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3 Undervalued U.S. Cannabis Plays With Plenty Of Upside

May 3, 2019 • 11:26 AM GMT+0000
8 MIN READ  •  By Anthony Varrell
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One of the reasons why the cannabis industry is so exciting for investors is due to how quickly the industry is evolving and how rapidly the companies are growing.

During the last year, the United States (US) cannabis industry has taken center stage and has become the hottest potential growth opportunity for investors. This is a trend that we have been closely following and we have been monitoring the opportunities that are levered to this burgeoning cannabis market.

The landscape of the North American cannabis industry has changed, and this is one of the most important trends to be watching. If you compare the size of the cannabis market in the US to Canada, the trend over the last year is significant as the US market is growing much faster. When you compare these two markets at the company level, the difference is vast and this is something that investors need to be aware of.

Going forward, we expect the US cannabis market to significantly outpace the Canadian market and this will shake up the overall industry. Although the average valuation of a US cannabis company has significantly increased over the last year, these companies are still trading at a significant discount to the average valuation of a Canadian cannabis company.

The international cannabis opportunity is currently the best way for Canadian cannabis companies to compete with US cannabis companies when it comes to generating the most revenue. We have been bullish on the international cannabis opportunity, especially when it comes to the European Union (EU). With a population that is north of 600 million, the EU is significantly larger than the US and we are favorable on Canadian cannabis companies that are levered to this emerging market.

Currently, the European cannabis market is in its infancy and we expect the international opportunity to become much more significant after 2020. These countries have been slow to adopt medical cannabis regulations and cannabidiol (CBD) is currently the most significant opportunity for companies.

As United States cannabis companies continue to grow, we expect the valuation disparity to change and this will create some of the most significant opportunities for investors. Today, we have highlighted 3 United States cannabis companies that have been recording significant revenue growth and these are opportunities to be watching.

1933 Industries is a Burgeoning US Cannabis Company

During the last year, we have seen a significant increase in amount of investor interest in United States cannabis companies and several of these companies have multi-billion-dollar valuations. Although we find these companies to be attractive, we believe that the easy money has been made and want to highlight a company that has been flying under the radar.

The company, 1933 Industries (TGIF.CN) (TGIFF), has been in the middle of a major expansion and has been capitalizing on the Las Vegas cannabis market. One of the reasons we are excited about this opportunity is due to the focus on developing leading in-house cannabis brands. We are favorable on the focus on creating leading brands and believe that this will prove to be a major growth driver for the company.

When it comes to generating awareness at the consumer level, 1933 has been an all-star and has secured several strategic relationships with world renowned celebrities like Tony Hawk. The company was one of the few selected to include a product in the Gilt Bag and we found this to be a testament to the quality of its CBD products. 1933 has also formed a strategic partnership with a leading mixed martial arts (MMA) gym and we are favorable on the focus on extreme sports.

During the last year, 1933 has reported significant growth and we are impressed with the stronger fundamentals. Over the next year, we expect to see the company build upon its success and believe that this opportunity has been flying under the radar. When compared to a Canadian company with similar revenues, 1933 is trading at a considerable discount and we believe that this disconnect will be transitory. The company has significant growth prospects and this is an opportunity to be watching.

Halo Labs Generates $10+ Million (CAD) in the First Quarter

Cannabis oil has been one of the most attractive verticals of the cannabis industry and we have been bullish on this opportunity for several years. Halo Labs (HALO: NEO) (AGEEF: OTC) is a US cannabis oil company that we have been highlighting and hope that you have been following this emerging opportunity.

In late 2018, we started covering Halo Labs after we met with the management team and have been impressed with how the company’s fundamental story has advanced since then. When we started following Halo Labs, the business was only focused on the cannabis oil opportunity in Oregon. A lot has changed since then, as the company has expanded into California and Nevada.

We are bullish on the cannabis oil opportunity in these markets and this expansion has proven to be a major growth driver for the company. So far this year, Halo Labs has been generating significant traction in these new markets and has been reporting record revenue numbers on a month-over-month basis.

During the first quarter of 2019, Halo Labs has generated approx. $7.8 million ($10.2 million CAD) in revenue. The company has been benefiting from its leverage to the California and Nevada cannabis markets and we are favorable on the growth prospects going forward. When compared to its peers, Halo Labs has an attractive valuation and this is an opportunity to be watching. Over the next year, we expect the company’s valuation disparity to change and this is something that we are monitoring. If you look at the recent performance of Halo Labs, it is easy to understand that this is a company that is on the move and we will keep an eye on this one.

Plus Products is a Leading US Brand in the Making

Demand for cannabis infused products continues to increase and this is a trend that we expect to continue. There is a global trend that is going away from smoking and we have seen a massive increase in the amount of demand for vaporizers or e-cigarettes. We are seeing a similar trend in the cannabis industry, where fewer consumers are smoking and more are consuming edibles or using a vaporizer.

We have been ahead of the curve with the smokeless product opportunity and have been laser focused on this market. Last year, we highlighted Plus Products (PLUS.CN) (PLPRF) after discovering the company’s products at a California dispensary. Plus Products has been capitalizing on the California cannabis opportunity and is the most popular edible in the state. This is a massive achievement and we are favorable on the success that it has had in this market.

When we look at Plus Products, we see a company that has the ability to expand into every medical and recreational cannabis market in the US. Plus Products was successful in creating the most popular edible brand in one of the most competitive cannabis markets. Last year, the company acquired GOOD CO-OP and plans to release new products later this year.

Plus Products is focused on increasing the number of products available to consumers and we are bullish on this. During the last year, the company has recorded massive revenue growth by only selling gummies. Once Plus Products launches new products, the distribution and demand are already in place and we expect this to be a catalyst for the business.

One of the reasons we are favorable on Plus Products is due to the types of investors it has attracted. The cannabis edible company has attracted some of the smartest money in the cannabis sector and this is a testament to the strength of the business. Plus Products is a company that has been nothing short of an execution story and has significant catalysts for growth.

 

 

 

 

Pursuant to an agreement between StoneBridge Partners LLC and PLUS Products Inc. we have been hired for a period of 180 days beginning March 21, 2019 and ending September 21, 2019 to publicly disseminate information about (PLUS) including on the Website and other media including Facebook and Twitter. We are being paid $5,000 per month (CASH) per month for services rendered. We own 106,000 shares of (PLUS), which we purchased in via private placement. We may buy or sell additional shares of (PLUS) in the open market at any time, including before, during or after the Website and Information, provide public dissemination of favorable Information. On November 1st 2018 StoneBridge Partners LLC sold 50,000 restricted shares of (PLUS) to a private investor via a direct sale.

Pursuant to an agreement between StoneBridge Partners LLC and 1933 Industries we have been hired for a period of 180 days beginning January 9 , 2019 and ending July 9, 2019 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.

Pursuant to an agreement between StoneBridge Partners LLC and Halo Labs we have been hired for a period of 180 days beginning September 4, 2018 and ending March 4, 2019 to publicly disseminate information about (HALO) including on the Website and other media including Facebook and Twitter. We are being paid $6,750 per month for a period of 6 months. We own zero shares of (HALO), which we purchased in the open market. We plan to sell the “ZERO” shares of (HALO) 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 (HALO) in the open market at any time, including before, during or after the Website and Information, provide public dissemination of favorable Information.

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Authored By

Anthony Varrell

Anthony Varrell is Managing Director of StoneBridge Partners LLC. SBP continues to drive market awareness for leading firms in the cannabis industry throughout the U.S. and abroad.

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