Cannabis and Hemp Sector Ideas

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>>> Medical Marijuana Update: Organigram leads the weedco Power Rankings



Chris Parry Chris Parry, Stockhouse.com

August 19, 2014



http://investorshub.advfn.com/OrganiGram-Holdings-Inc-TSXV-OGI-28825/




Alrighty, let’s do this. The medical marijuana industry has now had its chance to hype-spike and reality-trough and so, with the smoke now clearing, it’s time to take a long look at which companies in the ganjasphere are delivering on their promise, and which still have some work to do.

The list below features some companies that have yet to go public, with my viewpoint based on their likelihood to open at a double and stay there, while others have been in the sector for a while and have earned their position based on either delivering what they’ve promised, or on the value proposition I believe they present to shareholders.

This list is entirely subjective. It’s my opinion and mine alone. And no matter how many times you call me names, it won’t change it.

It’s not a list of the biggest plays, nor the fastest climbing share prices. To make this list, a company simply needs to be on the ascendancy, or at the bottom of their stock chart and likely to roll upwards soon, and have a business plan that makes sense.

Yes, Tweed and Affinor homers, I know you’re going to resent the list. Can’t be helped. Make your own list.

But understand this: in my experience, the louder a company and its shareholders bleat about criticism, the more likely that criticism will very quickly be shown to be deserved.

Act like you’ve been there.

THE LIST:


1.ORGANIGRAM (TSX:V.IX, Stock Forum – soon to be V.OGI):Coming soon and, for mine, likely to double. Organigram’s differentiator from the other grow plays out there is two-fold: First, they’re entirely organic, and (I confirmed this a few days ago) certified as such. Second, they’re bilingual from top to bottom of the company, which gifts them 30% of the Canadian MMJ market right off the top. I’m not big on grow companies as a rule, but these guys have a manageable grow footprint, which means they’re not going to be doing private placement raises to pay their monthly hydro bill, they’ve already sold out of product, and they’re going to have the first mover advantage for the entire French-speaking market (and the Maritimes, which is where they’re located). In addition, they just raised a boatload of cash and turned away some three times what they accepted. That’s some serious dollar signs you’re seeing before your eyes. Many eyes are on the Bedrocan launch, but Organigram is going to be there first and the game is theirs to lose.


CANNABIS TECHNOLOGIES (CSE:C.CAN, Stock Forum): This play is so simple it’s scary – take existing pharmaceutical therapies, rip them apart to figure out what’s the active ingredients are in same, figure out which of those ingredients are also found in cannabinoids, and lay down some IP on those cannabinoid therapies. GW Pharma is doing it the traditional way, with five years plus of trials before a product will be ready for market. C.CAN is fast-tracking it and has already cranked out glaucoma and arthritis IP in just a few months. Those ‘big brains’ I have been long talking about as being part of Affinor’s dream team roster? They’re principals in this one. I see it as very undervalued, and expect there to be a WiLan like vault of potentially profitable IP at the company by year’s end.


BEDROCAN (TSX:V.PCC.P, Stock Forum – soon to be V.BED):The jolly green giant in the European space, Bedrocan is already selling weed to patients, though it’s flying it in from the Netherlands because it doesn’t yet have a running facility locally. Minor details, however, as the Dutch team has plans to come in and not just train the locals, but oversee the grow for a substantial period, as I understand it. If you like Tweed (TSX:V.TWD, Stock Forum) as an investment (and more power to you if you do), you should be paying attention to this one as it has the power to smoosh the early mover, has raised a ton of financing, and will get a lot of US investor attention.


ABATTIS BIOCEUTICALS (CSE:C.ATT, Stock Forum): Abattis has been pretty quiet over the last few months after a rip-roaring $2+ start to proceedings, and that’s seen their share price settle at around $0.50 five months later. Abattis is my vertical integration play of choice, as they have so many moving parts, you almost feel like at least one of those has to pop as a genuine profitmaker. Between Biocube Grow Systems, Phytalab, iJuana Cannabis, Experion Technologies, Biocell Labs, Instant Payment Systems, North American BioExtracts and Northern Vine, the catch for Abattis will be getting all the parts to work well together and not just bleed capital. That said, they’ve got plenty of assets that can be flipped for cash when and if needed. I’ve touted them as a legitimacy play for a long time and I’m sensing activity on the horizon. Time to watch hard.


SUPREME PHARMACEUTICALS (CSE:C.SL, Stock Forum): Yes, I know, a third grow play in my top five goes against what I’ve long told anyone who’d listen – that grow plays are no play. But here’s why Supreme, which still doesn’t have its MMPR, makes the roster… flat out value. At just $16m in market cap, and with a now-tight share structure and a $5m raise on the way the company says will make its Ontario facility MMPR-ready, and with ops man John Fowler being just about the best I’ve met in the grow space, you’d be silly not to consider this as a spec option. If the MMPR comes, it’ll fly. That said, the risk inherent in a Supreme bet is, if that MMPR doesn’t come, what happens next? That Plan B is what I’d like to see, but I’d like to see it from about 800 other applicants too. The stock is being hurt right now by a low-priced private placement, but I see the current price as a value buy-in.


CHLORMET TECHNOLOGIES (CSE.C.PUF, Stock Forum): Wow, did the TSX do a number on these guys or what? Once a high flyer, the Venture trade halted the company right at the start of what looked like it might have been a zip to a dollar, insisting it perform a change of business process before it could be resumed, thereby killing the good vibes with investors and ultimately profoundly damaging the play. The company is looking to rebuild, however, and is working to stake a claim in the Washington State recreational market with a leaseback deal with a licensed 21k sq. ft. grower. They’ve also got a London, Ontario facility nearing completion and hoping for an MMPR, but the Washington State play brings the Plan B that I wish more companies had and, frankly, it might just be a great Plan A. At a market cap of just $2.8m and with an ultra-tight float, this could be an absolute barnstormer on any good news. Way oversold.


NATURALLY SPLENDID ENTERPRISES (TSX:V.NSP, Stock Forum):When I go food shopping at Save-On and come face to face with a ‘medical marijuana’ company’s product line next to the Splenda and the Zevia soda, that to me is a sign things are going well. Though we can argue as to whether V.NSP should actually qualify as an MMJ company based on its retail hemp seed lines, in a sector awash with inherent danger and over-promotion, a company actually getting its products onto shelves is something that matters. Add some big plans for partnerships with large food conglomerates (hemp in your cereal anyone?), spectacular packaging and a constant presence at every. Single. Event. And what you’re left with is a good long play that’s near doubled its share price in the last six months.


VODIS PHARMACEUTICALS (CSE:C.VP, Stock Forum): You may recall this one as Southbridge Resources not long ago, a company that I talked about often as being hard to buy into, and harder to get info on. Well we have info now, not the least of which is the news that former Vancouver Mayor and Senator Larry Campbell, a long time fighter for Canadian drug reform, is on the company advisory board, along with former BC Minister for the Environment and federal Conservative Party co-chair John Reynolds. The company has a small 12k sq. ft. grow/test/training facility in BC that they hope will get MMPR approval, but I hear rumblings about the company looking south for growth opportunities in Washington State, and that makes a lot of sense to me. Their growers have been at it for a long time and they have 25 strains to pick from. It’s a small play, to be sure, but I like where it’s going.


GEONOVUS MINERALS (TSX:V.GNM, Stock Forum): Lots of mining going on with this stock right now, which is how it’s not being hectored to death by the TSX for its medical marijuana exploration in Uruguay. But that Uruguay play is interesting. Here’s the skinny: Uruguay is full recreational right now. But growing there is a fool’s errand because 1) no import/export allowed just yet and 2) there’s an election coming that will likely see, based on popular support, the recreational rules overturned. Where Geonovus is interesting is they’re not looking at growing weed, but rather using Uruguay as a research facility without the limitations inherent in US and Canadian research. As an example as to why this matters, North American hemp legally has to have no THC, which limits its yield and uses to grain, oil and fibre. Uruguayan hemp has no such limitation and offers far better yield and use cases that stretch into construction materials, plastics, composites and more. Add a lack of THC limitations in therapeutic research and a local arm’s length partner that is engaging with both sides of government and local academia and this is one that, if all goes to plan, could be very interesting. Lots of pieces have to come together to make it so, but get it on your radar. If Geonovus fully dives into medical marijuana, it owns the Uruguay game from the outset. $2.2m market cap, tight float, and the chance that they’ll literally strike gold isn’t a bad side bet.


CALYX BIO-VENTURES (TSX:V.CYX, Stock Forum): An absolute mess – that’s what this company was as it was coming through its carinata experiment last year. With a Business Development Canada partnership that left the company pretty much edged out of its own deal by BDC machinations, the company has shifted gears, shifted sectors, and is now full bore gunning at the tech end of the medical marijuana game, and might have found the fertile ground it needs to thrive. Calyx has acquired Cannigistics Agri-Solutions which, long story short, is one of a handful of companies trying to own the cannabis software solutions game. Cannagistics has a plan to work with government to make their platform the tracking/compliance/grow scheduling/inventory software of choice for the US and Canada, and they have serial tech-entrepreneur Roger Forde and IR gorilla Keir Reynolds on board to make it happen. Early looks are niiiiiice. The market cap is ultra-small and the share structure tight. Ripe for a run if it can hit the ground running.



The Disappointments:



NOTE: These are the companies that either crashed hardest, never got started or, in the last two cases, lost direction. I'm not saying don't buy them. I'm just not amped about what they've done with the last six months.


1.GREEN AND HILL INDUSTRIES (OTO:GHIL, Stock Forum): Down 50% today. Down 97% since April despite continual column inches from lazy editors who see a minor celebrity involved and figure that makes a story. If it’s not a pump and dump, it’s doing a really good impersonation of one. Called it. Nailed it. Golf clap.
VERDE SCIENCE (OTO:VRCI, Stock Forum): From 9c to 1.5c in three months, even with Nancy Pelosi’s son on the advisory board. Called it. Nailed it. Golf clap.


SATORI RESOURCES (TSX:V.BUD, Stock Forum): Yep. Such a good ticker symbol, such a long time to do nothing with it. I’ve helped the company along a little recently after several months of kicking it to bits for its lack of action, and there are things on the move at the company which will warrant it coming off this list in the weeks and months ahead but, right now, taken over the last six months, it absolutely qualifies as a disappointment. One thing to note: The last three dips Satori has taken have been downtick trades at the close, which points to someone screwing with the stock price.


TWEED (TSX:V.TWD, Stock Forum): No need to recount all the issues that have come with Tweed over the last six months. They’re documented and, it appears, ongoing. I have yet to meet a grower yet who hasn’t said Tweed asked them to come take a look at their crop for some advice, only for no advice to be feasible. The company has got a (small, weird) MMPR for its second facility (in really quick time and much to the annoyance of many less politically connected companies), which I believe it intends to use for early stage growing only (based on the lack of on-site security vault). And, sure, they have money to continue buying their way out of trouble. But at some point you need to sell a lot of weed as a grow play just to keep the lights on and I don’t see it. Yet. But if anyone has the size to fix it, I could see Tweed doing so.


AFFINOR GROWERS (CSE:C.AFI, Stock Forum): Considered leaving this one off the list, if I’m honest, because the danger in saying anything negative about Affinor is you unleash a horde of rabid fanboys who refer to the CEO by his first name and are shocked – outraged! – that anyone could have soured on their bet and believe such a change in position has to have stemmed from corruption and/or mental breakdown. But here’s the deal with Affinor and what took them out of my top five (where they admittedly spent a large part of the year): Too much, too soon, for too much money, with too few checks and balances. I can get behind growing strawberries while you wait for your MMPR. I can get behind vertical integration acquisitions. But I can’t get behind the Chairman buying the Chairman’s own company, for a lot of money, when another company owns the license for its weed IP. And I can’t get behind buying the company that builds parts for the things the Chairman’s company sells because they were nice to the Chairman when times were tough. And I can’t get behind buying a rooftop garden that even the founder of Lululemon, the city of Vancouver and tens of millions of dollars of seed money couldn’t keep afloat. They do have a Washington State weed play that they’re now pointing to as el grande salvation, and they’ve just bought a piece of another shell which points to maybe a spin-off or two in the future. But to properly pull it all together in the coming months, they’ll need a period of compression and reflection (see Abattis) where they figure out how much money they have, how each component is working, what their burn rate is, and how all of those pieces apply to the big picture. For mine, the company has strayed from the days where I pegged them as ‘the smartest guys in the sector’ and now they’re being ‘the smartest guys in the room’. Cue fanboy outrage.


Disagree with my assessment? Feel free to tell me why, but try to keep it to actual facts, not lame insults and accusations. Happy to give anyone a right of reply if they actually put some thought into it. Remember, your behaviour in defending your investment reflects upon your investment.

--Chris Parry
http://www.twitter.com/chrisparry

FULL DISCLOSURE: Cannabis Technologies and Calyx Bi-Ventures are Stockhouse Publishing clients.

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