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Wall Street’s Attraction to Cannabis Continues to Grow

Oct 10, 2016 • 12:23 PM EDT
3 MIN READ  •  By Michael Berger
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Wall Street is becoming increasingly more focused and attracted to the legal cannabis sector, the fastest growing industry in the world.

From Cowen and Co. picking up coverage on Kush Bottles (KSHB), an OTC stock, to Goldman Sachs initiating coverage on GW Pharmaceuticals (GWPH) with a Buy rating and a $189 price target, it is clear that the tide is turning.

Legal Cannabis Coming

Legal cannabis is coming and the 2016 election will serve as a catalyst to the cannabis industry as a record number of states are voting on some form of legal cannabis.

With California voting on legal recreational marijuana and a legal medical marijuana initiative on the ballot in Florida, the elections represent a watershed moment for the cannabis industry.

Not only are a record number of states voting on legal cannabis, but the polls show that legal cannabis is leading in every state where there is such an initiative on the ballot.

How to Capitalize on the Movement

From an investor standpoint, there are several ways to capitalize on this opportunity but the best avenue is through investing in publicly traded companies.

We have highlighted the following five stocks that are levered to results of the elections and that we view as some of the top investment opportunities:

  1. GW Pharmaceuticals (GWPH): Continues to be our favorite investment i the cannabis sector and we are even more favorable on GWPH after Goldman Sachs initiated coverage with a Buy rating and $189 price target. Goldman Sachs said that the price target is based on blend of its $161 discounted cash flow valuation (85%) and its $349 target based on acquisition (15%).
  2. Canopy Growth Corp (CGC) (TWMJF): After edging lower on Thursday, CGC and TWMJF rallied more than 7% on Friday and ended the week on a high note. Mushroomstocks is favorable on Canopy and we continued to hold onto shares due to: 1) its leading Canadian market share, 2) its management, which continues to execute on initiatives and create value for shareholders, 3) its partnerships and recent acquisitions, and 4) its growth potential. We are also favorable on OrganiGram (OGI) (OGRMF), Aphira (APH) (APHQF), Mettrum (MT) (MQTRF), and Aurora (ACB) (ACBFF).
  3. Kush Bottles (KSHB): The shares are trading at $3 after KSHB fell less than 2% on Friday. We are favorable on Kush Bottles due to the product it provides, its geographic diversity, and its continued execution. Kush Bottles is focused on providing exit bag products that are in compliance with regulations and we see a lot of opportunity for growth as new state markets open and existing markets develop.
  4. MassRoots (MSRT): The shares recently bounced off its all-time lows and rallied more than 55% from that level. MSRT is trading at $0.59 after the shares ended Friday up more than 13% and this move came after the company announced that it paid off all its debt and cut salaries for its management team. We remain favorable on MassRoots as it is poised to benefit from new members being able to download and use its app after the election. We see further upside from current levels and recommend keeping an eye on shares!
  5. American Cannabis Company (AMMJ): The company’s diverse revenue stream and continued success makes AMMJ an attractive long-term opportunity. American Cannabis is levered to the results of the election as the company has clients in several states voting on some form of legal cannabis. We are particularly focused on Florida for the company and expect to see them generate more revenue after the election is over. 
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Authored By

Michael Berger

Michael Berger is Managing Partner of StoneBridge Partners, LLC and Founder of Prior to entering the cannabis industry, Michael was an Equity Research Analyst at Raymond James Financial covering the Energy Sector. Michael has been featured in publications such as The Street, Bloomberg, US Money News, and hosts various cannabis events across North America.


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