Cannabis Stocks: Weekly Overview and Opportunity Report Part 1

The global economy is entering unchartered territory and several of the world’s most successful investors painted a gloomy picture of the United States economy and stock market at the Delivering Alpha conference yesterday.

Although these investors shared a common outlook and perspective, they overlooked a number of bright spots and opportunities within the economy and stock market, specifically in the cannabis industry.

Entering the First Inning of a Multi-Decade Growth Cycle

The state of the global economy has caused world-renowned investors and economists to expect a recession within the next year. At the same time, an increased amount of capital continues to enter the cannabis industry. This level of capital entering the industry is not only larger but smarter too; these investors and firms are long-term holders who see the bigger picture.

We believe the cannabis industry just entered the first inning of what will be a multi-decade growth cycle. The last time investors had this type of opportunity was during the tech boom which created countless millionaires.

Although the cannabis sector offers investors a lot of opportunity, it presents even more risk and one must be cautious before entering this market. We want to help investors focus on the top investment opportunities within the cannabis sector and have highlighted recent developments at companies that are attractive long-term investments in the paragraphs below.

Cannabis Company Developments

Kush Bottles (KSHB) reported one of the most significant developments in the cannabis industry earlier this week after Cowen and Company initiated coverage on the company with a Buy rating and a $3 price target . The analyst covering KSHB believes that the company offers unique exposure to the emerging cannabis industry.

Kush Bottles is the exclusive distributor of The Satchel, a premier child resistant cloth bag developed by American Cannabis Company (AMMJ). The company also offers several child resistant and non-child resistant exit bag solutions, all of which are fully customizable, allowing Kush Bottles’ customers the opportunity to creatively market and brand themselves. We find this aspect of its offering significant as companies compete to become a recognized brand among consumers.

• We are favorable on Kush Bottles’ focus on providing exit bag products that are in compliance with regulations. During August, we recommended KSHB at $1.36 and we remain favorable on the shares at current levels as we continue to view Kush Bottles as one of the top long-term investments in the cannabis industry.

GW Pharmaceuticals (GWPH) has fallen more than 10% from its highs since it reported that it was working with Morgan Stanley after other drug makers approached it to express interest in an acquisition.

Prior to the Morgan Stanley announcement, GWPH was trading in the low-to-mid-to-high $80s since early August. We remain very favorable on the shares and continue to monitor GWPH for a bottom as the market continues to doubt the acquisition rumors.

• We continue to remain favorable on GWPH and will add to our position on further weakness due to: 1) it being the only pure-play cannabis biotech investment opportunity, 2) its continued success with its Epidiolex product, 3) its deep pipeline of products that will provide GW with catalysts for years to come, and 4) it is trading below the average Wall Street price target.

Earlier this week, MassRoots (MSRT) announced that it entered into a strategic partnership with Headset, Inc., a leading business intelligence platform for cannabis-related businesses. The purpose of the partnership is to expand the functionality and utility of the MassRoots and Headset platforms.

Headset’s base-level intelligence dashboard and menu management software will integrate with MassRoots for Business. Headset’s standardized database of products and strains will also serve as a foundation for MassRoots’ product review system, which is scheduled to be released in October.

• We are excited about this partnership for a number of reasons, specifically the founders’ background and track record. Headset was founded by the founders of Leafly and we expect to see constant improvements and upgrades to the MassRoots platform as this relationship continues to develop and mature.

Yesterday, American Cannabis Company, Inc. (AMMJ) announced that it has generated more than $53,000 in revenue from SoHum Living Soils during the third quarter. SoHum is a proprietary growing solution that provides plants with the necessary nutrients to optimize the plant’s growth potential.

American Cannabis Company is led by a management team that continues to execute as the company has been awarded 13 licenses in 7 states. The company has built 560,000 square feet of cultivation space, produced 46 tons of SoHum Living Soil, sold 888,000 units of the Satchel, and has seen 98% growth over the last two years.

• We are favorable on American Cannabis Company because the company has a consulting business that continues to grow as it increases market share across the country. AMMJ supports its the growth of its consulting business through the sale of products like the Satchel and SoHum, which differs from other companies who support growth through the sale of stock and warrants.

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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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