Long-Term Catalyst for the Canadian Marijuana Industry?

10/20/2015 9:08 am EST

Focus: STOCKS

Michael Berger

President & Founder, Technical420.com

The Canadian general election victory for Justin Trudeau and the Liberal Party is also a huge win for the Canadian marijuana industry, so Michael Berger, of Technical420.com, highlights a pair of companies poised for growth as a result.

With the Canadian general election over and new leader voted in, many people are wondering what is next. Justin Trudeau and the Liberal Party were underdogs at the beginning of the campaign but now he will form a majority government after capturing 184 of 338 seats.

The outcome of the campaign is a huge victory for the Canadian marijuana industry and it will serve as a catalyst for Canadian marijuana stocks. Justin Trudeau and the Liberal Party have said they will make marijuana legalization a priority.

Marijuana Stocks Rally

During the last week, Canopy Growth Corporation (CGC) has seen its share price run up 25% and we think shares still have room to run. CGC is the largest medical marijuana producer in Canada and they have been able to increase market share through organic and inorganic growth initiatives.

In late August, CGC completed the acquisition of Bedrocan Cannabis Corp. (BED). The acquisition successfully combined the two largest Canadian medical marijuana producers and created a conglomerate in the Canadian medical marijuana industry.

Less than a week later, they entered into an agreement to acquire MedCannAccess. Through this acquisition, CGC will be able to offer in-person client services through MedCannAccess’s network of community engagement centers in Ontario. Under the agreement, CGC acquired a 33% stake in CannScience Innovations, Inc., a drug development company based out of Toronto. CannScience conducts extracts research and is focused on delivering standardized metered dosing in a range of alternate delivery methods.

OrganiGram Holdings, Inc. (OGI) is not as big as CGC, but they are also a leader in the Canadian marijuana industry. During the last week, OGI has seen its share price climb by more than 47%. Although we are more favorable on CGC than OGI, we expect to see shares move higher Tuesday.

OGI is based out of Moncton, Canada and the company produces and sells medical marijuana through its subsidiary, Organigram, Inc. In early September, OGI received regulatory approval to activate four more grow rooms. This increased their annual production capacity to 2,100kg which is sufficient to execute on their annual business plan.

Outlook

The victory by Trudeau’s Liberal Party will serve as a long-term catalyst for the Canadian marijuana industry. If Trudeau legalizes recreational marijuana, many of these companies will see incremental top line and bottom line growth. We will continue to monitor trading and company developments going forward.

Michael Berger, Founder and President, Technical420.com

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