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The Cannabis Christmas Shopping List
Submitted by Justin Hayek on November 29th, 2019As highlighted in my previous blog post here, I believe we could see a short term bottom in the cannabis sector near this year's tax-loss selling deadline of December 27th. With this investment thesis in mind and with the assistance of cannabis sector experts, I have carefully prepared a 'cannabis stocks shopping list'.
To avoid the bad companies and to narrow my shopping list to a select few companies that are deemed best in class operators, I have been talking to our cannabis analyst and a colleague who is a director of a dedicated cannabis hedge fund in Canada. Getting a sense for the best companies and therefore first choice as cannabis investments is important.
Taking it a step further, I pared down the list to well-financed issuers, that is companies with significant cash & cash equivalents giving them the ability to make it through this very challenging financing environment and lower probability of near-term shareholder dilution (financing risk).
My shopping list of cannabis companies is a mix of 9 Canadian and US businesses within various segments of the sector:
- well-funded, large scale, licensed producers in Canada
- an extractor
- a retailer (bricks & mortar locations)
- US & international vertically integrated operators (from seed to sale)
- and a US consumer packaged goods company (production, branding, marketing of final product)
The list has a 60-40 weighting between US and Canadian operators. By investing across a number of different issuers, segments and geographic regions we are reducing single security risk and selecting the incorrect segment.
The List
I won't be naming each company as I don't think it's appropriate nor do I want to suggest these names are suitable to you without having suitability of investment. However, by providing more information, my hope is that it helps you in understanding the opportunities that exist in the sector today and what I believe are the low hanging fruit.
* Note market cap, cash / market cap and YTD stock performance are all as of intraday December 9, 2019
Company #1 - Large, well-funded licensed cannabis producer & hemp company in Canada. Mainly selling business to business (wholesale). Secured supply agreements with 10 Canadian provinces. Own and operate a chain of cannabis retail stores across Canada.
Cash & Cash Equiv ($millions) | Cash as of date | Market Cap ($millions) | cash / market cap ratio | YTD stock performance |
2,736 | Sep-30 |
9,777 |
28% |
-32% |
Company #2 - A global cannabis & hemp derived CBD company. Growing, manufacturing, and marketing of cannabis products for medical & recreational market. Financial backing by big tobacco company.
Cash & Cash Equiv ($millions) | Cash as of date | Market Cap ($millions) | cash / market cap ratio | YTD stock performance |
1,992 | Sep-30 | 3,200 | 62% | -38% |
Company #3 - licensed producer of cannabis & cannabis derived products. Distribution agreements with all 10 provincial authorities. One of the lowest cost licensed producers in Canada.
Cash & Cash Equiv ($millions) | Cash as of date | Market Cap ($millions) | cash / market cap ratio | YTD stock performance |
48 | Aug-30 | 547 | 9% | -29% |
Company #4 - cannabis extraction business wtih operations in Canada & Australia. Two primary businesses: tolling services & wholesale.
Cash & Cash Equiv ($millions) | Cash as of date | Market Cap ($millions) | cash / market cap ratio | YTD stock performance |
72 | Nov-20 | 448 | 16% | +96% |
Company #5 - Operates and owns 33 licensed cannabis retail stores across Canada (AB, SK., MB, YK, ON). Received strategic investment from one of Canada's largest operators of convenience stores
Cash & Cash Equiv ($millions) | Cash as of date | Market Cap ($millions) | cash / market cap ratio | YTD stock performance |
30 | Aug-3 | 108 | 28% | -44% |
Company #6 - Multi-state operator owns, manufactures, and distributes a portfolio of cannabis consumer packaged goods brands. Executed definitive acquisition agreements for 13 manufacturing facilities, licenses for 96 retail locations and operations across 12 U.S. states.
Cash & Cash Equiv ($millions) | Cash as of date | Market Cap ($millions) | cash / market cap ratio | YTD stock performance |
156 | Jun-30 | 1,424 | 11% | 0% |
Company #7 - Vertically integrated seed to sale operation of medicinal cannabis in Florida with expansion into 3 other states planned. Controls 55% of Florida market with 35 stores across the state.
Cash & Cash Equiv ($millions) | Cash as of date | Market Cap ($millions) | cash / market cap ratio | YTD stock performance |
72 | Sep-30 | 627 | 11% | +60% |
Company #8 - Cannabis products manufacturer in California. Its products consist of cannabis-infused edibles, which the Company sells to both the regulated medicinal and recreational markets to over 300 licensed dispensaries in California.
Cash & Cash Equiv ($millions) | Cash as of date | Market Cap ($millions) | cash / market cap ratio | YTD stock performance |
30 | Nov-20 | 72 | 42% | -65% |
Company #9 - Vertically integrated multi-state operator in the US. Opertaing in 11 US states, 23 production facilities, 56 retail licenses and 22 owned dispensaries.
Cash & Cash Equiv ($millions) | Cash as of date | Market Cap ($millions) | cash / market cap ratio | YTD stock performance |
90 | Sep-30 | 531 | 17% | -27% |
As with any cannabis company, there is a high degree of risk involved. Please consult with Justin Hayek, investment advisor, before investing to ensure suitability and risk tolerances have been considered before you invest. If you want to connect with me and discuss these investment opportunities or others send me an email jhayek@pifinancialcorp.com or call me at 604-718-7576