertically integrated companies in California.
High Hampton is in the middle of a major transition and we believe that the market underappreciates this. The new strategy leaves the company well positioned to fully execute on the brands and distribution assets that make up its investment portfolio. We find this to be significant and are favorable on the amount of value that can be created through this portfolio.
Breaking Down the Investment Portfolio
In late 2018, High Hampton completed the acquisition of Mojave Jane, a licensed manufacturer of premium cannabis extracts and concentrates for the California market. Mojave Jane provides the company with leverage to the smokeless cannabis product market, which we consider to be one of the most attractive verticals in the cannabis industry.
Mojave Jane is licensed for both volatile and non-volatile manufacturing and currently utilizes state-of-the-art CO2 extraction technologies and proven distillation techniques to create products for both the recreational and medical cannabis market. We believe that this acquisition will result in the addition of near-term revenue and will create countless synergies within High Hampton’s growing portfolio of California -based cannabis manufacturers and distributors.
In July 2018, High Hampton made its initial move into the smokeless product market and completed the acquisition of HS Airway Holding, a California company that owns the CALIGOLD Edibles brand. CALIGOLD represents a significant acquisition and adds a well-established and recognized edibles brand to the company’s portfolio of products. The edibles brands represents a significant growth opportunity and has 7 multi-strain flavored award-winning chocolate bars in dispensaries across California with other products ready to launch.
CALIGOLD is a well-known brand that enhances High Hampton’s product portfolio and we expect the CALIGOLD product line to generate significant traction through High Hampton’s distribution platform. This improves the company’s leverage to the California edibles market and believe that this is an attractive asset.
An Execution Story to be Watching
2019 has already proven to be a significant year for High Hampton and this is an opportunity that we are watching closely. The market has responded favorably to the recent developments and the shares have been trending higher. Although the recent rally has been significant, High Hampton is trading well off its 2018 highs and we find the valuation to be attractive (especially when compared to its peers).
Last week, Cresco Labs announced that it would be acquiring Origin House for more than $800 million and this was a major development for the California cannabis industry. This is a market that many of the larger United States cannabis companies have been focused on and we are favorable on the leverage that High Hampton has to this market.
During the last year, High Hampton has reported several major developments and this is an opportunity to be watching. These developments have the California cannabis company well positioned for growth and we are favorable on this. We believe that the market underappreciates the growth prospects associated with this emerging opportunity and this is an important aspect of the story.
To learn more about this emerging play on the United States market, please reach out to firstname.lastname@example.org
Pursuant to an agreement between StoneBridge Partners LLC and High Hampton Holdings Inc. we have been hired for a period of 360 days beginning June 1, 2018 and ending June 1, 2019 to publicly disseminate information about (HC) including on the Website and other media including Facebook and Twitter. We are being paid $6,000 per month for a period of 12 months. We own zero shares of (HC), which we purchased in the open market. We plan to sell the “ZERO” shares of (HC) 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 (HC) in the open market at any time, including before, during or after the Website and Information, provide public dissemination of favorable Information.