The biggest players in the cannabis industry are unwittingly commoditizing their product; thereby driving the price down. I don't like that model.
I like the retailers who are going to be the names everyone starts to recognize when they pass the stores in their area.
The winners in that segment will be the producers and the retailers who are developing their own brands. The owners of those brands that eventually roll off people's lips will be worth a higher multiple.
Ironically, the segment I like MOST have the cheapest PPS's.
I deem those companies the essential suppliers of CDB oils, the extractors. They are the least sexy and least volatile of the group.
Extractors are analogous to the midstream companies in oil and gas; those being the storage and pipeline companies. Transport is essential otherwise you can't move the product from field to refinery, or distribute it throughout the USA.
The extractors are like the midstream companies in that they are building a "book" of long term production contracts that last for 2 or 3 years. Cash flow is secure and growing. These companies are also expanding their facilities to meet demand.
Just like a pipeline company will sell out a commitment to move a certain amount of gas or liquid for a period of years before the pipeline company contracts to build the pipeline, cannabis oil extraction companies are signing long term contracts before they build out more or expanded extraction facilities.
The cannabis extractors are the companies that take raw flower and extract the oils that are used in edibles, vapes, beverages, balms, and every other product you see on store shelves with CDB. Those products cannot be made without the extractors' function.
The extractors market is also bigger than just publicly held companies. Anyone who wants to make CDB products has to get the oils from an extractor.
The bigger players all do their own extraction, but they are also contracting out extraction to augment their own processes.
This segment of the industry is essential, especially for any of the incubator companies up through the mid-majors in size who won't be investing in the extraction infrastructure.
