I completely comprehend that cannabis stocks suitable now are about as well-liked with investors as a New York Yankees jersey is at a Boston Red Sox game. But regardless of the dismal functionality for most cannabis stocks this year, there are some excellent possibilities for extended-term investors.
My focus is mostly focused on the U.S. market place, which continues to expand considerably. 3 stocks that I assume appear like excellent picks to get in October are Charlotte’s Internet Holdings (OTC:CWBHF), Revolutionary Industrial Properties (NYSE:IIPR), and Trulieve Cannabis (OTC:TCNNF). Here’s why.
1. Charlotte’s Internet
If you assume that CBD items will continue to get traction in the U.S. and elsewhere, you are going to almost certainly like Charlotte’s Internet. The corporation pioneered hemp CBD and reigns as the No. 1 brand in the total hemp-derived CBD market place.
Charlotte’s Internet reported year-more than-year income development of 45% in the second quarter. I anticipate sales will choose up even extra momentum with increasingly extra retailers stocking the company’s CBD items. Charlotte’s Internet has extra than doubled the quantity of retail places carrying its items so far this year. Just a couple of days ago, it announced that 738 Vitamin Shoppe retailers in 45 states had began promoting its CBD gummies.
My take is that Charlotte’s Internet is positioned superior than any other hemp CBD corporation to transition effectively to a big player in the international customer packaged goods (CPG) market. It surely enjoys superior brand recognition and a broader retail distribution network. I assume that the corporation also has a stronger management group, with CEO Deanie Elsner and a number of essential executives claiming comprehensive practical experience in the CPG market.
One particular wild card for Charlotte’s Internet is what actions the U.S. Meals and Drug Administration (FDA) could possibly take with establishing regulations for CBD items. Delays or quite tight restrictions on CBD items would hurt the corporation. Having said that, the cat is out of the bag with CBD — and the FDA knows it. More than the extended run, affordable regulations for the CBD market need to pave the way for sustained development for Charlotte’s Internet.
two. Revolutionary Industrial Properties
Revolutionary Industrial Properties, also identified as IIP, is extra than 30% off its all-time higher from just 3 months ago. I assume the pullback presents a excellent obtaining chance.
It really is crucial to initially fully grasp why IIP’s shares have retreated. The corporation announced in July that it was promoting 1.three million shares to raise money. This brought on dilution in the worth of current shares and was reflected in IIP’s reduce providing value for the stock providing. In addition, general weakness amongst cannabis stocks weighed on IIP.
But what is even extra crucial is that IIP’s enterprise prospects have not weakened one particular bit. In my view, these prospects are even stronger now that the cannabis-focused true estate investment trust (REIT) has almost $164 million in extra money to invest in new properties thanks to its stock providing.
I seriously like IIP’s “rinse-and-repeat” enterprise model of investing in cannabis properties, leasing them out to obtain appealing extended-term returns, and then reinvesting its money into expanding even extra. With a number of state health-related cannabis markets nonetheless in their early stages, IIP need to have lots of possibilities to rinse and repeat in the future.
three. Trulieve Cannabis
One particular of IIP’s tenants is an additional of my preferred cannabis stocks to get in October: Trulieve Cannabis. But when Trulieve leases a home in Massachusetts from IIP, it is the company’s Florida chance that is seriously intriguing.
Trulieve at present operates 33 health-related cannabis dispensaries in Florida. It expects to bump up that total to 44 retailers by the finish of 2019. And Trulieve certainly dominates in the state’s health-related cannabis market place with a market place share of almost 50%. The No. two corporation in Florida claims a market place share of significantly less than 14%.
The health-related cannabis market place in Florida could soar to extra than $1.7 billion by 2022. If Trulieve can keep its existing market place share, the corporation could be on track for annual sales of close to $800 million in the not-as well-distant future. That is fascinating for a stock with a existing market place cap of significantly less than $900 million.
And there are extra development possibilities for Trulieve as nicely. The company’s expansion into California, Connecticut, and Massachusetts need to allow Trulieve to increase sales. There is even a opportunity that Florida could legalize recreational marijuana, with efforts underway to spot a constitutional amendment to do so on the state’s ballot in 2020. Current polls show that 67% of Floridians help legalizing pot. If Florida follows in the footsteps of the 11 other states that have legalized recreational marijuana, Trulieve will have a considerably bigger chance.