After a slew of disappointing fourth-quarter earnings reports from Canada’s largest cannabis producers, it might seem like this industry has nothing to offer investors who are averse to taking huge risks. You’re nearly right, but there are at least two stocks in this space that appeal to more conservative investors who don’t buy companies while they’re losing money.
The latest results from Charlotte’s Web Holdings (NASDAQOTH:CWBHF) suggest it’s the first cannabis company to establish a recognized brand with real pricing power.
There aren’t many cannabis companies making money right now, and there’s only one that pays you to hold its shares. Innovative Industrial Properties (NYSE:IIPR) is a canna-business-focused real estate investment trust that pays regular dividends.
Both of these companies produce profits now, and there are good reasons to suspect they’ll steadily earn a lot more.
Charlotte’s Web Holdings: Early lead
This company’s name is derived from a cannabis strain that its founders created for a girl with uncontrollable seizures named Charlotte. After 60 Minutes showed America how well it worked for young Charlotte, requests for the proprietary strain started pouring in. Right now, Charlotte’s Web is the only nationally recognized brand of cannabis product, and the pricing power it’s displaying is just incredible.
The Charlotte’s Web strain hardly produces any THC, which is marijuana’s main psychoactive cannabinoid. Instead, it produces heaps of CBD and small quantities of various terpenes and other cannabinoids that all work together to heighten CBD’s therapeutic properties. You might not believe in the entourage effect, Charlotte’s customers and most cannabis consumers do. Charlotte’s Web doesn’t sell its seeds, which means patients can’t get the exact same thing from anyone else.
Exclusivity gives Charlotte’s Web pricing power, an exceedingly rare trait in the cannabis industry. It’s easy to find purified CBD isolate for less than $10 per gram, but customers don’t seem to mind paying around $100 for every gram of CBD oils and capsules from Charlotte’s Web. While most of the big cannabis producers reported significant losses, Charlotte’s operations squeezed out a $15.0 million profit with just $69.5 million in total sales last year.