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5 U.S. Cannabis Stocks To Watch in 2019

Jan 25, 2019 • 11:52 AM EST
US Cannabis.png
8 MIN READ  •  By Michael Berger
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The United States cannabis industry is one of the most exciting growth opportunities available for investors and we have been closely monitoring this burgeoning market. During the last year, the industry has recorded significant growth and the companies levered to this market have benefited from this growth.

2018 was a banner year for the United States cannabis industry and we expect 2019 to be even more significant. Today, we have highlighted five companies that have been capitalizing on this burgeoning opportunity and that are well positioned for growth from here.

Liberty Health Sciences: An Undervalued Execution Story

Liberty Health Sciences (LHS.CN) (LHSIF) is one of the most underappreciated growth opportunities and this is a company that investors should be watching. Liberty Health has significant catalysts for growth and is in the middle of a major expansion in Florida. The company is also capitalizing on the Ohio medical cannabis market.

The Florida medical marijuana market represents a massive opportunity, Liberty Health is athorized to open up to 30 dispensaries in the state. Currently, the company operates seven dispensaries and six delivery hubs and expects to open another seven dispensaries by the end of February.

In late 2018, Liberty Health opened several new dispensary locations and we expect fundamentals to significantly improve over the course of 2019. The company operates a state-of-the-art cultivation facility in central Florida that is in the middle of a major expansion. Once construction is complete, Liberty Health will be Florida’s largest cannabis producer and this is an important aspect of the story. The company will have the capacity to support its dispensary locations in Florida and we are bullish on the growth prospects going forward.

In December, negative reports were issued on Aphria (APHA.TO) (APHA) and this put considerable pressure on the company. Since the weakness was not based on fundamentals this created a opportunity for investors to look at a high-quality cannabis company with massive growth potential. When compared to its peers, Liberty Health is trading at a significant discount and this is an opportunity that investors should be watching.

Plus Products: A Leading Cannabis Edibles Company

Plus Products (PLUS.CN) is a leading cannabis edibles manufacturer in California that has been executing flawlessly on a major expansion. Demand for smokeless cannabis products continues to increase and Plus Products has been a beneficiary of this trend. The company’s products are carried by leading dispensary chains across California and by delivery service companies such as Eaze.

During the last year, Plus Products has significantly advanced its fundamental story and has become one of the top edible brands in California, according to data from BDS Analytics. From increasing production capacity to acquiring leading edible brands, the company has been focused on important growth initiatives and we are bullish on this aspect of the story. Plus Products has been laser focused on growth and this is an opportunity that investors should be watching.

Last month, Plus Products completed an all-stock acquisition of California-based cannabis-infused baked goods brand GOOD CO-OP, Inc. This was a significant development and we expect this acquisition to prove to be accretive in the first half of 2019. The acquisition represents a strategic entry into the third largest edibles category, baked goods, after having achieved the top spot in the edible’s category with only four full-time offerings. The acquisition also adds an additional 4,800 square feet of manufacturing space and associated equipment in Southern California, augmenting its existing 12,000 square foot manufacturing facility.

Over the next year, we expect to see Plus Products build upon its leading position in California and will monitor how the team executes from here. The company is led by a management team with a proven track record of success and this is a key part of the story. When it comes to investing in cannabis companies, it all starts with the management team and this is an area where Plus Products excels. We are favorable on the company’s leverage to the California cannabis market and believe that this is an opportunity worth watching. 

1933 Industries: A Leading West Coast Cannabis Company

Las Vegas has become a major destination for cannabis companies and this is a trend that we have been closely watching. With more than 40 million tourists visiting Las Vegas on an annual basis, the cannabis market has been thriving and companies levered to this opportunity have been benefiting.

1933 Industries (TGIF.CN) (TGIFF) was one of the first companies to start capitalizing on the Las Vegas cannabis market and has been expanding into new markets. Last year, the company experienced strong growth and this was fueled by increasing demand for its cannabis products in Nevada, California and Colorado. We are favorable on the leverage to these burgeoning cannabis markets and expect to see the company build on its success from last year.

1933 Industries has an attractive operating structure and is comprised of three subsidiaries which are focused on the production of cannabis through Alternative Medicine Association (AMA), the production and sale of industrial hemp-based and CBD infused products through Infused MFG., and security and intelligence through Spire Global Strategy.

The company is in the middle of a major expansion and construction on its 67,750 sq. ft. cannabis cultivation facility. 1933 Industries recently purchased 2.78 acres located next to the cultivation facility, bringing the total land package to 4.17 acres. The company has received all of the necessary permitting such that the new cultivation facility should be operational during the first quarter of 2019.

During the last year, 1933 Industries has been nothing short of an execution story and has several catalysts for growth. The company trades at a valuation that is very attractive, especially when compared to its peers, and we are favorable on the growth prospects going forward. 1933 Industries is well capitalized and is led by a management team that is focused on creating value for its shareholders.

Halo Labs: An Expansion Story Worth Watching

In 2018, one of the most exciting trends was the increasing demand for cannabis oil products and we expect this trend to be even more significant this year. Demand for cannabis oil has been increasing rapidly as demand for smokeless cannabis products has been surging higher. The trend toward smokeless products have been significant and demand has been increasing, especially with the older demographic and this is something that we have been monitoring.

Halo Labs (NEO:HALO) (AGEFF) is a company that has been capitalizing on the cannabis oil market and we have been monitoring this opportunity. In 2016, the company was established and was initially focused on the Oregon cannabis market. Since inception, Halo Labs has produced over 3 million grams of oils and concentrates in Oregon and has become a leader in the market. During the last year, Halo Labs has been in the middle of a major expansion and has expanded into Nevada and California.

In October, Halo Labs announced a multi-million cannabis oil distribution agreement with Falcon International Corp. and we are bullish on the growth prospects of this relationship. Under the agreement, Halo will supply at least 50,000 grams and up to 70,000 grams of bulk cannabis distillate at $7.50 per gram. This relationship will add approx. $1.6 million to $2.2 million in revenue on a monthly basis and has an initial term of six-months (and extends indefinitely on rolling six-month terms). This is a significant relationship and we are favorable on the leverage to the California market.

The Nevada market represents a significant opportunity for cannabis businesses and we are favorable on the growth prospects going forward. In August, Halo’s facility in Nevada became operational and has been generating strong revenues. The company launched three of its leading brands which are available at 12 dispensary locations across the state as well as a private label brand for Cannacopia. Halo has been laser focused on execution and its Nevada manufacturing and sales operations have steadily ramped higher, with the company having enough inventory to increase sales up to $1 million per month.

Halo Labs has significant growth prospects, an attractive valuation, and a proven track record of success. We are monitoring the United States cannabis oil company and this is an opportunity worth watching.

Curaleaf: A United States Execution Story

Curaleaf (CSE: CURA) (OTC: CURLF) is a leading United States cannabis company that investors should be watching. With a presence in 13 states, the company has significant reach and has incredible growth prospects. Curaleaf has the largest footprint of branded retail stores in the United States and has been laser focused on entering and capitalizing on strategic cannabis markets. Currently, the company is levered to Arizona, California, Connecticut, Florida, Maine, Maryland, Massachusetts, Nevada, New Jersey, New York, Ohio, Oregon, and Pennsylvania.

When compared to other multi-state-operators, Curaleaf represents a differentiated opportunity as it plans to consolidate synergistic assets under its widely recognized existing consumer brand. Curaleaf is focused on creating a national brand and we are favorable on its ability to accomplish this. The company is led by a management team with a proven track record of success and this is an important aspect of the story. Curaleaf offers cannabis consumers and patients access to a product line that is comprised of high-quality products and we are favorable on such product offerings.

During the last year, Curaleaf has been able to replicate its success in new cannabis markets. This is significant and not something that is easy to accomplish. Curaleaf has made significant investments in its operations and is in the middle of a major expansion. Through organic and inorganic growth initiatives, Curaleaf will continue to expand its footprint in the United States and we expect to see the company announce strategic acquisitions in the near future. 

The United States cannabis industry is one of the most significant growth opportunities and Curaleaf is positioned to be one of the greatest beneficiaries of this phenomenon. Over the next year, we expect the company’s fundamentals to improve significantly and this is an attractive aspect of the story. Curaleaf has been nothing short of an execution story and has significant catalysts for growth. This is a company to watch.

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Authored By

Michael Berger

Michael Berger is Managing Partner of StoneBridge Partners, LLC and Founder of Technical420.com. Prior to entering the cannabis industry, Michael was an Equity Research Analyst at Raymond James Financial covering the Energy Sector. Michael has been featured in publications such as The Street, Bloomberg, US Money News, and hosts various cannabis events across North America.

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