The Action Keeps Heating Up for CBD Stocks: Three Ways to Play It

Mouss Kleindler - July 18, 2019

Recent analysis suggests that we are starting to see more mainstream adoption of CBD by US domestic consumers. That is once again ratcheting up the volume in the space as far as analyst projections for overall growth. Naturally, investors want to be a part of the fastest growing segments in the market. Hence, the current clamor to find the best setups in the CBD industry.

Three of the most interesting stocks in the space right now, as we see it, include: Canopy Growth Corp (NYSE:CGC), Tech Central Inc. (OTCMKTS:TCHC), and Cronos Group Inc (NASDAQ:CRON).

 

Canopy Growth Corp (NYSE:CGC) engages in growing, possession, and sale of medical cannabis in Canada. Its products include dried flowers, oils and concentrates, softgel capsules, and hemps. 

It has also become a leader in the CBD market.

According to its own materials, the company offers its products under the Tweed, Black Label, Spectrum Cannabis, DNA Genetics, Leafs By Snoop, Bedrocan Canada, CraftGrow, and Foria brand names. It also offers its products through Tweed Main Street, a single online platform that enables registered patients to purchase medicinal cannabis from various producers across various brands.

In the company’s words, “Canopy Growth is a world-leading diversified cannabis and hemp company, offering distinct brands and curated cannabis varieties in dried, oil and Softgel capsule forms. From product and process innovation to market execution, Canopy Growth is driven by a passion for leadership and a commitment to building a world-class cannabis company one product, site and country at a time.”

This is also one of the most geographically diversified players in the cannabis space, with operations in 12 countries across five continents.

And there has been plenty of PR work here. The Company is proudly dedicated to educating healthcare practitioners, conducting robust clinical research, and furthering the public’s understanding of cannabis, and through its partly owned subsidiary, Canopy Health Innovations, has devoted millions of dollars toward cutting edge, commercializable research and IP development. Through partly owned subsidiary Canopy Rivers Corporation, the Company is providing resources and investment to new market entrants and building a portfolio of stable investments in the sector.

One of its most important divestitures and strategic interests is Canopy Rivers Inc., a unique investment and operating platform structured to pursue investment opportunities in the emerging global cannabis sector. The company works collaboratively with Canopy Growth to identify strategic counterparties seeking financial and/or operating support. 

The company has developed an investment ecosystem of complementary cannabis operating companies that represent various segments of the value chain across the emerging cannabis sector. As the portfolio continues to develop, constituents will be provided with opportunities to work with Canopy Growth and collaborate among themselves, which the company believes will maximize value for its shareholders and foster an environment of innovation, synergy and value creation for the entire ecosystem.

 

Tech Central Inc. (OTCMKTS:TCHC) engages in online video and photography content development and distribution businesses. 

The company is also involved in Website and mobile app technology integration design and development activities. Its content services include video shoots, photography, photo shoots, video and photography editing, voiceover, and Ad copywriting. The company was incorporated in 2014 and is based in Temecula, California.

But perhaps more importantly, the company is moving into the CBD space with a new CBD Affiliate Marketing app that could cause a major stir.

The affiliate marketing space has become a dominant online and mobile avenue for product awareness and sales, now accounting, for example, for more than 40% of Amazon’s $100 billion in annual sales. The affiliate marketing space is expected to grow to nearly $7 billion in total size in coming years, and over 80% of online sellers now make use of the strategy for at least some portion of sales. 

Affiliate marketing is an online commission advertisement/marketing process where affiliates get a piece of the revenue pie by turning up leads that actually result in sales. Businesses involved in e-commerce have become highly dependent on affiliate marketing because it gets results and the overhead is managed on a performance basis. 

At this point, the strategy has become so popular that, on average, affiliate marketing generates over 20% of all online sales, according to thebrandonagency.com.

The company just announced the launch of its white label division as part of its Better Mind CBD business. According to the release, Tech Central recently announced the launch of Better Mind CBD starting with a high end CBD line using proprietary formulas for Sleep, Anxiety, Inflammation and Stress. The company is now adding a white label division for customers that desire their own brand. White label clients can select existing hemp oil products from our catalog, or develop custom formulas with a formulator. Once the customer finalizes their formulas we have a design team that will work with them every step of the way to create a compliant label to represent their brand.

Shares of the stock are trading at key support with plenty of upside potential ahead as the crowd gradually starts to notice this new issue in the market competing as a player in the tech side of the CBD marketplace.

 

Cronos Group Inc (NASDAQ:CRON) casts itself as an investment firm in the biopharmaceutical space, with a strong emphasis on medical marijuana and cannabis-related research and products. In short, the company seeks to invest in other companies, either licensed or actively seeking a license, to produce medical marijuana pursuant to Canada’s Marijuana for Medical Purposes Regulations (MMPR).

The firm typically invests in companies based in Canada. The firm is primarily an equity investor, may also advance debt as appropriate. It seeks to make minority investments with appropriate governance and shareholder rights. The firm seeks board representation consistent with the size of the investment but does not need control.

Cronos Group Inc. was incorporated in January 2013 and is based in Toronto, Canada with an additional office in in Toronto, Canada.

According to company materials, “Cronos Group is a globally diversified and vertically integrated cannabis company with a presence across four continents. The Company operates two wholly-owned Canadian licensed producers regulated under Health Canada’s Access to Cannabis for Medical Purposes Regulations:  Peace Naturals Project Inc., which was the first non-incumbent medical cannabis license granted by Health Canada, and Original BC Ltd., which is based in the Okanagan Valley, British Columbia. The Company has multiple international production and distribution platforms including in Germany, Poland, Israel and Australia.  The Company intends to continue to rapidly expand its global footprint as it focuses on building an international iconic brand portfolio and develop disruptive intellectual property. Cronos Group is committed to building industry leading companies that transform the perception of cannabis and responsibly elevate the consumer experience.”

CRON shares have been relatively flat over the past month of action, with very little net movement during that period. 

Cronos Group Inc (NASDAQ:CRON) generated sales of $23.4M, according to information released in the company’s most recent quarterly financial report. That adds up to a sequential quarter-over-quarter growth rate of 551.4% on the top line. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($2.4B against $0).

 

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