A Pot Stock to Think About
Little-known stocks can provide big returns. And for investors who want to bet on overlooked tickers, few industries deserve more attention than pot.
The reason is simple: marijuana is a booming industry, but because legal pot is also a very new sector, most companies are just starting out and are yet to make it to the main stage. As a result, there could be some serious growth opportunities.
One of the top pot stocks to check out right now is WeedMD Inc (OTCMKTS:WDDMF, CVE:WMD), the parent company of WeedMD Rx Inc., which is a federally licensed cannabis producer for both the medical and recreational markets in Canada.
WeedMD owns and operates a 158-acre greenhouse and outdoor facility in Strathroy, Ontario. At the same time, it has a 26,000-square-foot facility in Aylmer, Ontario that specializes in cannabis extraction and processing.
The company uses a multi-channeled distribution strategy that includes selling directly to patients, relationships in the seniors’ market, and supply agreements with Shoppers Drug Mart—the biggest pharmacy chain in Canada—and six provincial distribution agencies. (Source: “WeedMD,” WeedMD Inc, last accessed December 5, 2019.)
The No. 1 reasons to consider WDDMF stock is the company’s fast-growing business.
In the third quarter of 2019, WeedMD generated CA$6.7 million of net revenue, representing a huge 232% increase year-over-year. (Source: “WeedMD Reports Third Quarter 2019 Financial Results and Announces Strategic Combination with Starseed,” WeedMD Inc, November 29, 2019.)
The company also stands out as a low-cost producer. In the third quarter, WeedMD’s cost to produce and package a gram of pot was CA$1.42, substantially lower than the $1.84 in the second quarter and $3.14 a year ago.
Furthermore, WeedMD recently completed the inaugural harvest of its 27-acre outdoor cannabis cultivation. The harvest is expected to yield a dry weight of more than eight tons (16,000 pounds).
This means the company is well positioned for “Cannabis 2.0,” the legalization of pot-derivative products in Canada. These products, such as edibles and beverages, are expected to legally go on sale later this month.
“WeedMD now has a significant amount of cannabis that we intend to bring to market over the current and coming quarters as both dried flower and in various value-added formats,” said WeedMD’s chief executive officer Keith Merker. (Source: “WeedMD Provides Corporate Update and Schedules Q3 2019 Earnings Call for November 29th,” WeedMD Inc, November 5, 2019.)
“Combining our vertically-integrated extraction business at our CX Industries site in Aylmer with our low-cost production of dried flower, we are well positioned to emerge as a leader in the production and sale of extracts,” he added. (Source: Ibid.)
And there’s more. On November 29, WeedMD announced that it is acquiring Starseed Holdings Inc. in an all-share transaction valued at about CA$78.0 million. (Source: “WeedMD Announces Strategic Combination with Starseed Holdings Inc. and Secures $25 Million Cornerstone Investment,” WeedMD Inc, November 29, 2019.)
Meanwhile, Starseed’s major financial backer, the Labourers’ Pension Fund of Central and Eastern Canada, will make a concurrent CA$25.0 million equity investment directly into WeedMD.
Notably, Starseed also has a partnership with the Laborers’ International Union of North America (LiUNA), the largest construction union in Canada, with more than 100,000 members and retirees. Starseed provides medical pot as a fully-covered drug benefit for LiUNA’s members.
Therefore, by acquiring Starseed Holdings Inc, WeedMD can gain access to that partnership.
WeedMD Inc (OTCMKTS:WDDMF) Stock Chart
Chart courtesy of StockCharts.com
Put it all together and you’ll see that, despite being a little-known company, WeedMD Inc has quite a few things going for it.
As the company capitalizes on Cannabis 2.0 and realizes the synergies of its new acquisition, WeedMD stock could see some serious upside.