Beyond the Bong
CannTrust Uplists Today to NYSE Under CTST
Life after professional football can be notoriously tough.
Some studies say nearly 80% of NFL players are broke within a handful of years of retiring.
But even though the NFL still views cannabis as a banned substance, a growing number of former players are looking to the industry for the next phase of their lives.
Take former Detroit Lions wide receiver Calvin “Megatron” Johnson. In December, he applied to grow, process and sell medical marijuana in Webberville, Michigan.
At first, he was denied because of some unpaid traffic tickets. But he’s since paid those and received preapproval.
Heisman Trophy winner and former NFL running back Ricky Williams – who was suspended multiple times as a player for pot use – launched his own line of cannabis products last year.
And even the great Hall of Famer Joe Montana is part of a $75 million investment in California pot operator Caliva.
We knew that Congress passing the 2018 Farm Bill would be huge for hemp.
But the reality is that industrial hemp growing was already exploding.
Last year, U.S. farmers grew 78,000 acres of hemp. That was a 200% increase over the 26,000 acres cultivated in 2017. Which itself was a 160% increase over the amount grown in 2016.
Montana and Colorado combined cultivated more than half of the U.S. hemp output, producing roughly 22,000 acres apiece last year…
So even before the most recent farm bill cleared Congress, farmers were ramping up production at a monstrous rate. That’s because sales of CBD (cannabidiol) and hemp products have been growing by at least double digits for the past several years.
Now, for 2019, forecasts are for U.S. industrial hemp to continue to skyrocket. Projections are for a 62% increase to 125,000 acres.
And that’s because CBD and hemp are in high demand from consumers.
Speaking of which, CBD and hemp are prominent in today’s “Making the Grade” feature.
Making the Grade
This week, we’re focusing on margins.
As we showed last week, pot stock revenue is exploding higher. That’s fantastic. But as investors, we also want to see profits. And we want to see nice, fat gross margins.
Gross margins are revenue minus the cost of goods sold, divided by total revenue. This is expressed as a percentage and lets us know how much of each dollar a company makes it gets to keep.
Cannabis is a high-margin industry, like coffee or top-shelf cocktails at a bar.
Pot generally costs less than $2 per gram to produce. But it sells for upward of $5 per gram. Of course, if it’s turned into a concentrate, extract or oil, the margins are even higher.
This week, my team and I pulled the top 10 cannabis stocks ranked by gross margin…
These are pretty impressive.
I mean, this is just the top 10, and they’re all above 73%.
Emerald Health Therapeutics (OTC: EMHTF) ranks at the top. And it’s above 100% because of some other operating income being added in.
Then we have infused beverage company Phivida Holdings (OTC: PHVAF), followed by Canadian nanocaps Beleave (OTC: BLEVF) and RavenQuest BioMed (OTC: RVVQF).
Further down the line, there’s Medicine Man Technologies (OTC: MDCL) and CBD producer CV Sciences (OTC: CVSI).
These are the type of gross margins most companies can only dream of.
Top 5 Pot Stocks to Watch
1) CannTrust Holdings (OTC: CNTTF): This is one of my favorite oils and extracts stocks. Its 450,000-square-foot Niagara Perpetual Harvest Facility is one of the best and sports one of the lowest costs per gram in the industry. And the company was named “Top Licensed Producer” in Canada last year.
Shares have already been on a tear in 2019, practically doubling so far.
But the ride might not be over yet. CannTrust shares started trading today on the New York Stock Exchange under the ticker symbol “CTST.” It joins Aphria (NYSE: APHA), Aurora Cannabis (NYSE: ACB), Canopy Growth Corp. (NYSE: CGC), Cronos Group (Nasdaq: CRON), Tilray (Nasdaq: TLRY) and our No. 2 Pot Stock to Watch (below) as cannabis companies uplist to major U.S. exchanges.
CannTrust was also one of our top 10 cannabis companies in terms of trailing 12-month revenue last week. And it has gross margins of more than 70%. There’s a lot to like, especially with the Canadian edibles market on the horizon in October.
2) Village Farms International (Nasdaq: VFF): Village Farms began trading on the Nasdaq last Thursday.
This is another company I’ve enjoyed talking about over the past few years. It’s the largest greenhouse operator in North America, with 10.5 million square feet of grow space. And it has a joint venture with Emerald Health Therapeutics for the 1 million-square-foot Pure Sunfarms facility.
Like Innovative Industrial Properties (NYSE: IIPR), Village Farms finds itself a winner as more states legalize cannabis and as legislation like the 2018 Farm Bill gets passed.
3) Choom Holdings (OTC: CHOOF): Choom couldn’t do anything wrong in early 2018. Shares went on a tear, topping $1 in June. The company is trying to establish a number of dispensaries in Canada. This is a dandy idea (keeping margins in mind) as dispensaries average $974 in revenue per square foot. That’s more than Whole Foods averages.
I think it will try to become Canada’s version of MedMen Enterprises (OTC: MMNFF).
Choom has 50 retail applications in process, and Aurora Cannabis has invested $27 million in the company. It also just signed a letter of intent with one of the winners of the Ontario dispensary location lottery.
At the moment, though, the company doesn’t have any revenue. But it’s worth keeping an eye on once dispensaries begin opening.
4) Liht Cannabis (OTC: LIHTF): This one was mentioned last week in the comments, so I thought I’d cover it. It has licenses in California and Nevada. But it’s jumping in on the CBD boom. Liht recently launched PureCloud 9, a collection of six organic hemp seed oil-based skin and wellness products. These range in price from $25 to $32.
It also received its second “organic” certification from Certified Kind. The USDA doesn’t allow cannabis or cannabis products to technically be certified organic (as it’s illegal at the federal level). So the industry created its own standards.
It’s very small and has no financials at the moment. But it’s focusing on an “organic” approach, and CBD is a promising start.
5) Tilray (Nasdaq: TLRY): Like Choom, Tilray was a cannabis darling of 2018. Unfortunately, it has since struggled. But it’s looking to turn a corner. This past week, the company unveiled its largest acquisition yet: the $317 million purchase of Manitoba Harvest.
Manitoba Harvest is the world’s largest hemp food producer. And Tilray plans to use these assets to launch its own line of CBD-derived products in the U.S. by this summer.
Tilray reports quarterly results on March 18. And everyone is going to be listening in. We’re looking for revenue this year to jump 281% to $156.35 million.
Now, the broader markets are up double digits so far this year. But pot stocks have smoked those gains.
The Horizons Marijuana Life Sciences ETF (OTC: HMLSF) is up more than 50%. Though most of our Top 5 Pot Stocks to Watch have done even better so far…
Investors are in risk-on mode.
The broader markets are booming because of this.
Pot stocks continue to soar even higher, minting big paydays for investors.
If you have a pot stock in mind that you’d like me to discuss here, leave the ticker symbol in the comments section.
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