During the last year, the cannabis industry has recorded massive growth and this is an opportunity to be watching. During this time, the United States cannabis market has become a major area of interest and we have seen significant consolidation in this space.
We believe that consolidation will be one of the most significant trends of 2019 and this is something that we are very excited about. When it comes to creating value, being acquired is one of the best outcomes for shareholders and we have been focused on identifying companies that represent attractive acquisition targets.
California has been one of the major areas of interest for companies that are making acquisitions and we are not surprised by this. California is the world’s largest cannabis market and we are favorable on the growth prospects associated with this market. An interesting statistic associated with this market is related to its size and how it has shrunk when you compare 2018 to 2017 (according to BDS analytics).
Although recreational cannabis became legal in California on January 1, 2018, there were several bottlenecks in the market that impacted growth. Going forward, we expect this market to record massive growth and have been focused on identifying companies that have been flying under the radar and have attractive leverage to this market.
High Hampton Holdings (HC.CN) (HHPHF) is a company that meets this criterion and we are favorable on its leverage to the California market. 2019 has already proven to be a banner year for the company and we are not even at the mid-point. High Hampton has several major potential catalysts for growth, and we believe that the market does not appreciate this.
An Emerging Opportunity
The California cannabis company is in the middle of a major transition and we believe that the market under-appreciates the growth prospects associated with this. We expect High Hampton’s refined strategy to enhance operations, to improve margins, and to increase cash flow. The new strategy will allow the company to fully execute on the brands and distribution assets that make up its investment portfolio and we find this to be significant.
Going forward, the name of the game for High Hampton is execution and we are favorable on the new leadership team in place. The revamped strategy will leverage the acquisitions that the company made in 2018 and will allow High Hampton to become one of the few truly vertically integrated companies in California.
The California cannabis market represents a multi-billion-dollar opportunity and we believe that High Hampton’s new strategy will result in it having a more significant piece of this market. This is an opportunity that we are excited about and believe that it is also attractive to companies that are looking to make an acquisition in this market.
One of the reasons we are favorable on High Hampton Holdings is due to its portfolio of cannabis brands.
High Hampton Holdings made several significant acquisitions during the last year and we have highlighted these transactions below:
- In late 2018, the company acquired 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. 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 entered the smokeless product market through the acquisition of HS Airway Holding, which owns the CALIGOLD Edibles brand. The edibles brand represent a significant asset and has several award-winning chocolate bars in dispensaries across California with other products ready to launch. This acquisition improves the company’s leverage to the California edibles market, and we believe that this is an attractive asset.
- Last year, High Hampton enhanced its California distribution network with the acquisition of 420 Realty. Earlier this year, 420 Realty received six California State cannabis licenses to operate at its facility and we are favorable on the growth prospects associated with this.
An Under-appreciated Growth Story
Although High Hampton has significantly advanced its fundamental story during the last year, the shares have been under pressure and have come well off its 2018 highs. We are favorable on the growth prospects going forward especially after the acquisition of Mojave Jane and the granting of six California State cannabis licenses to 420 Realty.
High Hampton reported several major milestones last year and has been laser-focused on the California cannabis market. The company has been enhancing its operations from a manufacturing and distribution standpoint and we are bullish on this. We expect the recent acquisitions to quickly prove to be accretive and will monitor how the team executes from here.
High Hampton has benefited from being able to use its stock as a currency and this is an important aspect of the story. Through inorganic and organic growth initiatives, the company has been able to enhance its story and we are favorable on its ability to grow without having to spend cash. High Hampton is in the early innings of a major growth cycle and this is something we are closely watching.
We are bullish on High Hampton’s leverage to the California cannabis market, the improved distribution, and its valuation. The company has massive growth potential and is trading at a valuation that is attractive when compared to its peers. The recent pullback has been significant, and this is a California cannabis company that we continue to monitor. To learn more about this burgeoning opportunity, please contact email@example.com
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