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Canopy Growth: The Kingpin in Cannabis
10/09/2018 5:00 am EST
While at the Toronto MoneyShow recently, I listened in on a session devoted to cannabis stocks. Adult use of marijuana will become legal in Canada on Oct. 17, and investors are piling in, observes Mark Skousen, editor of Forecasts & Strategies.
So are the fraud peddlers, just as they played the cryptocurrencies in the past couple of years. One must be careful in playing this speculative market.
Cannabis stocks are moving up in anticipation of a gigantic legal market in Canada and eventually in the United States. Over 30 states have legalized medical marijuana use, and nine allow recreational use. More will follow.
Pot stocks recently took a tumble after the U.S. government announced that federal law still prohibits marijuana from being imported into the United States. But, public opinion is tipping, and at some point the federal law will change in favor of legalization.
According to Barclays, the cannabis market is large, with over $150 billion in sales. As marijuana becomes more legal to use, this market could grow even bigger. I’m not a fan of smoking marijuana for recreational use, but its use as a medicinal drug is much bigger than most people realize. Some consider it a “vice,” but for others it’s a miracle drug for alleviating pain.
The biggest publicly traded company is Canadian cannabis grower Canopy Growth Corporation (CGC), and I’ve recommended it twice to subscribers in the Fast Money Alert . The company recently began trading on the New York Stock Exchange, so it is now very easy to trade.
Canopy Growth is considered the kingpin of this industry and is expected to control 20% or more of market share in the medical and recreational marijuana market. It has the best-known brand in the country (Tweed), and has aggressively acquired other properties, such as Mettrum Health.
Plus, it is expanding rapidly into European markets. It has 2.4 million square feet of marijuana growing capacity under construction or in development in British Columbia, with the option of acquiring another 1.7 million square feet there for capacity expansion. As the Motley Fool states, “Canopy Growth’s bottom line should soon look a lot greener.”
Just last month, beverage giant Constellation Brands (STZ) entered into a $4 billion deal to increase its ownership stake from about 10% of Canopy to approximately 38%. I wouldn’t be surprised to see Altria (MO), Philip Morris International (PM) and other big tobacco companies jumping onboard soon.
Like almost all cannabis stocks, Canopy is growing fast, but still hasn’t reached profitability yet and does not pay a dividend. However, its outlook is positive. I consider it a speculative buy, but it may not be for conservative investors.
The worldwide cannabis market is in its earliest days - this MoneyShow Toronto panel will talk to some of the companies and individuals leading the Canadian sector - and by extension - the worldwide market. As the first G20 country to fully legalize adult-use recreational cannabis - Canada is on the forefront of cannabis cultivation, innovation and finance. Learn from companies and leaders driving the industry forward - and hear what they have to say about what the future holds for the sector and for the investing opportunities therein.
Recorded: Sept. 15, 2018.
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