The Top Hemp Stocks to Consider in 2019

Top Hemp Stocks for 2019
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Top Hemp Stocks for 2019

Who knew that legalizing hemp production would be the one issue that both Democrats and Republicans would agree on? A provision in the 2018 Farm Bill approved by Congress legalized hemp production. That’s good news for the top hemp stocks for 2019.

2018 may have been the year for Canadian cannabis, but the marijuana spotlight in 2019 will be focused on the United States. This will be a boon not just for hemp-manufacturing companies and hemp-processing companies, but for hemp-derived cannabidiol (CBD) companies.

The U.S. is now open for business when it comes to the hemp and CBD industry. And there are many well-established companies set to take advantage of this lucrative market.

2018 Farm Bill Legalizes Hemp

With the flick of his wrist, President Donald Trump signed the $867.0-billion 2018 Farm Bill into law—and with that action, he legalized hemp.

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The bill doesn’t legalize marijuana for recreational or medical uses; it only covers hemp. Still, it will have huge implications for Wall Street. It’s just another step forward in the eventual federal legalization of adult recreational marijuana.

The push for legalizing hemp was spearheaded by Mitch McConnell (R-KY). Why would a conservative like McConnell, who has long rallied against legalizing marijuana, want to legalize hemp? Jobs, jobs, jobs.

Since 1970, hemp has been classified, along with LSD, heroin, and marijuana, as a Schedule I drug on the Drug Enforcement Agency’s (DEA) list of controlled substances. Schedule I drugs are those that have, according to the DEA, no currently accepted medical use and have a high potential for abuse.

How one could abuse hemp has always been a head-scratcher. While hemp and marijuana have been thought of being the same thing, they aren’t. Yes, hemp is derived from the cannabis plant, but it can’t get you high.

Senator Ron Wyden of Oregon said the following on Twitter:

Benefits of Hemp

What is hemp good for then?

Those who are still wearing the same pair of “Birkenstocks” they purchased in the late 1960s will tell you that hemp fiber is great for making clothes, rope, paper, cardboard, food, construction materials (insulation, concrete), and biofuel. The seeds and flowers can be used in health foods, body care products, and nutraceuticals.

CBD is known to reduce stress and anxiety and make people feel more alert and focused. Studies have also shown that CBD reduces the symptoms associated with schizophrenia.

Hemp and CBD products can be turned into medicines, oils, extracts, drinks, etc. and sold by big-box retailers like Target Corporation (NYSE:TGT) and Walmart Inc (NYSE:WMT).

And that’s why senators like McConnell are in favor of legalizing hemp. McConnell is a senator from Kentucky, a state where tobacco acreage has plunged by nearly 90% over the last 100 years.

Tobacco may have been a big part of Kentucky’s past, but McConnell is hoping that hemp will be part of its future. On December 11, he tweeted the following:

Demand for Hemp-Derived Products to Top $20 Billion by 2022

The demand for tobacco may be waning, but the demand for marijuana, hemp, and CBD has been soaring.

Industry analysts estimate that the U.S. cannabis market is currently worth $800.0 million, and that it will top $20.0 billion by 2022. (Source: “Why the U.S. Cannabis Industry May Witness a $20 Billion Boom,” Fortune, December 13, 2018.)

Hemp is a cash crop that’s too tempting to not want a piece of.

And now that hemp is legal, farmers can buy crop insurance, apply for loans, grants, and write off business expenses just like for any other crop.

Removing hemp and its extracts from Schedule I of the Controlled Substances Act is also a gift for investors who do not like to invest in so-called “sin stocks.”

Whereas investing in a marijuana pure-play company would be off the table for some, investing in hemp-manufacturing companies, hemp-processing companies, or businesses that manufacture CBD products opens the door of opportunity.

Hemp Industry Stock List

Below is a partial list of hemp stocks and CBD stocks worth keeping an eye on in 2019.

Company

Stock Tickers

Acreage Holdings Inc

OTCMKTS:ACRGF, CNSX:ACRG.U

Harvest Health & Recreation Inc

OTCMKTS:HTHHF, CSE:HARV

Aurora Cannabis Inc

NYSE:ACB

MJardin Group Inc

OTCMKTS:MJARF, CSE:MJAR

Cresco Labs Inc.

OTCMKTS:CRLBF, CSE:CL

Aphria Inc

NYSE:APHA

Hemp Inc

OTCMKTS:HEMP

Rocky Mountain High Brands Inc

OTCMKTS:RMHB

Neptune Wellness Solutions Inc

NASDAQ:NEPT

Isodiol International Inc

OTCMKTS:ISOLF, CNSX:ISOL

Americann Inc

OTCMKTS:ACAN

CV Sciences Inc

OTCMKTS:CVSI

Origin House

OTCMKTS:ORHOF, CNSX:OH

Canopy Growth Corp

NYSE:CGC

Top Hemp Stocks for 2019

Instead of delving into larger marijuana stocks that everybody is more than well aware of, it might be more advantageous to look at some of the lesser-known American hemp stocks—companies that should perform very well now that hemp is legal in the U.S.

Cresco Labs Inc.

Cresco Labs Inc. (OTCMKTS:CRLBF, CSE:CL) is new to Wall Street. In fact, the company only began trading on December 3. The Chicago-based company is one of the largest integrated multi-state cannabis operators in the U.S.

The company grows, processes, and retails its cannabis products in six states (Illinois, Ohio, Pennsylvania, Nevada, California, and Arizona), with approval pending for acquisitions in three more states (New York, Massachusetts, and Maryland).

On December 6, Cresco announced plans to acquire 100% of the shares and interests of Hope Heal Health, Inc. and an affiliated real estate entity.

The new assets will allow Cresco to cultivate, manufacture, process, and operate a medical marijuana dispensary, with the opportunity to obtain up to three medical marijuana dispensary licenses and three adult-use dispensary licenses. (Source: “Cresco Labs Acquires Assets in Massachusetts with First Cannabis Harvest Planned for Spring 2019,” Cresco Labs Inc., December 6, 2018.)

Hope Heal Health’s 150,000-square-foot cultivation facility planted its first crop in early December, with the first cannabis harvest expected in the first quarter of 2019.

On December 10, Cresco announced that revenue for the third quarter of 2018 increased 335% year-over-year and 51% sequentially to $12.2 million. Year-to-date revenue was up 248%, at $25.1 million. (Source: “Cresco Labs Announces Profitable Third Quarter 2018 Financial Results with Revenue Growth of 335% Year-over-Year and 51% Quarter-over-Quarter,” Cresco Labs Inc., December 10, 2018.)

Third-quarter net income came in at $3.9 million, compared to a net loss of $0.2 million in the same prior-year period. This represents a 95% increase over the net income of $2.0 million recorded in the second quarter of 2018.

As of September 30, the company had total assets of $149.5 million, including cash and cash equivalents of $93.9 million. This does not include the full amount of proceeds from financing activities completed subsequent to the end of the quarter.

Long-term liabilities totaled $2.0 million. As of September 30, the company had a working capital position of $105.3 million.

Harvest Health & Recreation Inc

Harvest Health & Recreation Inc (OTCMKTS:HTHHF, CSE:HARV) is also a new hemp stock, having only begun trading on the in mid-December. The Tempe, Arizona-based cannabis company has one of the largest footprints in the country.

Since beginning operations in 2011, Harvest Health has expanded its presence in the U.S. every year. It currently holds licenses in 12 states (Arizona, Arkansas, California, Colorado, Massachusetts, Florida, Nevada, Maryland, North Dakota, Pennsylvania, and Ohio). (Source: “Industry Experience,” Harvest Health & Recreation Inc, last accessed December 19, 2018.)

The company also plans to expand into other states by 2020.

On December 3, Harvest Health announced that third-quarter revenue increased 62% year-over-year to $11.2 million. Total revenue was up six percent from the $10.5 million recorded in the second quarter of 2018. (Source: “Harvest Health & Recreation, Inc. Reports Third Quarter 2018 Financial and Operation Results,” Harvest Health & Recreation Inc, December 3, 2018.)

The company reported a net loss of $0.5 million, which follows $3.7 million in expansion and reverse takeover expenses.

Year-to-date revenue came in at $30.0 million, a 92% increase over the $15.6 million recorded in the first nine months of 2018.

On December 19, Harvest Health added to its existing retail licenses in Pennsylvania by winning every medical marijuana dispensary license it applied for. This means Harvest can now open more retail stores than any other company in the state of Pennsylvania. (Source: “Harvest Wins Every License Applied for in Pennsylvania,” Harvest Health & Recreation Inc, December 19, 2018.)

Harvest Health has six months to become operational before it begins dispensing medical cannabis.

“As is true elsewhere, we are now ahead of schedule in the state of Pennsylvania, as we work to build the largest retail footprint in cannabis,” said Steve White, founder and CEO of Harvest Health. “Pennsylvania, as a cannabis market, has exceeded our expectations.”

Harvest Health will be the biggest medical marijuana retailer in Pennsylvania, and it already has the largest footprint in Arizona, the third-largest medical marijuana market in the U.S.

In early December, Harvest Health announced a joint venture with Aina We Would, LLC (AWW) to create a national cannabis real estate investment firm to provide up to $100.0 million in capital for cannabis-related real estate asset acquisitions. (Source: “Harvest Health & Recreation Announces Joint Venture with Aina We Would, LLC,” Harvest Health & Recreation Inc, December 10, 2018.)

Through the new joint venture, AWW will buy, develop, and finance new construction projects, engage in land purchases, capital improvements, and sale-leasebacks to Harvest Health and other businesses operating in the cannabis industry.

“Real estate is the lifeblood of the cannabis economy and a huge piece of any company’s bottom line,” said Harvest Health Executive Chairman Jason Vedadi.

“With this partnership, AWW has been structured to turn a significant cost center into a potential profit driver and to become a potentially attractive source of financing for Harvest’s expected expansion.”

Hemp Inc

Hemp Inc (OTCMKTS:HEMP) is not for the faint of heart. Trading at roughly $0.05 per share, it is a penny stock in the truest sense. But it should experience significant exposure now that hemp has been legalized.

The Las Vegas-based company is a leader in the industrial hemp industry. Wholly-owned subsidiary Industrial Hemp Manufacturing, LLC in North Carolina is the North America leader in producing loss circulation material and spill absorbents for the oil and gas industries.

In addition to the company’s operation in North Carolina, Hemp Inc has a hemp processing center in Medford, Oregon and a 4,500-acre hemp-growing eco-village in Golden Valley, Arizona.

Hemp Inc offers products and services to the medical and recreational marijuana industries. On top of that, the company develops and operates web sites that provide news and entertainment related to the medical marijuana industry.

Hemp Inc’s strategy is to build the world’s largest hemp oil extraction infrastructure by creating joint ventures with multiple companies to house and operate their CBD extraction equipment in its 85,000-square-foot facility in Spring Hope.

“It is no surprise that the legalization of hemp is creating a media whirlwind – and Hemp, Inc. is at the center of it,” said Hemp Inc CEO Bruce Perlowin. (Source: “Hemp, Inc. Featured in Forbes, The Oregonian and Additional News Outlets as U.S. Farm Bill Heads to President’s Desk,” Hemp Inc, December 19, 2018.)

“Our multi-state operations allow us to work with farmers across the nation, and we are confident this legislation will be a boon for the small family farm and U.S. economy as a whole,” added Perlowin.

Trading at roughly $0.05 per share, it’s easy to see that Hemp Inc carries a lot of risk. The company is light on news and its current financial position will not set Wall Street on fire.

That said, the stock has been bullish since news of the 2018 Farm Bill became public. Hemp Inc is a very speculative play, but it has huge potential and is worth keeping an eye on in 2019.

Analyst Take

Medical marijuana is legal in 33 states and recreational marijuana is legal in 10 states and Washington, D.C. And those numbers are growing.

Legalizing hemp is a big step forward for the U.S. cannabis industry, which, as mentioned earlier, could be worth more than $20.0 billion by 2022.

Up until now, all eyes have been focused on Canada’s small marijuana industry, but in 2019, the spotlight will be on U.S.-based hemp manufacturers and hemp producers. For investors who missed out on the 2018 Canadian cannabis craze, 2019 may be their year.