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5 U.S. Cannabis Stocks You Need To Know

Apr 19, 2018 • 11:30 AM GMT+0000
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7 MIN READ  •  By Michael Berger
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Cannabis stocks levered to the United States market have been trending higher following a major show of support from President Donald Trump.

This development was a watershed moment for the domestic cannabis industry and stocks have been in rally mode. President Trump’s show of support has led to a significant increase in trading volume and we are favorable on this trend.

Today, we have highlighted 5 companies that are levered to the United States cannabis market and believe that investors need to keep an eye on these.

MPX: Acquires a Canadian Licensed Producer

MPX Bioceuticals (MPX.CN) (MPXEF) is one of the few companies levered to the marijuana market in both the United States and Canada and we favorable on this leverage. The company is capitalizing on the booming Nevada recreational marijuana market as well as the medical marijuana markets in Arizona and in Maryland.

MPX is in the middle of a major growth cycle and the company’s fundamentals continue to improve. The company has a strong presence in Arizona and the wholesale business currently supplies over 40 dispensaries in the state. MPX also has a significant presence in Nevada and we are bullish on their position within this market.

Yesterday, MPX signed a letter of intent to acquire 100% of Canveda, a Licensed Producer under Health Canada’s ACMPR. Canveda operates in Peterborough, Ontario from a fully built-out facility that is ready for its first production run and can produce approx. 1,000-1,200 kilograms of cannabis flower a year.

MPX will acquire Canveda for $18 million ($3 million cash and $15 million stock at $0.70 per share). MPX also issued 6 million warrants ($0.84 for 5 years). Closing of the transaction is subject only to customary conditions.

During the last week, shares of MPX have been breaking out and the shares are trading at overbought levels. We remain bullish on the long-term outlook and continue to see upside to current levels. We are favorable on the leverage to some of the most exciting markets in North America and view MPX as a long-term opportunity.

CROP: A Cannabis Real Estate Stock to Watch

One company that we believe is flying under the radar is CROP Infrastructure Corp. (CROP.CN) CROP is focused on the North American cannabis opportunity and in particular the Washington state market

CROP is in the early innings of a major growth cycle and is focused on some of the most attractive growth markets. The company plans to pursue opportunities throughout North America and is just getting started. CROP operates an attractive business model which is focused on leasing real estate, providing branding and equipment as well as its expertise in exchange for  30% of the property management and licensing fees.

Last month, CROP issued an update on the WashingtonGreenhouse project and the market responded favorably to this update. The shares have come off their highs following this announcement and we believe this has created a great opportunity for new investors.

The Washington state project will be completed in phases and construction on the first 12 purpose-built light supplemented greenhouses encompassing a planned total area of ~44,000 square feet is almost complete. The first 6 greenhouses are currently under construction with completion anticipated shortly. CROP will shortly begin Phase 2 construction of the next group of 6 greenhouses planned for the property, bringing another 22,000 square feet of canopy online. Completion of the greenhouses as planned will bring the project’s expected annual tenant production capacity to approximately 24,000 pounds of cannabis product.

CROP represents an undervalued opportunity and we think the market cap significantly under appreciates the company’s growth potential. This creates an exciting opportunity and one that we are going to keep a close eye on. If you look at companies focused on the real estate side of the cannabis industry, you will notice that CROP is significantly undervalued. This is a stock investors need to watch.

iAnthus: Continues to Increase Market Share Across the U.S.

Over the last year, iAnthus Capital Holdings (IAN.CN) (ITHUF) has been nothing short of an execution story and has been increasing market share in the United States. The holding company has significantly advanced its fundamental story and is levered to some of the most exciting marijuana markets in the United States.

Yesterday, iAnthus announced a milestone and completed the acquisition of the remaining 20% of Pilgrim Rock Management, the affiliated management and services company affliated with Mayflower Medicinals. Under the agreement, iAnthus acquired the remaining ownership interest for 1,655,734 common shares.

Mayflower, a non-profit Massachusetts corporation affiliated with Pilgrim Rock, has received two provisional licenses to operate registered marijuana dispensaries in Massachusetts, with a third application pending. iAnthus further provided the following updates regarding Mayflower’s operational progress:

  • Mayflower’s 36,000 sq. ft. cultivation facility is fully operational, and the first extraction cycle was completed last week
  • Mayflower’s first harvest will shortly move to the drying and curing rooms. The first harvest, as a pilot, utilized a subset of the facility’s total grow space. Mayflower will quickly move to optimize the full capacity of the facility in subsequent harvests
  • The flagship Harvard Avenue dispensary is now completed and staffed. Pending final regulatory approval, Mayflower expects to open to medical patients in early May

iAnthus has been a major beneficiary of the recent comments from President Donald Trump and the shares have rallied well off its recent lows. Momentum has been trending higher and the shares are trading at overbought levels after the recent rally. This move higher has taken place on strong volume and we are favorable on the long-term outlook. Investors need to keep an eye on this one.

Plus Products: An Elite California Edibles Opportunity  

Plus Products (Private) is a company we are very excited about. Over the last year, the edibles manufacturer and distributor has significantly increased its market share in California and it’s fundamentals continue to improve.

Plus is going to be a major beneficiary of the burgeoning legal marijuana market in California and has seen amazing demand for its gummy products. The edibles manufacturer is laser focused on increasing production capacity and has secured a new state-of-the-art facility to accomplish this initiative. We are favorable on this move as the company will be able to fund this project with the proceeds from a recent offering.

When it comes to investing in cannabis businesses, it all starts with the management team and Plus is led by a team that has a proven track record of success. The company has made a few strategic additions to its board of directors and we believe this positions the edibles manufacturer to succeed.

Cannabis investors have been actively looking for high-quality cannabis investments levered to California and we think Plus Products represents one of the most exciting opportunities. With an initial public offering set to take place in 2018, this is a company that cannabis investors need to keep an eye on.

High Hampton: A California Cannabis Stock

One stock we have been monitoring closely is High Hampton (CSE: HC) (HHPHF) due to the leverage to the burgeoning California cannabis market. The company is poised to benefit from improving regulations in the United States and is focused on becoming a leading distributor of cannabis products.

We are favorable on High Hampton as it benefits from a multi-faceted growth strategy. The company is increasing market share in California through a variety of strategic initiatives and offers an attractive platform since its integrated vertical supply chain improves margins by lowering the cost of goods sold and operating costs of brands and operators.

High Hampton owns a 10.8 acre property in Coachella, California and is pursuing Conditional Use Permits (CUP) for cultivation and manufacturing. The California cannabis company acquired the strategic property for less than $2 million and if it is granted a CUP, the property value will significantly increase. We are favorable on the company’s opportunity to be granted a license as High Hampton has engaged strategic partners to ensure that the buildout is executed flawlessly. 

High Hampton represents an underappreciated and attractive opportunity for investors as the issuance of a CUP would be a major catalyst for the shares. We are bullish on the company’s growth strategy and its focus on the California cannabis market. We will monitor how well High Hampton continues to execute and investors need to keep an eye on this one.

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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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