The best real estate deal on the planet. Could you profit thanks to it?
Back in 1972, Congress included a special provision in the Public Buildings Amendments – otherwise known as Public Law 92-313. This overlooked law forces federal agencies to pay rent for the buildings they occupy. And thanks to a smart investment strategy, private citizens could financially benefit from this situation.
The buzz and excitement around the budding legal cannabis space has been building for years and is finally starting to yield some results.
In mid-June, Canada became the second country in the world to legalize the sale and use of recreational marijuana. Legalization there will go into effect in October, and has spurred excitement from consumers and investors alike.
In the U.S., Oklahoma just became the 30th state in the nation to legalize medical marijuana. Nine of those 30 states have also approved the use of recreational weed.
Our neighbors to the south in Mexico legalized medical marijuana in June 2017. And in total, 30 countries have legalized the drug in some capacity.
It’s no wonder then why it’s expected that the legal cannabis industry will grow to be a $57 billion market by 2027.
Still, despite the world-wide growth of the legal cannabis industry, moving marijuana from an illicit drug to a legal one hasn’t been without its complications.
In the U.S. for one, while state after state legalizes the drug for either medical purposes or recreational use, and as support for medical marijuana legalization nationwide reaches 93% approval according to recent polls, cannabis remains illegal on the federal level.
And that’s not likely to change any time soon as the Trump administration has issued new U.S. Small Business Administration lending rules for businesses with direct integration with the marijuana industry making doing business increasingly difficult and as the Justice Department renews efforts to crackdown on the marijuana trade despite public support for it.
But despite such challenges, the marijuana market is quickly gaining steam across the globe and these four stocks are likely to overcome any bumps in the road.
Canopy Growth (NYSE: CGC)
The company is the top cannabis stock in Canada, which is currently the largest marijuana market in the world, and is the world’s largest publicly-traded pot stock by market cap.
In its most recently reported quarter, CGC reported a 107% increase in revenues over the same quarter a year ago. The company has $322 million in cash and minimal long-term debt at just $7 million.
Canopy Growth is poised to see incredible growth when legalization goes into effect in Canada in October. It already has supply agreements for recreational cannabis with multiple Canadian provinces and has already been ramping up production in anticipation of newly increased demand.
The company also entered a partnership with Constellation Brands (NYSE: STZ) late last year. The maker of Corona and Modela beers bought a 10% stake in CGC and together, the companies are expected to develop marijuana-infused beverages.
But the medical marijuana space is likely where Canopy will show the most growth in the coming years.
Canopy has subsidiaries and partnerships world-wide, including in countries such as Australia, Brazil, Chile, Denmark, Germany, and Spain.
The company’s CEO, Bruce Linton, recently said, “We’re a global medical cannabis company. When we talk about being in five continents, it’s five continents for medical cannabis. … The medical portion we speak of, over the next two and three years is as big, or much bigger than, the recreational portion.”
With its rapid growth and global footprint, CGC is a dominant player in the cannabis space. The stock is also somewhat less volatile than its peers, making it a good pick for investors wanting to get their feet wet in the marijuana space.
The company maintains a healthy balance sheet compared to most pot stocks. While Aurora has recently racked up debt amounting to roughly $160 million likely from its recent acquisition activity, this debt is offset by cash and equivalents of $223.6 million.
In the marijuana market, Aurora is a massive player and has grown through at least 14 acquisitions in the last two years as it seeks to “create a preeminent global cannabis company.”
One notable acquisition was its recent purchase of Ontario-based MedReleaf in a deal valued at $2.5 billion.
With MedReleaf’s peak annual production of 140,000 kilograms, Aurora’s combined annual production yield will be ramped up to an estimated 570,000 kilograms, rivaling the capacity of Canopy Growth.
Aurora also boasts extensive distribution channels in Canada and internationally, and has shown phenomenal growth rates. As demand for medical marijuana has exploded, the company has shown 200% year-over-year growth.
Auxly Cannabis (OTC: CBWTF)
Auxly Cannabis (OTC: CBWTF) operates the type of business investors are used to seeing in the commodities sector, gold and silver specifically.
Auxly is in the streaming business, meaning that it’s model isn’t centered on marijuana production, but rather offers operational and start-up capital to companies in the cannabis space. In return for the capital, the company receives a cut of production at reduced rates.
And its a smart business to be in when you consider that most financial institutions are apprehensive about working with marijuana-related businesses, especially in the U.S. where weed remains illegal on the federal level.
Considering this, cannabis companies in need of alternative financing look to Auxly.
While it’s a promising business model, Auxly has struggled this year and is currently down nearly -57% year-to-date. However, unlike Canopy Growth and Aurora, Auxly is low-hanging fruit that has not yet been plucked and, therefore, the decline in stock price may present a buying opportunity.
OrganiGram Holdings (OTC: OGRMF)
OrganiGram (OTC: OGRMF) is an under-the-radar grower that’s unique in the space as it has the numbers to back up its investment potential.
The company boasts incredible revenue growth, and has shown positive earnings in the last two quarters.
What sets it apart is that the company operates a single grow site, helping to centralize its costs and, thus, improve its margins.
OrganiGram already has supply agreements in place with four Canadian provinces ahead of legalization, and is expected to produce 113,000 kilograms per year when it reaches full capacity in the first half of 2020.
What’s also unique about OrganiGram is that, beyond dried weed, the company is focused on cannabis oil – a product that commands a higher price point than dried weed and comes with a better margin.
In its last quarter, OrganiGram sold 552,000 milliliters of its cannabis oil, a 297% increase from the same quarter in 2017.
OrganiGram’s focus on cannabis in both its dried and oil forms makes the stock an attractive option.