CODI: Acquisitions and Dividends

08/13/2015 9:00 am EST

Focus: STOCKS

Michael Berger

President & Founder, Technical420.com

The surge in the number of publicly traded cannabis companies has made it difficult for investors to focus on legitimate investments, so Michael Berger, of Technical420.com, highlights one that presents investors the opportunity to invest in a company levered to the industrial hemp industry and in one that also offers a dividend.

Although cannabis is one of the fastest growing industries in the United States, there is not much reliable information available as to credible investment opportunities. There are over 300 publicly traded cannabis companies and more than 95% of them trade on the over-the-counter (OTC) exchange. The OTC exchange, also known as the Pink Sheets, is comprised of startups, defunct public shell companies, scams, and a few companies that have long-term potential.

The surge in the number of publicly traded cannabis companies has made it difficult for investors to focus on legitimate investments in the industry. One of these is a NYSE-traded holding company, Compass Diversified Holdings (CODI). CODI presents investors the opportunity to invest in a company levered to the industrial hemp industry and also offers a dividend.

Hemp Can Change the World

Since growing hemp has been illegal for almost a full century, researchers have been unable to learn all of the benefits associated with it. Currently, 23 states have an active hemp industry or have authorized hemp research. Hemp is a distinct variety of the cannabis plant but it is not the same substance as marijuana. Although hemp is commonly associated with marijuana, it should not be.

Industrial hemp and marijuana are two completely different plants, inside and out. Hemp contains a very small amount (less than 1%) of tetrahydrocannabinol (THC), the primary psychoactive ingredient in marijuana (the chemical that gets a user high).

The benefits associated with hemp are endless. A number of products which are used by people every day can be created from hemp. These include paper, clothing, building materials, fuel, and nutrition.

What Does Compass Diversified Holdings Do?

Compass Diversified Holdings owns and manages a diverse family of established North American middle market businesses. In July, CODI finalized the acquisition of Fresh Hemp Foods Ltd., for $132.5 million (CAD) and sold its CamelBak Products, LLC subsidiary to Vista Outdoor, Inc. 

Fresh Hemp was founded in 1998 in Winnipeg, Canada and operates under the name Manitoba Harvest. The company produces and sells its products online and through retail stores in North America. Manitoba offers hemp hearts, heart bites, protein powders, oils, and food starter packs.

Manitoba’s products are currently carried in approximately 7,000 retail stores across the United States and Canada. During the fiscal year that ended on November 30, 2014, the company generated $37.9 million (CAD) in revenue, which represents a 23.9% increase on a year-over-year basis. Manitoba has continued to see significant revenue growth during the first half of its current fiscal year and they generated $27.6 million of revenue during this time.

CODI offers investors an 8.8% dividend yield or $1.44 in cash distributions per year. The company’s dividend has grown consistently over the years and its financial stability is secure, especially after the sale of its CamelBak subsidiary.

Michael Berger, Founder and President, Technical420.com

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