2017 has been a wild year for cannabis stocks across the board. We are constantly seeing major runs, blue sky breakouts and loads of excitement from positive press. This sector has mergers, deals and acquisitions at every turn. Nearly every company in the sector has been in the green lately which is drawing hoards of new investors who see a bright future in this space. So, after all of these crazy runs is it too late to dive in?
There are great companies who are still very undervalued in the sector and who haven’t made their biggest runs yet. Here are the top stocks to watch for 2018.
Market Cap: 457M
Hydropothecary were the first cannabis company to receive their license in Quebec and have an extremely strong position there. Quebec is famous for being more isolationist than any other province. I believe Quebec will put up more of a fight to protect Hydropothecary against competitors and thus the people will have brand loyalty to its largest grower. Hydropothecary is expanding to produce a whopping 108,000kg of cannabis annually. They have also cut down their production costs per gram in half placing them well below a projected 1$ mark.
Hydropothecary has done as well as anyone in branding their products for the luxury market. They put a heavy emphasis on non-smokables, including products like elixir sprays and THC tablets.
Supreme Pharmaceuticals (FIRE)
Market Cap: 409M
Supreme Pharmaceuticals has already made a big splash with partnerships with 2 of the strongest players in the game, Aurora Cannabis and Emerald Health Botanicals. They are focusing a lot on b2b sales and will be a huge asset to larger companies for the amount of supply that will be needed come legalization time. They are uniquely positioning themselves as being b2b sales rather than b2c sales like most other companies.
With a price/book value of 5.6 this company is still very undervalued. Investors are getting a good amount of equity with the purchase of a share. They’ve also done extremely well with working capital and converting debt and investment to value generating assets. They went from having 5M in assets to 60M in assets between 2016 and 2017 and took on very little debt in that time period.
Supreme has done well so far, but there is a lot of room to grow.
Market Cap: 94M
Hempco are one of the leaders in the hemp side of the sector. They have a strong relationship with Aurora Cannabis. Hempco’s stock is currently in a dip and with a small market cap of 94 million this stock is undervalued. They have $0 in debt and over $6M in assets. Their revenues have gone from 3.2M to 12M between 2014 and 2017 and have a very promising trajectory moving forward.
Hempco has been around for 17 years and is far from startup phase, this is also why they have a positive operating margin and are overall financially healthy. At $1.89 a share this company has a lot of room to grow.
Harvest One (HVST)
Market Cap: 112M
Harvest One has had a solid year, but there is still a lot of room to grow. They went public in March of 2017 at 76 cents a share and is up to $1.26 currently. HVST holds United Greeneries and Satipharm. Their stock has a 4.8 price/book ratio meaning the market price is not overly inflated and investors will get a healthy amount of equity with each share they own. They have 0 debt and very few liabilities.
HVST is also expanding as they recently secured a land deal for just under $1M to grow cannabis outdoors in British Columbia. United Greeneries is also set to expand by 35,000kg per year by 2018.
Harvest One: https://www.harvestone.com/