The best traders know how to find stocks that investors will seek out on pullbacks. And the best investors know what stocks to seek out on pullbacks. Hence, differentiating between the two groups is a Keynesian Beauty Contest kind of process.
Understanding how that contest works is about figuring out which trends are capable of delivering on deep value out-of-favor moments due to long-term secular growth themes that will stand the test of future history.
From that perspective, one group that deserves attention right now is the cannabis space.
The defining trend of legislative change is the operative idea. As more and more states move to legalize marijuana, both medically and recreationally, we stand to see fuel under stocks involved in pick-and-shovel goods and services, retailing, and cultivation in the space.
Another cue is how well the cannabis marketplace fared through the pandemic. In fact, while many industries suffered, legal cannabis sales soared by over 50% last year. Analysts now see the global cannabis market surpassing $70 billion in annual sales in less than a decade.
But throwing a dart at a list of pot stocks won’t get the job done for either traders or investors. With that in mind, we have sorted out a list of some of the most interesting opportunities in the space according to our analysis and highlighted several below.
Sundial Growers Inc (NASDAQ:SNDL) has been on and off the relative strength leaderboards in the cannabis space over the past year, but has shown the capacity to get trading groups excited with commitment during several trends. That factor shouldn’t be overlooked in the analysis.
The company engages in the production and distribution of flower, pre-rolls and vapes. The firm offers licensed producer, ACMPR, cannabis, medical cannabis, health and wellness, and cannabis extracts.
Sundial Growers Inc (NASDAQ:SNDL) recently announced that it has launched Caviar Cones, its newest product innovation, under the award-winning Top Leaf brand. The Forbidden Lemon Caviar Cones will be the first caviar cone product to hit the Canadian market. This launch reinforces Sundial’s focused innovation pipeline around premium inhalables in the Canadian cannabis market.
“Top Leaf’s brand promise is to deliver top quality inhalable products to consumers in the premium cannabis segment,” said Andrew Stordeur, President and Chief Operating Officer at Sundial. “In order to compete in this preferred segment of the cannabis industry, product quality is absolutely vital. Top Leaf’s Caviar Cones is the first of many high quality, high THC and flavourful products developed to satisfy even the most experienced cannabis user.”
Even in light of this news, SNDL hasn’t really done much of anything over the past week, with shares logging no net movement over that period. Over the past month, shares of the stock have suffered from clear selling pressure, dropping by roughly -16%.
Sundial Growers Inc (NASDAQ:SNDL) managed to rope in revenues totaling $7.5M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of -48.9%, as compared to year-ago data in comparable terms. But the company’s strong balance sheet – with cash levels exceeding current liabilities ($838.5M against $63.8M) by a massive margin – creates the potential for rapid growth through strategic action ahead.
Cannabis Strategic Ventures (OTC US:NUGS) is an up-and-coming interesting story in the space given its growth rate and the small numbers still involved for the company that seems to have a path toward becoming a serious vertical “farm-to-sale” player in the California cannabis marketplace – which is the biggest market in the world right now for cannabis.
As discussed in the company’s release last week, NUGS entered into a material definitive agreement in 2019 for the transfer of four cannabis licenses issued by the City of Los Angeles and the State of California for the Retail Sale, Cultivation, Distribution, and Manufacturing of cannabis products. However, due to the Covid-19 pandemic, approval of the transfer of licenses was delayed until recently: On August 9, 2021, following prior approval by the State of California, the Company was notified that the City of Los Angeles approved the change of ownership applications resulting in final regulatory approval to transfer all four licenses to NUGS.
Cannabis Strategic Ventures (OTC US:NUGS) now builds on that story by announcing this morning that it has begun to deploy those licenses through two steps.
First, it is announcing the upcoming grand opening of its customer-facing cannabis dispensary brand, “MDRN Tree”, which will open its first Los Angeles location at sometime this fall.
Next, the company plans to deploy another of its new licenses for the establishment of an indoor cultivation facility with the capability of up to 1,200 grow lights, projected to produce 2-3 lbs. of premium exotic cannabis flower per light per harvest across an estimated 5.75 harvests per year, suggesting an upside potential for total production capacity of 15,000 lbs. of premium cannabis flower per year.
Cannabis Strategic Ventures (OTC US:NUGS) CEO Simon Yu commented, “After securing key licensing, we are wasting no time in deploying those assets to launch one of California’s top vertical cannabis models. MDRN Tree will be our factory retail store – our direct interface with our end-market community – where we plan on showcasing the cannabis flower produced at our NUGS Farm North cultivation site. This farm-to-sale model offers the potential to drive simultaneous gains in quality control and profitability, and I look forward to providing further updates as we make strides in this direction.”
Tilray Inc (NASDAQ:TLRY) has emerged as one of the biggest players in the space following its merger with Aphria, Inc. The combined entity has enormous potential to define aspects of the marketplace, though it has occasionally gotten a bit ahead of itself in valuation terms, leaving a trail of burned bag-holders over shorter time horizons. That said, for long-term-minded players, deep value opportunities in the stock could be very interesting.
According to its materials, the firm is focused on medical cannabis research, cultivation, processing, and distribution of cannabis products worldwide. Its products include dried cannabis and cannabis extracts. It operates through the following segments: Cannabis and Hemp. The Cannabis segment consists of adult-use, medical and bulk sales of cannabis under regulated licenses and sold to retail, wholesale, pharmacy, government, and direct to patient. The Hemp segment consist of hemp seed, hemp foods, board spectrum hemp extract containing CBD, which are sold in an unlicensed operation and sold to retail, wholesale and direct to consumers.
Tilray Inc (NASDAQ:TLRY) recently partnered with ROSE LifeScience Inc., a local Quebec cannabis player. According to a release from Rose, the news follows the recent industry-impacting business combination between Tilray and Aphria Inc, creating the world’s leading cannabis company. As a result, ROSE is now an official partner to the new entity, representing an array of recreational cannabis brands in Québec.
“Expanding new business in Québec is always exciting,” said ROSE LifeScience President and CEO Davide Zaffino, of the partnership which includes sale, supply, distribution, and marketing. “Québec is the third largest cannabis market in the country. Partnerships like this show us why.”
The stock has suffered a bit of late, with shares of TLRY taking a hit in recent action, down about -4% over the past week. Over the past month, shares of the stock have suffered from clear selling pressure, dropping by roughly -19%.
Tilray Inc (NASDAQ:TLRY) managed to rope in revenues totaling $48M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of -7.8%, as compared to year-ago data in comparable terms. In addition, the company has a strong balance sheet, with cash levels exceeding current liabilities ($416.4M against $284M).
Other core growth names in the cannabis patch include Aurora Cannabis Inc (NASDAQ:ACB), Canopy Growth Corp (NASDAQ:CGC), GrowGeneration Corp (NASDAQ:GRWG), Innovative Industrial Properties Inc (NYSE:IIPR), and Cronos Group Inc (NASDAQ:CRON).
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