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Investing in the North American marijuana stocks boom


So you want to buy into the North American cannabis boom via marijuana stocks? The sudden expansion in the number of companies that have entered this market in both the US and Canada is remarkable, with many of them now listed. But which to watch?

With legalisation of marijuana consumption by Canadian adults scheduled for next month (17 October no less), more adventurous investors in Europe may want to take a closer look at the burgeoning American and Canadian cannabis industry.

According to a report from Hexa Research, the US medical cannabis market alone is expected to grow from $5.44 billion to reach $19.48 billion by 2024. The market is growing rapidly, owing to the rising demand for medical cannabis, which is now legal in 39 states, and is creating an enthusiasm for marijuana stocks.

Medical cannabis is now used in the treatment of various maladies, such as cancer, arthritis, epilepsy, nausea, pain Alzheimer’s disease, anorexia and multiple sclerosis, while the chronic pain segment dominated the market in 2016.

Another report from Technavio has indicated that the global cannabis-infused edible products market is expected to grow at a CAGR of over 25% between 2018 and 2022. Growing social acceptance of cannabis is considered the main factor that drives the market growth.

Fancy a drink of cannabis?

Koios Beverage Corp. is listed on the Canadian Stock Exchange under CSE: KBEV. Yesterday the company announced that it has the world’s first cannabis infused nootropic beverage which is scheduled for release in November. The new product will be a collaboration with the company’s partner Keef Brands, a division of CanCore Concepts, and Koios’ wholly owned subsidiary Cannavated Beverage Corp. Cannavated was formed specifically to license nootropic formulas to other companies working in the area of cannabis-infused beverages.

Koios Beverage was trading at 15 cents in the OTC market at the end of August but had tripled that within three weeks. The stock has since come off slightly, and is currently trading at 54 cents per share.

Keef Brands will manufacture, market and sell a line of beverages that are not only infused with THC, but also contain the nootropic supplements from the Koios line of brain enhancing functional beverages. The resulting product will be the first in the world to combine cannabis infusion with nootropic supplements that enhance the consumer’s mental acuity.

Keef Brands says it has the exclusive rights to the Cannavated nootropic formula for Colorado (a hotbed of legitimate cannabis growing), with the option of expanding the licensing agreement throughout the United States., provided it complies with all rules and regulations in the markets where cannabis has been made legal.

Keef Brands, through its network of licensed manufacturing partners, is among the world’s largest producers and distributors of cannabis beverages, and is the leading producer in Colorado by volume, where both companies are located.

“We first announced this joint development project in early September, and we’re very pleased to be able to announce this ground-breaking cannabis beverage will be available in Colorado in November,” said Koios Chief Executive Officer Chris Miller. “This is also the first product we are releasing through our partnership with Keef Brands.”

Gross profits from sales will be split evenly between Cannavated and Keef Brands. The non-carbonated cannabis beverage will be high in cannabidiol – better known as CBD – but will also contain THC, which is the psychoactive ingredient in the cannabis plant.

Cannavated was formed as a separate company that licenses its proprietary nootropic formulations to companies that independently research and produce cannabis-infused beverages. Initial distribution of the new cannabis beverage will be limited to the State of Colorado but will expand to other jurisdictions in the US once the two companies can be assured production will meet demand.

Strictly for medicinal use

The Supreme Cannabis Company is a Canadian publicly traded company that provides premium brands and products  and could well be poised for further growth as uptake of medical cannabis products in Canada continues. The firm’s management recently announced that its wholly-owned subsidiary, 7ACRES, has entered into a supply agreement to provide dried cannabis to Tilray Canada, a subsidiary of Tilray, itself a global leader in cannabis research, cultivation, processing and distribution currently serving tens of thousands of patients in 11 countries spanning five continents.

Supreme Cannabis shares popped from 98 cents in mid-August, to hit a peak of $1.75 at the end of August. It is still trading close to that high, at $1.73 at the time of writing.

The value of this initial supply agreement is estimated to be in excess of C$ 2 million. Dried cannabis provided to Tilray by 7ACRES will be used primarily to support medical cannabis patients in Canada, including Tilray’s own patient population.

Meanwhile, south of the border, Cannabis Sativa is engaged in the licensing of cannabis-related intellectual property, marketing and branding for cannabis-based products and services, the operation of cannabis-related technology services, and ancillary business activities. Cannabis Sativa’s subsidiary PrestoDoctor recently announced that it is currently providing online medical marijuana recommendations to Pennsylvania residents via its online recommendation platform.

“Easier access to alternative care is the driving mission at Presto Doctor, and has made PrestoDoctor the number one rated online medical marijuana recommendation platform,” explains Chief Executive Officer Kyle Powers.

Cannabis Sativa stock had a good run from around 15 August when it was trading at around $1.96, peaking at $8.11 on 11 September, which is quite a pump by anyone’s measure! Sadly the stock has come off some since then, and is currently trading at $5.17, which illustrates clearly some of the phenomenal volatility in this sector.

Back in Canada, Organigram Holdings is a TSX Venture Exchange listed company whose wholly owned subsidiary, Organigram Inc., is a licensed producer of medical marijuana in Canada. Recently, the company and Canopy Growth Corporation announced that following Organigram’s approval as a cannabis supplier in the province of Newfoundland and Labrador, the companies have signed a two-year supply and distribution agreement. Organigram will become a key supplier of branded, finished cannabis products to Canopy Growth’s Tweed-branded retail operations in Newfoundland and Labrador once adult recreational cannabis is legalized in Canada.

Canopy Growth will also perform a B2B sales function for Organigram by marketing its portfolio to other licensed retail outlets in Newfoundland and Labrador. Currently, Organigram also has supply agreements and memorandums of understanding with the provinces of New Brunswick, Nova Scotia, Prince Edward Island, Alberta, Manitoba and Ontario.

Organigram stock has been testing the $5 mark for the last six months: it blew well north of that in September as investor enthusiasm for small cap cannabis stocks soared. It is still trading over $5, although you could have had this stock for marginally more than $3 in July. Be aware that it has come off some and there has been some heavy selling in recent days. In the last week Organigram shares have slipped from $5.80 to $5.20.

We expect that the number of listed companies operating in this sector will only increase, with fast growing opportunities in marijuana stocks on both US and Canadian exchanges. Be advised however that many of these marijuana stocks are high risk ventures and not necessarily very liquid and should be considered in the same risk bracket as AIM stocks. On top of that you will be shouldering some currency risk if you are a sterling-based investor, but with the way the pound is flying at the moment, the risk is all on this side of the Atlantic!

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This article does not constitute investment advice. Do your own research or consult a professional advisor.

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