The big anticipated CBD bull market ran into a number of unforeseen problems in 2019. But now, as we kick off a new year, we may have fresh hope rising in the space for a number of reasons.
The most important driving factor for some sort of near-term turnaround in the CBD stock sector is just basic cyclicality: many of these stocks are simply too cheap given the forward curve for demand growth in the space and the beating the sector has taken.
But there are other reasons, including a coming legislative challenge to the current slow-moving status quo. In fact, there is movement from the US Congress to sidestep the FDA on CBD and push for it to be added to the list of legal dietary supplements in the Federal Food, Drug and Cosmetic Act through an amendment measure and to exclude CBD from prohibited foods.
The bill was introduced in the House by the chairman of the House Agriculture Committee with bipartisan support last month, so it has strong prospects to pass the House. If it gets to the Senate, Mitch McConnell is vulnerable and Kentucky is the capital of Hemp farming. The implications are relatively clear.
That could help to spark some recovery in the space as well. As such, we have a few candidates to have squarely on the radar: Growth Corp (NYSE:CGC), Smart Decision, Inc. (OTCMKTS:SDEC), Charlotte’s Web Holdings Inc (OTCMKTS:CWBHF), and Tilray Inc (NASDAQ:TLRY).
Canopy Growth Corp (NYSE:CGC) has clearly been working hard to establish itself as a leader in the CBD space for the past 24 months. We would strongly expect a bounce in the space would evidence itself well for CGC shareholders.
The company has a strong and well-developed venture arm, and understand how to scale a new strategy. And the market recognizes this and will assume the company has a very real path to leadership here if ROI in CBD remains on track as a long-term premise.
Canopy Growth Corp (NYSE:CGC) engages in growing, possession, and sale of medical cannabis in Canada. Its products include dried flowers, oils and concentrates, softgel capsules, and hemps.
According to its own materials, the company offers its products under the Tweed, Black Label, Spectrum Cannabis, DNA Genetics, Leafs By Snoop, Bedrocan Canada, CraftGrow, and Foria brand names. It also offers its products through Tweed Main Street, a single online platform that enables registered patients to purchase medicinal cannabis from various producers across various brands.
CGC managed to take in revenues of over $90M in its most recent quarterly data – which represents a rate of top line growth of nearly 250% on a year/year basis. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($3.2B against $372.8M).
Smart Decision, Inc. (OTCMKTS:SDEC) is possibly the most interesting name on this list because it represents something new in the space.
The company is a next-generation consumer-based CBD algorithm innovator that has designed a proprietary, patent-pending “Smart Decision” algorithmic CBD product platform (CBDSmartDecision.com) geared toward aiding consumers in selecting the right CBD-based products to suit their specific needs.
The company also just announced that it has reached 50 affiliate brands as members of its platform ahead of its upcoming launch.
Adam Green, Smart Decision CEO, commented, “We want to foster a relationship with our shareholders and with the larger market built on a rock-solid foundation of credibility. If we say we’re going to do something, then we’re going to do it. This idea lies at the very core of our identity as a company.”
According to the release, management notes that the next step will be to decide on a precise level at which to cap the number of affiliate members on the CBDSmartDecision.com platform. The Smart Decision platform is set for an advanced preview for interested investors and members of the public this week at the Expo in Las Vegas, and is on schedule for beta launch at the end of Q1.
“We don’t want to take on too many affiliates,” continued Green. “We can pass on more value to our shareholders by reinforcing a sense of exclusivity. Judging by the current flood of demand we are seeing from brands interested in being incorporated into our platform, this is hardly a stretch. Most importantly, we already have a sufficient field of top-tier brand partners to credibly represent a sense of comprehensive product coverage to consumers. At the end of the day, that represents one of the big check-boxes on the path to achieving what we set out to do here.”
Charlotte’s Web Holdings Inc (OTCMKTS:CWBHF) is the current leader as far as pure-play names in the CBD space, with over 9,000 points of distribution across North America. Hence, a pop in CBD on a thematic basis would obviously play our well for CWBHF shareholders.
The company sells its products online as well as through distributors, and brick and mortar retailers. Founded by the Stanley Brothers, the company’s premium quality products start with proprietary hemp genetics that are responsibly manufactured into whole-plant hemp extracts naturally containing a full spectrum of phytocannabinoids, including CBD, terpenes, flavonoids and other beneficial hemp compounds. Industrial hemp products are non-intoxicating.
Charlotte’s Web Holdings Inc (OTCMKTS:CWBHF) develops and distributes hemp-based cannabidiol (CBD) wellness products. Its products include CBD hemp oils, capsules, topicals, and pet products that feature CBD hemp oil extracts.
Charlotte’s Web pulled in sales of $33.5M in its last reported quarterly financials, representing top-line growth of 50.6%. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($67.2M against $18.3M).
Tilray Inc (NASDAQ:TLRY) acquired hemp foods company Manitoba Harvest last year, which puts it squarely in the CBD marketplace. The stock has been hit on debt-servicing costs, but short interest appears high and a return of momentum in the CBD theme should pay off here.
The company offers its products in Argentina, Australia, Canada, Chile, Croatia, Cyprus, the Czech Republic, Germany, New Zealand, and South Africa. Tilray, Inc. was incorporated in 2018 and is headquartered in Nanaimo, Canada.
Tilray Inc (NASDAQ:TLRY) pulled in sales of $51.1M in its last reported quarterly financials, representing top-line growth of 408.6%. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($122.4M against $130.2M, respectively).
