The Canadian MJ Index has been in correction mode after reaching all-time highs in mid-January 2018. Since then almost every major stock in the sector has seen a sharp drop in valuation.
Often times it’s when things seem the worst that the best opportunities present themselves. Like the old saying goes “it’s always darkest before dawn”
Investors are now starting to scan the markets looking for strong companies trading at a deep discount to their previous highs.
In our opinion we believe we may have found one of the most undervalued MJ stocks in Canada. We are making Aleafia Health Inc. (TSXV: ALEF) our top undervalued pick for 2018.
Markets can exaggerate prices in either direction and in the case of ALEF we feel the market has under-priced their stock.
In recent news ALEF announced the closing of a business combination with Canabo Medical Inc. Before the combination Canabo Medical (previously CMM.V) closed trading at $0.69 per share on December 22, 2017 before a nearly 3 month long halt.
During the halt, ALEF announced it raised $30,213,750 via private placement at $1.25 per share. The stock is currently trading at $0.60 per share. That’s a 52% discount to the $1.25 private placement. The investors in these private placements are typically very wealthy accredited investors. Having the opportunity for the average investor to buy into the same stock at half the price is not a common occurrence. This is a rare situation and a great opportunity for our followers/investors.
With $30m+ in the bank and the stock trading below CCM’s valuation before the business combination we see this as a great value play for investors.
Aleafia is the only Licensed producer with a large network of MMJ-expert Doctor-manned clinics— a downstream place to showcase their premier medical strains to patients in a one stop shop— a vertical integration strategy effectively rendering them unaffected from the demand issue soon to be facing most other competitors.
They are turning the typical Canadian LP model on its head.
In the coming months with the focus switching to recreational sales, other LP’s will struggle, in our opinion, to get their product into consumer’s hands unless they have a downstream distribution solution. Deals with drug store pharmacies are only a temporary solution, in our opinion.
As Aleafia’s fully funded 150,000 square foot greenhouse is constructed near the 6 million people in the greater Toronto area over the coming months, ALEF can slowly migrate ALL their thousands of patients to their world-class strains, growing the income statement in the process.
They also plan on increasing their clinic count from the current 22 from coast to coast, as well as increase their patient count at their existing locations. This could provide a sustainable increase in demand and an obvious increase in revenues.
ALEF’s ultimate goal is a 1.2 million square foot greenhouse grow, which by comparable standards could produce over 100,000,000 grams yearly. With the right clinic and patient growth, there could be a home for all of this supply under the ALEF umbrella.
The value is in the patients!
Taking a quick look at the ALEF chart we can clearly see the stock has been unfairly beaten down over the past 2 weeks.
With the RSI and slow stochastics in oversold territory and beginning to turn upward it’s easy to see ALEF is overdue for a strong bounce and possibly a full on reversal.
ALEF closed trading yesterday at $0.60 per share, up 15.4% on strong afternoon buying. ALEF was one of the top performing stocks in the entire sector. The large green candle and a new higher low is exactly what we want to see when a stock is trying to form a bottom and eventually reverse to the upside.
All things considered we love ALEF’s vertically integrated business model and feel the early struggles with the stock could ultimately end up being a blessing in disguise for our followers.
Take some time this evening to do your full due diligence and read up on everything ALEF is working on. We think you will be very impressed.
ALEF Technical Chart:
- Canada’s premier vertically-integrated MMJ company
- Existing licensed producer with 150,000 sq. ft. facility in 2018 and plans for 1,200,000 sq. ft. on 76 acres in Ontario
- 22 operating clinics nationwide. Expanding to 40 clinics in 2018.
- 40,000 patients to date. Adding 1,500 new patients per month and expected to exceed 2,000 per month by end of Q1 2018.
- In house patients provides for higher gross margins when LP production comes on stream.
- Largest research database for MMJ studies provides competitive advantage. (Access to data on efficacy of various strains, MJ derivatives, delivery and dosage).
- Multiple revenue streams from: Patients, MMJ, research, and big data monetization.
- Negotiating multiple large scale research projects for MMJ.
- Seasoned management team and board of directors with decades of experience in regulatory affairs, science & technology, and lifestyle branding.
About Aleafia Health Inc:
Aleafia Health is dedicated to bringing Canadians medical cannabis care through nation-wide medical cannabis clinics, a world-class processing and distribution facility, and innovative research. Aleafia Health Inc. is one of Canada’s leading, vertically integrated medical cannabis company with a unique patient-focused, medical cannabis healthcare solution. Led by a distinguished and experienced corporate leadership team, Aleafia Health Inc. is pioneering a patient-centric experience that includes personalized services before, during and after treatment. Aleafia’s 23 cannabis clinics are staffed by licensed, practicing physicians with more than 80 trained physicians. Aleafia Health Inc. has realized sustained patient acquisition growth and retention, underscoring the success of Canada’s first “patient-centric” cannabis-based health network.
135,944,461 common shares
6,689,000 stock options
Best of luck to you all and happy trading.
Editor in Chief
Image source: Shutterstock
Chart source: Barchart
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