With No Clear Leader in the World’s Largest Cannabis Market, These 4 California Pot Stocks Look to Fill the Void
2020 is Shaping Up to Be a Huge Year For These California Cannabis Stocks
If it were a country of its own, the State of California would have the fifth-biggest economy on the planet with a gross state (not domestic) product of $3 trillion for 2018. Analysts at Arcview and BDS Analytics say that by the end of 2019 California will have pulled in $3.1 billion in sales, a 23% jump from the year before, making it the world’s largest legal pot market. The same report projects statewide sales of $7.2 billion in 2024. It is also a maturing market, where marijuana tax rates might come down if lawmakers follow recommendations in a report from the state Legislative Analyst’s Office.
These changes might lower the cost of doing business, minimize youth consumption, and weaken the still-kicking illicit cannabis market in the state. With that said, here are 4 cannabis stocks already positioned to make the most of the burgeoning opportunity in the Golden State.
Hollister Biosciences (CSE: HOLL) (FRA: HOB) has products already available in close to 300 stores around the state, and as we reported recently, Hollister’s management vision and execution could lead the company to be a real powerhouse as a vertically integrated, high-margin consumer packaged goods (CPG) company operating in the California cannabis space. Hollister teamed up with Indus Distribution (CSE: INDS) and its supply chain management system WAYV to optimize inventory distribution for a well-spread presence throughout the state. In December, Hollister announced the launch of its new premium organic hemp-brewed beverage dubbed ‘Rebel Tea’ as well as its planned deal with Easyriders to create premium branded hemp products. In 2020, Hollister anticipates $20 million in revenue at a 35% operating margin. By 2023, the company anticipates revenue and operating margin to increase to $42 million and 48% respectively. Hollister has roughly 108 million shares outstanding with nearly 75% of those shares restricted by a lock-up agreement and 40 million held by insiders making HOLL’s tradable float only 28,554,707. With a current market cap of only $15 million, Hollister is easily one of the best value plays heading into 2020.
TransCanna Holdings (CSE: TCAN) (OTC: TCNAF) (FRA: TH8) is building cannabis-focused brands for the California lifestyle. Anyone who has seen kids wearing surf-oriented clothing or has tanned or dined in a California-themed business knows that the California lifestyle appeals well beyond the state’s borders. Inside the state, the company is making moves in Modesto with its Lyfted Farms Daly project, which gives TransCanna a cultivation, manufacturing, and distribution hub just east of the San Francisco Bay Area. December has been a great month for TransCanna and its stock. Earlier in the month, TCAN disclosed its revenue soared 90% over the previous month in response to the company’s continued expansion. TransCanna received more good news last week after it was reported that the company’s SolDaze brand won 1st and 3rd Place at 2019 Emerald Cup for its CBD edibles. To cap off an amazing December, TransCanna just received bullish news regarding its 196,000 sq ft Daly facility which caused shares of TCAN to jump 20% to close last week. TCAN stock has been on roll lately as word continues to spread about this excellent California cannabis opportunity.
Innovative Industrial Properties (NYSE: IIPR) is a cannabis-focused real estate company that trades on the NYSE as a real estate investment trust (REIT). IIPR focuses on states with strong and clear medical-use cannabis regulations, and its multi-state portfolio of specialized industrial and greenhouse buildings are all leased by licensed medical-use growers. These facilities are integral to the operators who lease them, and in California, IIPR has ten properties and counting. The company recently reported revenue growth of 201% in Q3 2019 and IIPR keeps raising its dividend based on stellar cash flow. If tenants can keep their own companies in order then the net effect for IIPR will be increased revenue growth and the addition of new facilities in 2020. In mid-November, IIPR reported that it acquired a property in Pennsylvania and inked a long-term lease with top MSO Green Thumb (CSE: GTII) (OTCQX: GTBIF). Yesterday, IIPR announced that it acquired additional properties in Pennsylvania and North Dakota as well as signed long-term leases with the company Grassroots. IIPR offers investors the best of both worlds as it combines the upside of cannabis with the more conservative income/dividend investing. IIPR is perfect for those with a lower risk tolerance that still want to participate in the burgeoning cannabis sector.
Origin House (CSE: OH) (OTCQX: ORHOF) is a rapidly growing cannabis brands and distribution company that aims to invest capital and know-how to build companies that can thrive. They take in cannabis consumer products that show promise and accelerate market reach to a network of over 450 dispensaries statewide. Origin House has developed more than 50 brands, leveraging an ever-growing proprietary database and consumer behaviour insights to ensure targeted distribution and optimal growth for its portfolio companies. With its California routine set, the company wants to turn its homegrown knowledge into a nationwide advantage as it expands beyond the state and replicates success with proven brands. In late November, Origin House reported Q3 earnings which featured record revenue of $22.8 million, up 244% over the previous year. The month of December brought more positive news for the company in the form of increasing shareholder support for its merger with multi-state operator (MSO) Cresco Labs (CSE: CL) (OTCQX: CRLBF), further proving the value of Origin House. Once the merger officially closes, the combined company will be a force to reckon with not just in California, but throughout the entire United States.
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Hollister Biosciences and TransCanna are paid clients of The Cannabis Investor.
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