Most attractive medical marijuana companies for investors
QUESTION: “I live where medical marijuana is legal. We think medical marijuana will be available long before recreational cannabis in most jurisdictions. As a result, we think it makes sense to invest in companies that are focussed on medical cannabis for now. I would like to know which medical marijuana companies you think are most attractive and stable. I have followed you for a long time on Seeking Alpha. I know you like Lexaria and want to know if you think they are a takeover target. Also we will buy Canopy Growth based on your work.”
KY from Pennsylvania, USA
ANSWER: The way things have evolved so far, it is licensing that determines the balance between medical and recreational cannabis. For example, in Canada, a Licensed Producer can grow either medical or recreational cannabis. Prior to October 17, 2018, all LPs grew medical cannabis because recreational was not allowed. Now that legalization is in effect, whether a company produces medical or recreational cannabis or both is up to their corporate policy assuming they are licensed to produce and sell.
In the U.S., it is a state by state matter with the federal government holding the hammer of determining that cannabis is a Schedule 1 drug and illegal. To date there are 31 states that allow medical marijuana including the nine that also allow recreational cannabis.
Alaska: medical and recreational
California: medical and recreational
Colorado: medical and recreational
Maine: medical and recreational
Massachusetts: medical and recreational
Nevada: medical and recreational
New Hampshire: medical
New Jersey: medical
New Mexico; medical
New York: medical
North Dakota: medical
Oregon: medical and recreational
Rhode Island: medical
Vermont: medical and recreational
Washington: medical and recreational
Washington, DC: medical and recreational
West Virginia : medical
There are also several other countries throughout the world that have different laws covering cannabis. For example, Colombia, South America has approved medical marijuana.
Here are a couple of companies engaged primarily in medical cannabis that are worth your consideration:
Sunniva (CSE: SNN): is about to commence production of high quality cannabis from their California campus located in Cathedral City, California. They have commenced construction of their Canadian campus in Okanagan Falls, British Columbia that should begin initial production in the first half of 2019. Management is committed to produce high quality, medical cannabis to be sold on a business to business basis. SNN has “retained Canaccord Genuity to review their strategic alternatives that may include a sale of, an investment in, or a joint venture for some or all of the Company’s Canadian assets with the intention to spin out the Company’s Canadian assets into a separate Canadian entity and apply to list its shares on the Toronto Stock Exchange and the NASDAQ Stock Market.” Recently trading at under $5 per share, the stock appears greatly oversold and undervalued.
Khiron Life Sciences (TSXV: KHRN): is licensed and operates in Colombia, South America and is licensed only to produce medical cannabis and oils. Their initial grow facility is near completion and about to commence planting. Colombia has a positive international reputation for growing coffee and cut flowers as well as various fruits and vegetables. Cannabis is a natural extension of this agrarian activity. Operating in Colombia will enable KHRN to produce high grade cannabis at a highly competitive cost and gives is an edge in expansion within Latin America.
KHRN has built an amazing team of Colombian executives and employees supported by a group of Canadian and American professionals. They are the leader in cannabis in Latin America with a strong base in Colombia, a recent entry into Chile and plans to expand into Mexico with the assistance of Vicente Fox, former President of Mexico, CEO of Coca-Cola Mexico and a well-known cannabis proponent who recently joined the Board of Directors.
Khiron has a strong business model for growth including the education of doctors and other medical professionals in the benefits of medical cannabis.
In the recent correction in cannabis stocks, KHRN has dropped to exceptionally attractive levels mainly due to the exercise of $1.20 per share warrants. Once these warrants are dealt with I expect a sharp recovery in the price of the shares.