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.

 

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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.

 

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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.”

 

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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.


INNdepth

Want more details? Check out these articles for more INNdepth coverage:

Want an overview of investing in cannabis stocks? Check out Why Consider Investing in the Cannabis Industry?


This is an updated version of an article originally published by the Investing News Network in 2018.

Don’t forget to follow us @INN_Cannabis for real-time news updates!

Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.

 

Cannabis - Will The Fortune 500 Join The Party?

 
Our Exclusive FREE Report Contains Information You NEED To Know About Cannabis Stock Investing!
 

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Ability to test the taste, smell, feel and visual appeal of beverages in development will provide a significant advantage for BevCanna and its white-label clients

Emerging leader in innovative health and wellness beverages and products, BevCanna Enterprises Inc. ( CSE:BEV , Q:BVNNF , FSE:7BC ) (“ BevCanna ” or the “ Company ”) announces today that it has been granted an amendment to its Health Canada-authorized Cannabis Research License to include sensory evaluations of cannabis beverages in its product development trials. This update to the License will allow BevCanna to conduct on-site human assessments of the taste, smell, feel and visual appeal of its products in development.

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NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF UNITED STATES SECURITIES LAWS

Avicanna Inc. (” Avicanna ” or the ” Company “) (TSX: AVCN) (OTCQX: AVCNF) (FSE: 0NN), a biopharmaceutical company focused on the development, manufacturing and commercialization of organic and sustainable plant-derived cannabinoid-based products, is pleased to announce that it has closed a non-brokered private placement (the ” Offering “). Under the Offering, the Company has issued an aggregate of 4,587,022 units (the ” Units “) at a price of CAD$0.85 per Unit for aggregate gross proceeds of approximately CAD$3.9 million.

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Mendo operates an online portal for medical patients that ships nationwide through www.Mendocannabis.ca. Glacial Gold™ CBD and THC vapes and distilled oils will be distributed by Mendo to their medical cannabis clients in Quebec and across Canada.

Quebec is the third-largest cannabis market in Canada, representing approximately 15%[1] of Canadian cannabis retail sales in the country, and approximately 22% of the Canadian population[2].

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Figure 1: Glacial Gold CBD and THC Vapes and Distilled Oils

To view an enhanced version of Figure 1, please visit:
https://orders.newsfilecorp.com/files/5347/100149_54a84d0cc4d15940_001full.jpg

Canadian spending on medical cannabis totaled $587 million in 2020[3]. Medical cannabis has become an important component of Canadian healthcare, with $119 million of medical cannabis purchases reimbursed by the Federal Government through Veterans Affairs Canada in 2020[4]. Despite Canada’s progressive cannabis regulation, price is still a major barrier for many medical patients.

Nextleaf leverages its patented high-efficiency ingredient processing technology to gain a competitive advantage and improve cannabis oil economics through the low-cost production of cannabis distillate standardized for potency and purity.

“Launching accessibly priced Glacial Gold™ vapes and distilled oils in Canada’s medical market and in Quebec have been important milestones for Nextleaf. We believe Mendo and their Quebec-based medical platform is positioned to become one of the leading suppliers of medical cannabis to patients and veterans in this country,” said Paul Pedersen, co-founder and CEO of Nextleaf Solutions. “Our innovative technology enables us to produce high purity ingredients at a low cost per molecule to offer patients quality CBD and THC products.”

“We are delighted to work with Nextleaf to offer Glacial Gold™ products through our recently expanded national portal, accessible by medical patients Canada-wide,” said Jay Schwartz, Director of Mendo Medical. “We are excited to feature the seven Glacial Gold™ SKUs that launched last month in British Columbia and to help them launch two new CBD SKUs that we think patients will be eager to experience.”

Nextleaf launched its award-winning, prohibition-era brand Glacial Gold™ in British Columbia last month, receiving national attention for quality products at disruptive price points. Included in the initial launch of Glacial Gold™ were seven total SKUs, consisting of four 1-gram vape SKUs and three distilled oil SKUs.

Glacial GoldDistilled CBD 50 Oil, Distilled THC 30 Oil, and Distilled 30:30 Blend feature high-purity distillate in a base of organic coconut MCT oil for a premium consumption experience, without premium pricing. A clean tasting and neutral oil allows for the greatest flexibility in use and consumption occasions.

The initial vape lineup from Glacial Gold is offered in two potency levels to match the consumer’s tolerance level or consumption occasion. The Session THC Vape features a full potency THC profile for cannabis enthusiasts who seek a more elevated experience and connection. The Anytime 1:1 Vape is formulated with a balanced THC and CBD profile for consumers looking for a more moderate, go-to vape.

About Medicibis

Medicibis is a federally licensed producer of dried cannabis and distributes its products under the brand name ENDO. Medicibis operates out of its 20,000 sq.ft. facility located 15 minutes from downtown Montreal in St Jean Sur Richelieu. Medicibis operates an online portal for medical patients that ships nationwide through their website mendocannabis.ca. Mendo’s menu has been carefully curated to offer a variety of products from licensed producers from all over Canada. Mendo is positioned to become one of the leading suppliers of medical cannabis to patients and veterans in the country.

About Nextleaf®

Nextleaf is a federally regulated producer of cannabis oil that owns one of the largest portfolios of U.S. patents for the extraction and distillation of cannabinoids. Nextleaf distributes cannabis vapes and distilled oils under its award-winning prohibition-era brand, Glacial Gold™, and supplies cannabis distillate to its wholesale customers. Nextleaf’s proprietary closed-loop automated extraction plant in Metro Vancouver efficiently transforms cannabis and hemp grown in B.C. and throughout Canada into high-purity cannabis distillate at an industrial scale. Nextleaf is developing delivery technology and differentiated cannabinoid-based formulations through its Health Canada Research Licence with sensory evaluation of cannabis via human testing. The Company owns 17 U.S. patents and has been issued 95 patents globally.

Nextleaf Solutions trades as OILS on the Canadian Securities Exchange, OILFF on the OTCQB Market in the United States, and L0MA on the Frankfurt Stock Exchange.

Follow the Company across social platforms: Twitter, LinkedIn, Facebook, and Instagram.
www.nextleafsolutions.com

Follow Glacial Gold™ across social platforms: Instagram, Twitter, and Facebook. www.Glacial.Gold

For more information please contact:
Jason McBride, Corporate Development
604-283-2301 (ext. 219)
jason@nextleafsolutions.com

On behalf of the Board of Directors of the Company,
Paul Pedersen, CEO

Certain statements contained in this press release constitute “forward-looking statements”. All statements other than statements of historical fact contained in this press release, including, without limitation, those regarding the Company’s ability to capitalize on its IP portfolio, the Company’s strategy, plans, objectives, goals and targets, and any statements preceded by, followed by or that include the words “believe”, “expect”, “aim”, “intend”, “plan”, “continue”, “will”, “may”, “would”, “anticipate”, “estimate”, “forecast”, “predict”, “project”, “seek”, “should” or similar expressions or the negative thereof, are forward-looking statements. These statements are not historical facts but instead represent only the Company’s expectations, estimates and projections regarding future events. These statements are not guarantees of future performance and involve assumptions, risks and uncertainties that are difficult to predict. Therefore, actual results may differ materially from what is expressed, implied or forecasted in such forward-looking statements. Additional factors that could cause actual results, performance or achievements to differ materially include, but are not limited to the risk factors discussed in the Company’s MD&A for the most recent fiscal period. Management provides forward-looking statements because it believes they provide useful information to investors when considering their investment objectives and cautions investors not to place undue reliance on forward-looking information. Consequently, all of the forward-looking statements made in this press release are qualified by these cautionary statements and other cautionary statements or factors contained herein, and there can be no assurance that the actual results or developments will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, the Company. These forward-looking statements are made as of the date of this press release and the Company assumes no obligation to update or revise them to reflect subsequent information, events or circumstances or otherwise, except as required by law. The CSE has not reviewed or approved the contents of this press release.

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