With the recent farm bill legalizing hemp production in the United States and even more states moving toward at least partial acceptance of marijuana, marijuana-related businesses are generating new interest among investors. Still, not all stocks in the industry are worth considering investing in, even if the industry ends up growing like the “weed” marijuana is frequently known as. We asked three of our contributors to pick marijuana businesses that are worth watching in the current environment, and they selected Origin House (NASDAQOTH:ORHOF), Canopy Growth (TSX:WEED) (NYSE:CGC), and Innovative Industrial Properties (NYSE:IIPR).
A kingmaker in California
Keith Speights (Origin House): Investment firm Beacon Securities thinks that distributors and retailers could be the “kingmakers” for cannabis brands. Assuming that view is correct (and I think it is), Origin House is in an excellent position to be the kingmaker in the biggest legal marijuana market in the U.S. (and in the world, for that matter): California.
Origin House ranks as the top distributor of cannabis products in California. There are several reasons why investors should watch this stock closely in January, starting with the company rolling out more of its own brands in 2019. Origin House plans to shift its revenue mix from 70% from distribution and 30% from selling its own brands to a 50-50 mix this year.
Another thing to watch with Origin House is growth in the California recreational marijuana market. This market got off to a slower-than-expected start in 2018 due primarily to cumbersome regulatory processes and too-high tax rates. However, expect more dispensaries to be licensed in 2019, which will work to Origin House’s benefit.
Origin House recently announced that it has taken steps to fend off potential hostile takeover bids after being “approached by several public cannabis companies contemplating stock-based offers to acquire” it. While the company clearly isn’t interested in selling out at a price tag that doesn’t value its prospects highly enough, investors will definitely want to keep their eyes open for potential deal making.
A billion-dollar opportunity
Todd Campbell (Canopy Growth): One stock worth watching this month is Canopy Growth, because Constellation Brands (NYSE:STZ) just told investors that Canopy Growth’s goal is a $1 billion sales run rate within the next 18 months.
Constellation Brands, which owns 38% of Canopy Growth, delivered that auspicious news during its earnings conference call this week, and there’s reason to think Canopy Growth can reach its target, even though its current sales pace is south of $100 million.