The Australian cannabis market has been maturing since medical marijuana was federally legalised in 2016.

The next year, Food Standards Australia New Zealand legalised low-THC hemp food for human consumption in Australia. The country went on to legalise medical marijuana exports in 2018, allowing medicinal marijuana products developed in Australia to be exported to licenced recipients in countries where the drug is legal.

Recreational cannabis remains federally illegal in the country, but recent legislation shows the door may be opening. In 2019, the Australian Capital Territory passed a bill allowing for the possession and growth of small amounts of cannabis for personal use. The law went into effect on January 31, 2020.

More recently, in late 2020, the Therapeutic Goods Administration greenlit the sale of low-dose cannabidiol (CBD) through over-the-counter methods without a prescription. The ruling from the Australian regulatory agency is expected to officially come into effect in February 2021.

With these and other changes in the works, Australia’s cannabis industry is projected to have long-term potential. The legal cannabis market in Oceania is expected to be worth US$1.55 billion by 2024, with Australia accounting for 79 percent of the region’s market, Prohibition Partners forecasts.

According to a study from FreshLeaf Analytics, the value of the medical market in Australia reached AU$95 million in 2020, and the firm expects revenue to jump again to over AU$150 million in 2021. In short, Australia’s role in the global cannabis industry will certainly continue to grow.

Here the Investing News Network profiles 10 ASX cannabis stocks with market caps between AU$30 million and AU$225 million. All ASX cannabis stocks below are listed in order of market capitalization from largest to smallest, with data compiled using TradingView’s stock screener on January 12, 2021.

1. Creso Pharma (ASX:CPH)

Market cap: AU$209.83 million

Creso Pharma was the first company to import medical cannabis into Australia and the first to launch these products in Switzerland for people, as well as animals. The cannabis company’s anibidiol product was the first hemp CBD complementary feed in animal health thanks to a partnership with Virbac Switzerland. Creso Pharma has also launched cannaQIX in Switzerland; it was the first CBD nutraceutical in human health.

The company’s medicinal cannabis product lines cover therapeutics, nutraceuticals, animal health, lifestyle and topicals.

2. Cann Group (ASX:CAN)

Market cap: AU$176.84 million

Cann Group provides a range of medicinal cannabis products for patients in Australia and globally. In 2017, the company was granted Australia’s first cannabis research licence, as well as the first medicinal marijuana cultivation licence. Cann Group partners with leading medical scientists in Australia to research and harness the therapeutic potential of cannabinoids, terpenes and other bioactive constituents of cannabis.

The company has secured supply agreements in global cannabis markets, including the UK, Germany and other European segments.

3. Incannex Healthcare (ASX:IHL)

Market cap: AU$166.42 million

Incannex Healthcare is a clinical-stage cannabinoid medicine company with global export capacity. It has four clinical programs underway for the development of a variety of cannabis medicinal products aimed at major unmet medical needs, including obstructive sleep apnea, traumatic brain injury/concussion, sepsis-associated acute respiratory distress syndrome and temporomandibular joint disorder.

In 2020, the company worked to advance its clinical trials. By the second half of the year, cannabinoid products accounted for Incannex’s entire revenue stream.

4. Botanix Pharmaceuticals (ASX:BOT)

Market cap: AU$131.37 million

Botanix Pharmaceuticals has a product pipeline that includes three advanced clinical programs using synthetic cannabidiol for the topical treatment of serious skin diseases and for antimicrobial applications. The company also has an exclusive licence to use a proprietary drug-delivery system called Permetrex for direct skin delivery of pharmaceuticals.

Botanix Pharmaceuticals’ programs are focused on treating acne, rosacea, atopic dermatitis and microbial infection. The company secured a clear development path for its BTX 1801 synthetic cannabidiol antimicrobial product after the successful completion of a pre-investigational new drug meeting with the US Food and Drug Administration.

5. Althea Group Holdings (ASX:AGH)

Market cap: AU$114.2 million

Althea Group Holdings takes the concept of medical cannabis a step further with its work as a pharmaceutical-grade cannabis supplier. In addition to offering relief through accessible medical cannabis, the company is implementing components of the plant in its research on advanced drugs.

Althea has successfully expanded into the global cannabis market with a wholesale supply agreement to import a range of Althea-branded finished products for sale and distribution in South Africa beginning in Q2 2021. This agreement came on the heels of the news that the company is slated to become the first commercial supplier of Australian medicinal cannabis extract products to the German market, with all necessary licences for sale and distribution granted by the German government.

6. Zelira Therapeutics (ASX:ZLD)

Market cap: AU$113.79 million

Zelira Therapeutics’ efforts are on unmet clinical needs and on using medicinal cannabis to treat a range of diseases and disorders. Its most common target areas include pain, anxiety and sleep.

Zelira is largely focused on developing treatment options using plant-based medicinal marijuana, and currently has three clinical-stage programs with a focus on insomnia, autism and opioid reduction. The company is also conducting a pre-clinical research program to test cannabinoids in breast, brain and pancreatic cancer.

7. Medlab Clinical (ASX:MDC)

Market cap: AU$75.51 million

Medlab Clinical is a medical research and development company focused on novel biotherapeutics such as nutraceuticals and pharmaceuticals. The company is also developing pharmaceutical cannabis products.

In early 2020, Medlab Clinical launched the NanaBis Observation Study in Australia. NanaBis is a cannabis-based pain treatment drug that may prove useful as an alternative to opioid medication. It is also being used to investigate cancer pain management.

8. BOD Australia (ASX:BDA)

Market cap: AU$49.25 million

BOD Australia is focused on cannabis and hemp-related products. It develops, distributes and markets health and skincare products created using plant-based extracts in Australia. The company secured a foothold in the European cannabis market in 2020 with a AU$200,000 purchase order for four Swiss-branded hemp seed oil products to be sold in France, the Netherlands and the UK.

BOD Australia’s reach in Australia ranges from selling prescription and over-the-counter products to more than 1,000 outlets, such as pharmacies, retail stores and healthcare chains. It also has distribution agreements with two pharmacy wholesalers in Australia.

9. IDT Australia (ASX:IDT)

Market cap: AU$42.47 million

One of Australia’s oldest listed life science companies, IDT Australia is a pharmaceutical manufacturing company with extensive experience in the development and production of pharmaceutical products. Through its GMP-compliant facilities, the company provides full-scale services for new drug development, plus scale-up and commercial active drug manufacturing for local and international clients.

IDT Australia’s clients include Cann Group; IDT Australia is the manufacturer of the medical cannabis products that are a part of two of Cann Group’s export supply agreements with European and UK partners.

10. MMJ Group Holdings (ASX:MMJ)

Market cap: AU$31.04 million

MMJ Group Holdings has a wide range of cannabis investments, including healthcare products, technology, infrastructure, logistics, processing, cultivation, equipment, retail and research and development.

Among other companies, it has invested in Harvest One Cannabis (TSXV:HVT,OTCQB:HRVOF), which develops health and wellness products; Fire & Flower Holdings (TSXV:FAF,OTCQX:FFLWF), a recreational cannabis retailer that’s developed a variety of cannabis products and accessories; and MediPharm Labs (TSXV:LABS,OTQQX:MEDIF), a cannabis extraction company that received its cannabis oil production licence from Health Canada in 2018. MediPharm Labs has launched cannabis extraction services in Australia.

Investor takeaway

The presence of these ASX-listed cannabis companies shows that the cannabis industry in Australia is undoubtedly growing, as are investment opportunities in Australia’s cannabis industry. While recreational marijuana remains illegal in the land down under, the medical cannabis industry is thriving, making that side of the sector worth considering.

So far, Australia has no timeline attached to the legality of recreational use of marijuana, but it will be a story to watch over the coming years for those interested in the space.

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Canada’s legal cannabis industry has experienced significant growth in the past few years. For those interested in investing in cannabis, a slew of marijuana companies have broken into the big leagues of market trading to become TSX cannabis stocks.

The TSX offers a new venue for cannabis ventures, and big names in the cannabis industry have made the cut, including massive licensed producers expanding their product offerings and brands.

These companies are leaders in the industry thanks to their rapid growth and large-scale developments.

For those interested in how to invest in cannabis, here the Investing News Network offers a growing list of all the cannabis-related companies listed on the TSX in alphabetical order.

Alcanna (TSX:CLIQ,OTC Pink:LQSIF)

Alcanna is an alcohol retail operator first and foremost, but thanks to an investment from Aurora Cannabis (TSX:ACB,NYSE:ACB), the company now also manages marijuana retail shops across the country under the retail brand name Nova Cannabis.

Aleafia Health (TSX:ALEF,OTCQX:ALEAF)

After completing a key acquisition, the firm was able to reach the TSX and gain a spot amid some of the top cannabis producers in Canada. Aleafia Health has a direct focus on the health and wellness space and its relationship with cannabis products.

Aphria (TSX:APHA,NYSE:APHA)

Aphria was one of the first cannabis companies to reach the TSX and help solidify the growth of the marijuana industry. After undergoing a management change, the firm has maintained attention to its scale by growing its operations and international ventures.

Aurora Cannabis

Aurora Cannabis has secured a spot among the leading producers of marijuana in Canada, and has operations across the globe. The company has continued a steady path of acquisitions for players involved in all parts of the supply chain and development of marijuana technology.

Avicanna (TSX:AVCN,OTCQX:AVCNF)

Avicanna is a Canadian company working on the development of plant-derived cannabinoid-based products. The two subsidiaries of the company are licensed to cultivate and process cannabis for the production of cannabis extracts and purified cannabinoids.

Canopy Growth (TSX:WEED,NYSE:CGC)

Canopy Growth is one of the largest leading Canadian cannabis producers, with investments across the entire sector. The firm has a significant investment from alcohol-maker Constellation Brands (NYSE:STZ).

Canopy Rivers (TSX:RIV,OTC Pink:CNPOF)

As a venture capital firm specializing in cannabis, TSX cannabis stock Canopy Rivers invests in innovators across the marijuana value chain.

Cardiol Therapeutics (TSX:CRDL,OTCQX:CRTPF)

Cardiol Therapeutics is working on the development of medicines based on pharmaceutical-grade cannabidiol (CBD) and refining the production of lab-made elements of cannabis for medical use.

Charlotte’s Web Holdings (TSX:CWEB,OTCQX:CWBHF)

This Colorado-based company operates as a hemp producer distributing novelty products in the legal US market. Shares of Charlotte’s Web Holdings reached the TSX after regulators gained more clarity on the legal status of hemp in the US.

Cronos Group (TSX:CRON,NASDAQ:CRON)

Cronos Group is a leading marijuana firm with a blockbuster investment deal from Altria Group (NYSE:MO), one of the biggest tobacco producers in the world. The firm, like many other producers, has expressed interest in entering the US cannabis market at an appropriate time.

Delta 9 Cannabis (TSX:DN,OTCQX:VRNDF)

TSX cannabis stock Delta 9 Cannabis is a vertically integrated cannabis company selling cannabis products through its wholesale and retail sales channels.

Fire & Flower Holdings (TSX:FAF,OTCQX:FFLWF)

Fire & Flower Holdings is a licensed cannabis retailer that owns cannabis retail store licences in the Canadian provinces of Alberta, Saskatchewan, Manitoba and Ontario, as well as the Yukon.

HEXO (TSX:HEXO,NYSEAMERICAN:HEXO)

Similar to its producer peers, HEXO was able to secure a partnership with an established beverage maker to develop cannabis-infused drinks, thanks to a joint venture with Molson Coors Brewing Company (NYSE:TAP).

InMed Pharmaceuticals (TSX:IN,NASDAQ:INM)

InMed Pharmaceuticals operates as a biopharmaceutical company, but its focus is set on the development of CBD-based therapeutics for disease treatment. Its pipeline has three candidates.

MediPharm Labs (TSX:LABS,OTCQX:MEDIF)

MediPharm Labs, another TSX cannabis stock, is a cannabis extraction company working on offering pharmaceutical-grade cannabis oils and concentrates to be used for infused products. The firm expects to process 250,000 kilograms of dry cannabis per year for extraction.

Neptune Wellness Solutions (TSX:NEPT,NASDAQ:NEPT)

Neptune Wellness Solutions is a company working in the extraction market alongside the marijuana space for novelty products. The firm also produces cannabis capsules using Licaps technology.

OrganiGram Holdings (TSX:OGI,NASDAQ:OGI)

Organigram Holdings is a leading Canadian licensed producer of high-quality medical and recreational cannabis. Outside Canada, it is developing international partnerships to extend its global footprint.

The Green Organic Dutchman (TGOD) (TSX:TGOD,OTCQX:TGODF)

After a successful capital raising, TGOD reached the TSX with promises of organic cannabis production and cost-effective operations. It touts an international portfolio with operations in Europe and Latin America.

The Supreme Cannabis Company (TSX:FIRE,OTCQX:SPRWF)

The Supreme Cannabis Company has earned a reputation as a dedicated producer whose operations are growing at a steady scale. This company has a focus on brand development and an interest in international plays for the cannabis market.

The Valens Company (TSX:VLNS,OTCQX:VLNCF)

The Valens Company is a vertically integrated provider of cannabis products, and is well positioned to become a leader in the emerging global-wide cannabis nutraceuticals market, which includes cannabis oils, extracts, beverages and edibles.

Village Farms International (TSX:VFF,NASDAQ:VFF)

TSX cannabis stock Village Farms International is a vertically integrated greenhouse grower across North America. The company decided to enter the cannabis space through a 50/50 joint venture for the management of cannabis grower Pure Sunfarms.

VIVO Cannabis (TSX:VIVO,OTCQX:VVCIF)

VIVO Cannabis is a Canadian licensed producer of medical and recreational cannabis.

Zenabis Global (TSX:ZENA)

The resulting company from a reverse takeover between Sun Pharm Investments and Bevo Agro, this cannabis producer offers consumers a variety of recreational products.

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The potential for new disease research and treatments is expanding thanks to the global adoption of marijuana for medical purposes.

As more countries open the doors to the use and investigation of cannabis, medical applications for the drug are set to expand — indeed, the substance has already shown much promise.

However, in terms of treating skin cancer patients, currently the promise of cannabis outpaces any medically confirmed results or applications.

Though there may be individual cases crediting the drug, cannabis and its derivatives are not being applied to treat skin cancer — at least not yet. Read on to learn about the current situation and future possibilities.

Skin cancer, cannabis and medical research

According to the American Cancer Society, skin cancer is the most common type of cancer, accounting for over 5 million cases per year. This category holds many different variations, but the main three types are basal cell carcinomas, squamous cell carcinomas and melanomas; the rest are considered rare.

Melanomas develop in specific areas like the neck and face and can be more serious than their counterparts. Basal and squamous cancer cells, on the other hand, develop based on a person’s sun exposure and mostly appear on the head and neck.

The Canadian Cancer Society states that treatments for non-melanoma skin cancer include surgery, radiation therapy, photodynamic therapy and drug therapy, including the use of topicals.

In the future, cannabis and cancer could be paired up as more research across the globe begins to take place and companies look for new medications and formulations, boosted by the early successes of the drug.

Changes are happening slowly, with one serious improvement being when GW Pharmaceuticals (NASDAQ:GWPH) obtained approval in the US for its cannabidiol (CBD) solution, which treats seizures associated with Lennox-Gastaut syndrome or Dravet syndrome in toddlers.

After going through its clinical trials, the company’s Epidiolex drug received approval from the US Food and Drug Administration, signaling that top medical agencies are ready to confirm the medical prowess of cannabis and its derivatives for the benefit of patients.

Cannabis entering the skincare space

Looking more specifically at cannabis and skin ailments, the National Eczema Association has vouched for CBD as an option in the treatment of eczema, a skin disease that affects over 30 million people in the US.

“It has long been observed that cannabinoids possess anti-inflammatory, antimicrobial and anti-itch qualities,” the Independent reported.

A study from the the University of Colorado School of Medicine is looking further into the use of CBD for patients with psoriasis or eczema who have tried using topical steroids or topical immunomodulators.

Robert Dellavalle, professor of dermatology with the University of Colorado, told Inside Science that CBD products are growing in popularity, but the results are not being collected as properly as they could be.

“I believe it’s a wide-open horizon with tremendous potential that needs to be investigated, but there are a number of regulatory hurdles that need to be overcome and that’s where we are,” he said.

A medical study from the University of Colorado’s Anschutz Medical Campus shows the anti-inflammatory sensibilities of cannabinoids are the main reason why cannabis may be potent in combating skin diseases.

As part of its guide for healthcare practitioners, Tilray (NASDAQ:TLRY) indicates that medical cannabis could aid patients with inflammatory skin diseases such as dermatitis, psoriasis and pruritus.

“And while this research is still relatively formative, the results achieved so far clearly indicate its value and the promising potential of cannabis as effective medicine,” Tilray states.

Dave Berg, chief technology officer for software company Strainprint, told the Investing News Network the lack of sophisticated research has impacted the development of novel therapies for patients using cannabis.

“It’s been very difficult for people to study cannabis in a clinical way, but there’s been a ton observational data … There’s no really strong observational data set that allows us to make proper decisions,” Berg said.

In an effort to increase the research options available for cannabis, the Canadian federal government announced in 2018 that it would spend C$10 million over five years in order to assess the impact of cannabis use on the mental health of Canadians.

The government also promised C$10 million to the Canadian Center on Substance Use and Addiction for research purposes.

CBD skincare products getting traction

Amid developments geared at solving specific skin issues, more general CBD skincare products are also gaining popularity among many consumers.

For example, the introduction of cosmetics with cannabis elements, supported by Canadian licensed producers, is another upcoming element for the skin treatment segment of consumers. While not medical, this avenue does offer more options in terms of cannabis uses.

The endorsement from consumers for CBD ointments and other topicals for skincare has been documented with multiple products launched in the fractured US cannabis market.

One downside of the growth in these products is that it has led companies to make more and more claims about how these items can help with skin conditions. One study from the Journal of the American Medical Association warns that CBD products are often mislabeled online.

Takeaway on cannabis and skin cancer

In order for skin cancer patients to see the potential benefits from treatment with medical cannabis, much still has to change in Canada and abroad.

As the medical and recreational sections of the cannabis space continue drifting apart thanks to legalization efforts, the medical space should get more time to properly research and investigate the drug’s applications.

The early position CBD has gained in terms of skin maintenance and treatment could lead to further research on its impact on more serious diseases.

What’s more, GW Pharmaceuticals’ success, along with increased awareness of the medical benefits of cannabis, is moving the needle on research efforts geared at finding out how capable the drug will be in the medical space.

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The growth of the cannabis industry has made it possible for companies to offer many different investment opportunities through the major exchanges in Canada.

Previously known as the Canadian Venture Exchange, the TSX Venture Exchange is the sibling of Canada’s main listings board, the larger Toronto Stock Exchange.

For those interested in investing in cannabis companies, this exchange offers a variety of cannabis-related businesses, from growers to biotech companies looking for cannabinoid therapies.

Here the Investing News Network offers investors a growing list of all cannabis-related companies listed on the TSXV. Read on to learn more about them and their businesses.

48North (TSXV:NRTH)

This company is a marijuana producer looking to offer a variety of products for the recreational market in Canada, including for the health and wellness industry. 48North is a licensed outdoor grower of cannabis.

Auxly Cannabis Group (TSXV:XLY,OTCQX:CBWTF)

Created by Chuck Rifici, co-founder of Tweed, Auxly Cannabis Group operates as a cannabis streaming investment firm looking to boost various plays related to the sector.

Avricore Health (TSXV:AVCR,OTC Pink:AVCRF)

While Avricore Health operates as a healthcare technology company, in 2017 the firm made a deal with Emerald Health Therapeutics (TSXV:EMH,OTCQX:EMHTF) for the right to develop and sell endocannabinoid products in Canada to licensed pharmacies.

CanadaBis Capital (TSXV:CANB)

This cannabis company is targeting the Canadian market through a business model that is focused on cultivation, research, product development, retail and hemp.

Emerald Health Therapeutics

This Canadian cannabis company holds a variety of growing assets in the country. The firm holds a 50/50 joint venture for the management of a grower in BC with Village Farms International (TSX:VFF,NASDAQ:VFF).

EnWave (TSXV:ENW,OTC Pink:NWVCF)

EnWave is a technology company that has centered itself in the cannabis business thanks to its Radiant Energy Vacuum drying technology for organic materials. It effectively decreases the time from the harvest to the sale of cannabis products.

Elixxer (TSXV:ELXR,OTCQB:ELIXF)

Through its partners, investment firm Elixxer presently has significant interests in Australia, Jamaica, Switzerland, Italy and Canada.

Eve & Co. (TSXV:EVE,OTCQX:EEVVF)

Eve & Co. is a Canadian cannabis producer that, thanks to its subsidiary Natural MedCo, is targeting female consumers, specifically with premier brands.

Experion Holdings (TSXV:EXP,OTCQB:EXPFF)

Formerly known as Viridium Pacific Group, this cannabis investment firm holds a portfolio of assets, including its licensed producer Experion Biotechnologies in BC.

The Flowr Corporation (TSXV:FLWR,OTC Pink:FLWPF)

The Flowr Corporation is a vertically integrated cannabis company working on the cultivation and sale of medical and recreational marijuana in Canada.

FluroTech (TSXV:TEST,OTCQB:FLURF)

FluroTech is a technology company working on a cost-effective testing platform for the cannabis industry at large. The company’s proprietary CompleTest employs fluorescence spectroscopy technology to measure the specific contents of the product.

GTEC Holdings (TSXV:GETC,OTCQB:GGTTF)

This Kelowna-based cannabis company is vertically integrated, with operations in the cultivation, extraction and analytical testing sectors. The company is also pursuing retail operations through various investments.

Harvest One Cannabis (TSXV:HVT,OTCQX:HRVOF)

Harvest One Cannabis is a cannabis company with production and assets spread across Canada, Europe, Israel and Australia. The company gains its reach thanks to its three subsidiaries: United Greeneries, Satipharm and Dream Products.

Hill Street Beverage Company (TSXV:BEER)

This beverage maker has made its name thanks to its development of non-alcoholic beverages. Now the firm will offer consumers cannabis-infused drinks.

INDIVA (TSXV:NDVA,OTCQX:NDVAF)

INDIVA is a company focused on the supply of medical cannabis. Through an acquisition, it holds a licensed producer with an indoor cannabis facility in Ontario.

Khiron Life Sciences (TSXV:KHRN,OTCQB:KHRNF)

Khiron Life Sciences is a Colombia-based cannabis company raising capital in Canada. The firm has declared that it will seek to expand its presence through Latin America, including Mexico.

Meta Growth (TSXV:META)

This company is a retail operator managing cannabis shops across Canada. Meta Growth manages two recreational store brands: Meta Cannabis Supply and NewLeaf Cannabis.

Namaste Technologies (TSXV:N,OTCQB:NXTTF)

After a tumultuous management change, Namaste Technologies has centered back on its investments and the development of its marijuana play, which includes its online platform of cannabis consumer information.

Naturally Splendid Enterprises (TSXV:NSP,OTCQB:NSPDF)

Naturally Splendid Enterprises is a biotech company developing hemp products for consumers in the health and wellness space. It plans to pursue a stake in the edible cannabidiol market as well.

Pharmacielo (TSXV:PCLO,OTCQX:PCLOF)

Pharmacielo is another cannabis company originally from Colombia raising capital in the Canadian markets. The company is headquartered in Canada, but operates part of its marijuana growing in Colombia.

Radient Technologies (TSXV:RTI,OTCQX:RDDTF)

Radient Technologies is an extraction technology company that has dabbled in the cannabis sector thanks to a partnership with licensed producer Aurora Cannabis (TSX:ACB,NYSE:ACB).

Relevium Technologies (TSXV:RLV,OTC Pink:RLLVF)

Thanks to its subsidiary Biocannabix, this company has a cannabis play in the development of pharmaceutical-grade products infused with cannabinoid formulations.

SugarBud Craft Growers (TSXV:SUGR)

Like some other Canadian cannabis producers, this Alberta company specializes in growing and developing craft-style premium cannabis products.

Target Capital (TSXV:TCI)

Doing business as CBi2 Capital, this Alberta-based company’s investment strategy focuses on developing and managing a diversified portfolio of predominantly early stage cannabis opportunities.

Tetra Bio-Pharma (TSXV:TBP,OTCQB:TBPMF)

Tetra Bio-Pharma is researching and developing medicines based on cannabis and its elements.

Therma Bright (TSXV:THRM)

Therma Bright is a medical device company that has a subsidiary seeking to carve up a space in the technology space for medical and recreational marijuana thanks to its pain relief device.

WeedMD (TSXV:WMD,OTCQX:WDDMF)

WeedMD is another Canadian cannabis producer making product for the medical and recreational markets in Canada. Its subsidiaries include WeedMD Rx and CX Industries.

YSS (TSXV:YSS,OTC Pink:YSSCF)

YSS operates as an adult-use cannabis retailer with 17 stores in Canada.

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Cannabis stocks are getting a lot of attention, but what about cannabis exchange-traded funds (ETFs)? 

Now that the cannabis industry is beginning to mature, these marijuana-focused investment vehicles have become a budding part of the overall financial market.

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The marijuana sector has experienced highs and lows over the past few years, with some cannabis stocks performing better than others.

Both new and sophisticated investors are interested in the cannabis market — legal marijuana has opened the doors for many new players in the industry looking to expand their investment options.

But before any investor makes the decision to buy shares in the cannabis stock market, there are a number of key decisions that need to be made.

The goal of the Investing News Network (INN) is to educate investors and help them make key decisions with respect to their portfolios. To that end, we asked experts in the cannabis industry some of the most important questions to better understand how to invest in a cannabis stock. Here’s what they said.

How to invest in a cannabis stock: Does the company have a license?

One of the most crucial — if not the most crucial — components of any cannabis company is the type of license it may hold or a license it could be applying for in the future.

Following an arduous review process, Canadian companies can qualify to obtain licensed producer status from Health Canada. Companies can produce products for the medical and recreational spaces.

In order to capture the recreational marijuana market, a producer will need to sign a supply agreement with a province so its cannabis products can find a space on store shelves or online.

Going through the application process with Health Canada is intense, and the government body increased its initial requirements in 2019 when it announced that marijuana grower applicants will have to own a fully built site that already meets the health agency’s standards.

Health Canada said that after reviewing its licensing process, the government found its resources were being mismanaged and elected to enforce stricter initial standards for producer applicants.

Sean Gercsak, an investment advisor with Canaccord Genuity Group (TSX:CF,OTC Pink:CCORF), said licensed producers in Canada enjoyed impressive share price gains during the ramp up to marijuana legalization in October 2018.

According to Mason Brown, a director with Stoic Advisory, licenses are good indicators of where a company may be located in the marijuana supply chain.

The knowledge of what type of license — if any at all — a company holds can paint a clearer picture of where it is heading and if it’s worth investing in.

invictusmd-lo-rez-web_-blackfont1623x420-e1440617697416Invictus MD (TSXV:IMH  OTC: IVITF) is a cannabis company which represents a platform of licensed producers, under the Access to Cannabis for Medical Purposes Regulations (“ACMPR”), dedicated to providing high-quality, regulated pharma-grade cannabis for medical and recreational use. Our growers are supported by over 250 acres of buildable property with full access to our team of industry-leading horticulturists, biochemists, and project managers.   Successful Realized Return on Investment.

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“Depending on the stage of the licensing process, generating revenue could be anywhere from days to months to years away,” Brown said.

How to invest in a cannabis stock: Does the management team have experience?

Like any other industry, an investor should have a solid awareness of a company’s management team. For marijuana companies, this is especially important given the emergent nature of the space, the quick rise in options of stocks to buy and their market capitalizations.

“These are people you’re entrusting your money to, and if you can’t be confident about that, then by all means, don’t invest,” Alan Brochstein, a cannabis financial analyst with 420 Investor, told INN.

Brochstein suggested the first thing an investor should find out about the people leading a marijuana company is their experience in the market and their relationship to the industry.

For his part, Brown said two key indicators of an experienced management team are that some of the members have “strong, large-scale greenhouse growing experience” or executive experience from the pharmaceutical world — preferably someone involved with the launch of a blockbuster drug.

“Is management only here to make money, or do they have previous experience on the other side of the table, where cannabis made a material impact on their symptoms?” he said. “Together, these give a strong backing towards management’s passion for the industry and building their company.”

As the variety of available cannabis products branches out into other subsectors such as edibles, beverages and wellness products, it’s imperative to have a few team players on the roster that are well versed in these industries inside and outside the marijuana realm.

While interest and excitement for the marijuana industry continues to grow, pitfalls are still present in the space for those investing in marijuana stocks. A strong management team can mitigate investors exposure to such risks.

How to invest in a cannabis stock: What does its capital structure look like?

Brochstein said a quick review of any public company’s financial sheets will provide a lot of information on the company’s model, such as warrants and options.

What’s more, Brown recommended that investors find out how many shares management holds, if they have been buying or selling their own shares and how much capital the founders put into the company.

Brown added that investors should check if there are dilutive securities and what their exercise prices are, as well as the prices and valuations previous financings were done at, if a financing closed recently. He also said investors should know if the shares have a free-trading hold period, as it’s worthwhile knowing when that period ends.

An important fact to know is whether the company is currently facing any debt. This could prove important as the marijuana company continues working towards its goals. Investors might also want to ask a firm how much it has in cash savings, and how long that will keep the company afloat before it needs to raise more capital.

As cannabis companies mature into a world marked by increasing periods of economic upheaval, a strong balance sheet is a must. In the midst of the COVID-19 crisis, Nawan Butt, portfolio manager with Purpose Investments, told INN that in the Canadian marijuana sector in particular, attention is shifting to the sales performance of public cannabis producers.

Butt said in order to evaluate their ability to survive such pressure, he’s been dedicating a lot of attention to the balance sheets of public cannabis companies.

John Zamparo, an analyst with CIBC Capital Markets, appears to agree with this strategy. In a note issued to investors, Zamparo stressed that in times of economic uncertainty, investors should have “a hyper-focus on balance sheet strength,” which he believes helps in the long run to protect against potential downturns in the space.

Being cash flow positive and earnings before interest, tax, depreciation and amortization (EBITDA) positive, or at least on the path there, are in turn positive signals for investors that these companies will have a better chance at accessing capital than their peers.

“Capital has been very challenging for companies lately,” Andrew Udell, a financial expert with the Cannalysts, a popular research group, said to INN. “Companies that have demonstrated earnings and demonstrated EBITDA-positive status are going to be able to access capital.”

How to invest in a cannabis stock: What is the company’s strategy and its target markets?

These questions add to the concept of how much room for growth the company still has. Investors should be aware of the size of the company they are looking at, its specific market and where it can go after its initial strategy has been completed.

Brown told investors to evaluate the company’s aspirations and how likely it is to achieve those. “Does the company want to be a massive player in a small pond or a small player in a massive pond?”

He said a big distinction, and often an easy way to identify differences in companies, is the medical vs. recreational aspirations they may have.

“If a company is only focused on the medical segment then its total addressable market is going to be smaller than if it wanted to participate in both the medical and recreational markets,” said Brown.

Gercsak approves of investors being speculative and taking a look at cannabis stocks that may have aspirations to enter the recreational market — but only if they have a clear path to permitting and are well defined within the market.

How to invest in a cannabis stock: In summary

As any investor can see, the cannabis market has a lot to offer now and in the future. In fact, the North American cannabis market as a whole could grow at a compound annual growth rate of 15.5 percent to reach as much as US$104.9 billion by 2027.

Investors interested in the area are encouraged to look around by experts like Aaron Salz, founder of Stoic Advisory, who said the unique marijuana industry is growing extremely fast.

“It’s not just a national movement; rather, it’s a global movement, with many large countries enacting regulations that will provide legal access to marijuana to tens of millions of people,” he said.

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