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The legal cannabis movement scored its most significant victory yet as voters in California, Massachusetts and Nevada approved state ballot measures that legalized recreational cannabis while voters in Florida, North Dakota and Arkansas approved ballot measures that legalized medical cannabis.
The only state that did not pass a legal cannabis ballot initiative was Arizona.
The 2016 election changed the landscape of the cannabis industry. The passage of Proposition 64 in California, a state with 39 million residents, makes the use and sale of recreational cannabis legal along the entire West Coast. The passage of Amendment 2 in Florida is also significant as it legalizes medical cannabis in the third largest state.
The cannabis industry continues to develop and expand throughout much of the country. Massachusetts is the first state east of the Mississippi to legalize recreational cannabis.
How to Capitalize on New Opportunities
For the last year, we have said that the 2016 elections will be a watershed event for the cannabis industry. Although the results of the election will be a turning point for the legal cannabis industry, we are only in the first inning of what will be a multi-decade growth cycle.
When it comes to investing in the cannabis industry, the best avenue would be through publicly traded companies. For that reason, we want to highlight stocks that will benefit from the election results:
- Medicine Man Technologies (MDCL) provides cultivation consulting services and has clients in Arizona, California, Florida, Maryland, Nevada, Oregon, Ohio, Oklahoma, Ohio, Pennsylvania, Texas, and Puerto Rico. We are favorable on MDCL’s leverage to the cannabis industry as it stands to benefit from ballot initiatives passed in California, Florida, and Nevada.
- American Cannabis Company (AMMJ) provides advisory and consulting services for cannabis businesses in the United States and Canada. American Cannabis generates revenue from the sale of products used in the cultivation, processing, and sale of cannabis. The company also generates revenue through its consulting clients across the country. Although AMMJ is poised to benefit from the election results, the shares are up more than 1600% since September 1st and we are watching how AMMJ trades to see if there are legs left in this run.
- MassRoots (MSRT) has been called the Yelp of the cannabis industry and its mobile app can be downloaded only in states where medical cannabis is legal. The election will be a catalyst for MSRT because its user base and businesses network will benefit from the passage of ballot initiatives in California, Florida, Massachusetts, Nevada, North Dakota and Arkansas.
- GW Pharmaceuticals (GWPH) is the bellwether of the cannabis industry and tends to benefit from any positive development. Although this is the case following yesterday’s results, GWPH may move lower in the near-term as a result of increased market volatility. We continue to view GW Pharmaceuticals as the best long-term cannabis investment due to its deep pipeline of products, its successful FDA testing results, its Wall Street coverage, and its valuation as its shares are trading well below the average Wall Street price target. We continue to view GWPH as a buy opportunity on weakness today.
- Kush Bottles (KSHB) is focused on providing exit bag products that are in compliance with regulations. We see a lot of opportunity for growth now that new state markets will open and existing markets will expand and develop. We are favorable on Kush Bottles due to the product it provides, its geographic diversity and its continued execution. Shares of Kush Bottles should continue to move higher on account of this news.
- Finore Mining Inc. (FIN: CSE) (FNREF: OTC) is poised to benefit from the passage of Proposition 64 following its acquisition of KushTown USA, a California based cannabis infused products company. KushTown’s products are sold in more than 500 dispensaries across California and the company is focused on penetrating new markets in that state as the demand for cannabis infused products will continue to grow.
- On Monday, Arcturus Growthstar Technologies Inc. (AGS: CSE) (AGSTF: OTC) signed a letter of intent to acquire a 10-acre greenhouse that has been operational since 1959 and meets Florida’s criteria for cultivating cannabis. The greenhouse is located in a county designated to legally cultivate, process and dispense cannabis. During the past 12 months, the greenhouse has generated over $2.6 million in revenue with EBITDA of over $400,000. We are favorable on AGSTF’s leverage to Florida and expect shares to move higher.
- Terra Tech (TRTC) is levered to the results in California and Nevada through its multiple subsidiaries. Its Blum medical cannabis collective has one location in California and four in Nevada (2 are operational). TRTC will also benefit as we expect to see its IVXX subsidiary sell more cannabis products out of its California and Nevada dispensary locations.
- Through its three subsidiaries, Signal Bay (SGBY) provides research, consulting services, and analytical testing services to the cannabis industry. Last week, SGBY completed the acquisition of Green Style Analytics Lab in Yuba City, California. Following this acquisition, the company’s EVIO Labs division now has five operational testing labs. We expect SGBY to benefit from increased demand as a result of the passage of Proposition 64.
- Medical Marijuana Inc. (MJNA) is poised to benefit from the outcome of the election given the company’s brand recognition and its pipeline of products. The company was incorporated in 2009 and has strong brand recognition due it being the first publicly traded cannabis company in the United States. MJNA is comprised of a diversified portfolio of cannabis companies and brands that continue to flourish as new markets open and existing markets continue to develop. Although the shares are up significantly over the last two months, favorable market sentiment and strong brand recognition should send MJNA higher.
- AeroGrow International, Inc.(AERO) is one of our favorite long-term investments levered to the cannabis industry that is poised to see increased demand following the passage of these ballot initiatives. In April 2013, AeroGrow entered into a strategic partnership with Scotts Miracle-Gro (SMG) to continue to expand the indoor gardening market, including the development of large-scale lighting products. SMG owns more than 30% of AERO and we expect to see SMG fully acquire the company in the near future.
Important Investor Disclosures
This article was produced by StoneBridge Partners LLC. All information relied upon for the above report is publicly available via various research resources, including third-party sources we consider reliable, but we do not guarantee that any of such information is accurate or complete. StoneBridge Partners will often receive or expect to receive compensation from the subject companies. If StoneBridge Partners does receive compensation, the relationship and amount of compensation will be disclosed in our Terms and Conditions.
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