The biggest multi-decade opportunity for investors right now is the Canadian government's legislation to legalize recreational marijuana by this time next year—and the first companies to win government approval will the high-risers.
In a sector that's already seen stocks bust the borders with 1000% spikes, there is one company that currently has 2 of the only 50 licenses to cultivate in Canada, positioning itself to burst out of the gates as new legislation creates a multi-billion-dollar industry over night.
With one of the largest land packages to build cultivation facilities and 2 current licensed facilities located in two provinces in Canada, small-cap Invictus MD (TSX:IMH.V; OTC:IVITF) is set to rise.
It's already the first licensed medical marijuana company to pay a dividend to shareholders, and with its strains reaching into everything from pain management, cancer, epilepsy, anxiety and – most lucratively of all—recreation, the sky is the limit here.
We're now just shy of a year away from the start date of legal recreational use, and there are already predictions of a looming supply shortage.
Financial Post reports... there will soon be 3.8 million recreational users... But the market is only currently equipped to handle 150,000 medical marijuana patients.
The industry is scrambling to add growing capacity once the legal barriers are tossed aside.
Deloitte estimates this industry could be worth a whopping $22.6 billion annually. That's more than the combined sales of beer, wine and spirits.
Right out of the gate, Invictus MD, owner of two of just 50 licenses, has demonstrated that it will lead the way. The company holds $30 million in cash and is already generating dividends—a feat unheard of in the pot industry.
That's why it's called 'Canada's Cannabis Company'—it's already cemented market share for medical marijuana use, and now it's one of the first in and ready to fill the supply gap for a massive recreational push to supply 3.65 million new users.
#1 The Minting of the Next North American Billionaires
When you suddenly legalize a product that's already got a massive market under the table, you mint billionaires overnight. Just like it did at five o'clock on December 5, 1933—the moment Prohibition ended, and a billion-dollar industry (even then) was reborn.
It's already happening: The shares of the medical marijuana producers more than tripled last year, just at the prospects.
• AXIM Biotechnologies (NASDAQOTH:AXIM): exploded 1,720 percent
• Corbus Pharmaceuticals (NASDAQ:CRBP) was up 431 percent
• Aphria (NASDAQOTH:APHQF) grew 381 percent
• Aurora Cannabis (NASDAQOTH:ACBFF) was up 299 percent
• Canopy Growth Corp. (NASDAQOTH:TWMJF) up 259 percent
• Medical Marijuana (NASDAQOTH:MJNA) up 254 percent
• GW Pharmaceuticals (NASDAQ:GWPH) was up 64 percent
The smart money is investing too. Tribeca Investment Partners, a boutique fund manager, used bets on marijuana companies to help generate a 145 percent return over the year, according to Fortune magazine and Bloomberg. Nearly US$20 million of its investment gains in 2016 came from marijuana stocks, including Aurora Cannabis and Canopy Growth.
Then, in early April, Canada launched its first marijuana exchange-traded fund (ETF), giving investors diverse exposure to this tantalizing sector. The Horizons Medical Marijuana Life Sciences ETF (TSX:HMMJ) launched on the 4th of April on the Toronto Stock Exchange with 11 Canadian-listed stocks and four U.S.-listed stocks.
On 23 June, Invictus was included in the ETF.
The frenzy surrounding Canada's marijuana market is palpable, and will be even more frenzied on 1 July 2018.
And Invictus is way ahead of this game: It's already got a license to produce in this multi-billion-dollar market.
#2 A Pot Pipeline Going in Every Direction
The company's dream team targets small- and mid-size companies with significant growth potential and directs their strategies towards profitability.
They've made some game-changing acquisitions at just the right time; yet, their valuation is far below their peers, making Invictus a real entry point into this lucrative market if you're looking for outsized gains.
The company owns over 33 percent of AB Laboratories Inc., which received its cultivation license last October. The catalysts here are mounting, with the sales license expected in Q2. This facility has a capacity for 1,000 kilograms, with active expansion plans underway.
In May, Invictus also closed its acquisition of 100 acres with AB Ventures Inc., and is targeting production here of 25,000 kilograms by 2020.
In Alberta, Acreage Pharms received its license to cultivate under ACMPR and has a purpose built 7,000 square foot facility and a 30,000-square-foot expansion plan. Invictus MD currently owns 100 percent of this license.
It's a brilliant set-up for a small-cap company with CAD$30 million in cash and 78 million basic outstanding shares.
#3 Pot Dividends? The Impossible Because Reality
The logic of Chairman and founder Dan Kriznic is one that shareholders will certainly appreciate: "It made sense to give back [to those] who supported us."
Not only have shareholders gotten dividends in an industry that generally hasn't been mature enough to pay out—yet—but there's a reason this company is a uniquely attractive entry point: Invictus MD's market cap to funded capacity is about 5 times the industry standard.
Right now, the company has a funded production capacity of about 18,000 kilograms which, compared to its peers, suggests Invictus MD is significantly undervalued.
Its smart acquisitions have made all the difference.
Prior to October, when it entered the license producer market, Invictus MD was busy acquiring all the 'picks and shovels' of the cannabis space. Invictus MD has made one smart move after another, and it's always the 'pick and shovel' guys who have real longevity. First, they acquired a fertilizer company that was cash-flow positive, and then they sold one of its lighting divisions for $5 million, having paid only $900,000 for it less than a year before.
They've been nurturing their shareholders along with their crops. Invictus MD's focus on two verticals—cannabis cultivation and cannabis fertilizer and nutrients—gives it a competitive, low-cost advantage on this playing field.
Now they've got prime real estate to add to their portfolio, and this is one cash crop that should keep growing.
#4 'Top 40 under 40' in Vancouver
There's a reason this company is positioned for great things. Kriznic has been rated one of Business in Vancouver's 'Top 40 under 40', and he's put Invictus on the fast track to the market. He has built over a billion dollars in value for shareholders in his past.
And not only are the strains pre-approved by the health authorities, but they will reach into every corner of this market. It's a marijuana octopus that has left no stone unturned.
Those strains include high THC strains used to help with pain management and cancer, and high-CBD strains used for epilepsy and anxiety disorders. And when it comes to recreational—the company is gearing up to work on all strains available.
This combined with its tight capitalization structure and access to capital could make this a prime breakout target over the coming weeks and months.
They're also not new to this game. Invictus MD isn't just jumping on the green train at the 11th hour; it has been laying the ground work for a very smart expansion strategy.
Kriznic has turned $10-million companies into $150-million annual revenue generators. They've got a license to grow in more ways than one, and while they might not be a 'green giant' just yet, their undervaluation suggests they could be.
#5 Massive Demand Just Waiting to Be Legalized
The fundamentals are clear—demand is set to further explode once recreational use of cannabis becomes legal.
Where does this leave us with supply? Playing some serious catch-up, which is a producer's dream. In Canada, legalizing recreational marijuana could result in demand of about 400,000 kilograms of cannabis in its first full year, according to Canaccord Genuity analysts. And that's just for recreational use. Demand for medical cannabis is also growing at a significant pace, and the total combined demand for the first year could be 575,000 kilograms.
(Click to enlarge)
Source: New Frontier Data
Arcview Market Research of San-Francisco predicts that legal marijuana sales will reach close to $22 billion by 2021—up from nearly $7 billion last year. That's an annual growth rate of 26 percent, and it's in line with Deloitte's own estimations.
In Canada alone, Canaccord Genuity predicts that the recreational marijuana industry could reach $6 billion in sales by 2021.
If you haven't considered an entry point into this market yet—the window of opportunity is closing fast. Stocks are already shooting up on anticipation, and by 1 July 2018, high valuations will slam doors shut and only billionaires will come out. By that time, Invictus MD (TSX:IMH.V; OTC:IVITF) should already be walking with the green giants.
Other companies worth watching:
Knight Therapeutics Inc (TSX:GUD): Knight Therapeutics Inc has seen consistent growth in recent times and CEO Jonathon Ross Goodman has made his intentions of expanding the company's product pipeline clear. A marijuana boom in Canada is sure to be on the radar of this dynamic pharma giant.
Aphria Inc (TSE:APH): Aphria Inc is engaged in the production and selling of medicinal marijuana, and while the stock has trended downward since April, the constant profits here suggest there is a lot of upside. The recent pro-marijuana legislation from the Canadian government is sure to boost companies with the reputation of Aphria Inc.
MedReleaf Corp (TSE:LEAF): As a licensed producer of cannabis-based pharmaceutical products, MedReleaf Corp has a head start on the coming boom in Canada. Early July has seen a bounce in the stock price, and investors may look to ride it upward from here.
Valeant Pharmaceuticals Intl Inc (TSE:VRX): This pharma giant already produces products with a synthetic cannabinoid similar to THC, and the boom in Canadian marijuana is likely to see an increase in similar products. With very little downside, this stock appears to have bottomed out in April and is sure to benefit from Canada's pro-marijuana legislation.
Jean Coutu Group PJC Inc (TSE:PJC.A): The recent crash in Jean Coutu Group PJC Inc appears to have resulted in an oversold Canadian pharma stock with plenty of upside in the long-term. The marijuana legislation that has just come out of Canada provides yet more bullish news for a pharma company that looks like a real value buy.
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