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Playing for Keeps in Hemp and CBD Stocks (ACB, GTEH, CVSI, SKDI, CURLF)

The idea of the Hemp and CBD sector as a value play is probably not something momentum investors in the space ever wanted to read about. If that’s you, we apologize. The surge of speculation in 2018 and early 2019 loaded these stocks up with late-to-the-party money that eventually turned its tail and ran as 2019 soured into glut conditions for hemp and CBD and then crashed into cautionary statements from the FDA on the space.

It was remarkable to watch, but hardly unprecedented. In fact, one might say it’s the same old story we always come across in commodity markets:

Too much excitement creates vulnerability because it leads to too much investment in both shares and production. Inevitably, in the aftermath of that type of peak, the supply of the commodity and the supply of shares for sale eventually drown the market simultaneously, creating big problems for investors.

But the flip side of that coin is just as important: too much pessimism and selling creates a lack of investment in both shares and production. Inevitably, both the equity in producers and the commodity itself become woefully underpriced relative to the long-term trend in demand.

Which brings us to where we are now. Hemp and CBD stocks have been hollowed out, many companies in the space have shuttered their doors forever, and what’s left represents a group of survivors ready to climb back up the mountain in a marketplace still expected to grow by leaps and bounds for years to come. That means these stocks may be some of the most interesting investment opportunities in the market right now.

In other words, investors would be wise to start putting together a shopping list of the most undervalued and potentially promising Hemp and CBD stocks in the market. To that end, here are some promising candidates to consider: Aurora Cannabis Inc (NYSE:ACB), GenTech Holdings, Inc. (OTCMKTS:GTEH), CV Sciences Inc (OTCMKTS:CVSI), Sun Kissed Industries Inc. (OTCMKTS:SKDI), and Curaleaf Holdings Inc (OTCMKTS:CURLF).

 

Aurora Cannabis Inc (NYSE:ACB) has been whittled down to the bone over the past year, and just announced that the company’s CEO is stepping down and cost-cutting and more board oversight are set to dominate priorities. But there remain clear signs that CBD will continue to be a major priority for the company, suggesting that a recovery in the hemp and CBD space will drive interest to the stock.

The evidence we would point out is the company’s strategic moves over the past 30 months, which include a series of investments in CBD and hemp operations.

For example, in 2017, the company invested in Hempco, a Vancouver-based maker of hemp-based foods, hemp fiber, and hemp nutraceuticals. Hempco also supplied Aurora with raw hemp for extracting CBD. ACB bought the rest of Hempco three months later.

The company next acquired Agropro, Europe’s largest producer, processor, and supplier of certified organic hemp and hemp products. At the same time, Aurora acquired Agropro’s sister company Borela, which processes and distributes organic hulled hemp seeds, hemp seed protein, hemp flour, and hemp seed oil.

Just after that, in late 2018, Aurora acquired ICC Labs, which claims leadership in the South American hemp CBD market, with a large-scale extraction facility that can process 150,000 kg of CBD feed annually.

That’s three big M&A moves in the past 30 months with one clear goal: to capture major market share in the CBD space. It also shows that the company is prepared for a global expansion in the space over the long-term.

That said, succession will be a big issue that dominates the narrative here. 

 

GenTech Holdings, Inc. (OTCMKTS:GTEH) is a very different prospect. Where Aurora is a monster looking to streamline and likely to buy its way into new markets, GenTech is a small upstart ready to grow organically in a very specific niche: premium and CBD-infused coffee subscription package sales.

According to its recent release, “The Company is nearing the launch of its highly anticipated premium and CBD-infused coffee subscription product offering, “Secret Javas”, which includes a Nespresso-compatible capsule version. 

This is a big because we are talking about a large and rapidly growing market. Sales in food and beverages ecommerce in the US market is expected to reach $15bn by 2021, rising from just $9bn in 2016. Inside of that, Payments News reports that the approximate revenue from those who subscribe to products using the Amazon platform, rose from $2.9bn in 2014 to 11bn in 2018 with a significant proportion of these purchases in the grocery and gourmet food section. That’s a 260% increase over this period. 

Pair that up with the 125% CAGR expected from CBD over the next half decade, and you have an easy story to sell to new investors as the juice comes back into the hemp and CBD stock space.

GenTech Holdings, Inc. (OTCMKTS:GTEH) is also working to get more shareholder friendly now that it has gotten through the brunt of its development stage operations and is ready to start commercializing. The company just announced it is about to cut authorized shares, retire debt, and eliminate conversion risk for noted due 1-2 years out.

David Lovatt, CEO of GenTech, summed it up nicely: “We are riding a wave of extraordinary momentum on the operational side right now, and we have a number of extremely powerful catalysts set to roll out over coming weeks. But our first task is to reinforce to the market our total commitment to generating long-term shareholder value in a credible and robust way.”

 

CV Sciences Inc (OTCMKTS:CVSI) is a market leader in the CBD space in terms of brand recognition and distribution footprint. 

The company just announced that it was the first-ever CBD sponsor of the Farmers Insurance Open in late January. According to the release, “CV Sciences is the official CBD Partner of the Farmers Insurance Open as well as the Presenting Sponsor at the tournament. CV Sciences will be hosting a booth at The Grove, adjacent to the 18th Hole of the South Course at Torrey Pines. Tournament attendees will be able to sample PlusCBD™ Oil products, learn more about the potential benefits of hemp-derived CBD, and have the chance to win PlusCBD™ Oil products and exclusive CV Sciences gear.”

That type of exposure helps to continue to develop this brand. And being recognizable in the CBD space is crucial both for consumers and for investors. As the space heats back up, this stock will likely be quickly swept up in the tide.

CV Sciences Inc (OTCMKTS:CVSI) operates two distinct business segments: a drug development division focused on developing and commercializing novel therapeutics utilizing synthetic CBD; and, a consumer product division focused on manufacturing, marketing and selling plant-based CBD products to a range of market sectors.

The company also engages in the development, manufacture, marketing, and sale of consumer products containing plant-based CBD under the PlusCBD Oil name in various market sectors, including nutraceutical, beauty care, specialty foods, and vape.

 

Sun Kissed Industries Inc. (OTCMKTS:SKDI) is yet another take on the CBD marketplace. Sun Kissed just gobbled up a leading high-end CBD-based products developer and supplier, Hakuna, based in California.

Hakuna is a revenue-generating player with over 110 established retail distribution partners across over 20 states in the domestic US market. The company also has a line of premium products including CBD coffee, CBD tea, CBD Drink Drops, CBD Gummies, and CBD Flower product markets. 

Hakuna is currently nominated for “Best Hemp-Derived CBD Product” by the California Cannabis Awards after winning the DOPE Magazine Best New Product award for Southern California in the non-cannabis/non-tech category in 2017.

As of very recently, all of that is now under the ticker SKDI.

Hence, as the market starts to drool over CBD stocks again, you can bet Sun Kissed Industries Inc. (OTCMKTS:SKDI) is going to be roaring right out in front. 

 

Curaleaf Holdings Inc (OTCMKTS:CURLF) is another primarily cannabis name to make clear moves toward the CBD space. It has made significant moves into the space over the past 18 months, opening a number of new dispensaries for its cannabis products to open up markets, and then expanding vertically inside of that footprint to include a selection of CBD products for its patrons.

Recent expansion has focused on Florida with a new location in the Sarasota area.

In addition, Curaleaf Holdings Inc (OTCMKTS:CURLF) just announced that it closed the transformational acquisition of Select on February 1.

According to the related release, “With the completion of the acquisition, Curaleaf solidifies its stance as the largest cannabis operator in the U.S. in terms of operational and wholesale footprint, including 53 open dispensaries, and positions the Company well for its next phase of growth. Curaleaf’s acquisition of Cura Partners, Inc., owners of the Select brand, includes Select’s manufacturing, distribution, marketing and sales operations marketed under the Select brand name, including all intellectual property.”

Overall, Curaleaf, Inc. operates 51 dispensaries, 12 cultivation sites and 9 processing sites with a focus on highly populated, limited license states, including Florida, Massachusetts, New Jersey and New York. Curaleaf, Inc. leverages its extensive research and development capabilities to distribute cannabis products in multiple formats with the highest standard for safety, effectiveness, consistent quality and customer care. Curaleaf is committed to being the industry’s leading resource in education and advancement through research and advocacy. 

Curaleaf Inc.’s Florida operations were the first in the cannabis industry to receive the Safe Quality Food certification under the Global Food Safety Initiative, setting a new standard of excellence.

Published by Steve Hackney

Steve Hackney is a corporate finance professional with over 14 years of experience in cash management and investing. He earned a Bachelor of Science in Finance from Florida State University and holds a Certified Treasury Professional certification. Steve lives in Orlando, Florida with his family.

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