The Last Week in Cannabis and What It Means for Your Portfolio

The Last Week in Cannabis and What It Means for Your Portfolio

The cannabis sector is on fire again. Last Friday, Aphria Inc. (APHA) stock jumped 40 percent after a particularly successful quarter. Cronos Group Inc. (CRON) is increasing its exposure to the CBD business. West Coast Ventures Corp. (WCVC) continues to be one of the most interesting small cap stocks in the market today.

Aphria makes waves

Canadian cannabis producer Aphria last Friday caused a big stir in the market. The Company recorded net sales of 128.6 million Canadian dollars in the fourth quarter of the past fiscal year 2018/19 (as of May 31). Compared to the third quarter, this represents an increase of 75 percent. Compared to the same period of the previous year, sales were almost ten times stronger The company’s net profit was 15.8 million Canadian dollars.

These revelations have helped Aphria recover from a long slump and will likely restore investor confidence in the company, and sector, as a whole.

Cronos Group expands into CBD

Meanwhile, Cronos Group, Canada’s third largest producer of cannabis, is equipping itself for higher demand. The company invests $ US 300 million and buys Redwood Holdings’ CBD business. Cronos takes over Redwood’s four operational subsidiaries as well as the Lord Jones brand, which includes body lotions with CBD and bathroom salts, among others. Financially, Cronos can speed up the takeover loosely after Altria entered Cronos at the end of last year for around 1.9 billion US dollars.

West Coast Ventures Corp. broadens its CBD offering

West Coast Ventures is already interested as it represents the first CBD restaurant stock in the United States. The company took its Illegal Burger fast-casual dining concept and combined it with a very different kind of special sauce, CBD.

TWO of WCVC’s flagship Illegal Burger franchises have already seen some solid success. The IB CitiSet location is on pace to exceed $700,000 in sales in its first full year of operations and the IB Writer Square restaurant in Downtown Denver is on pace to exceed $1 million in sales this year.

The company recently expanded on this offer with a new Ilegal Pizza in restaurant in Florida. Like other locations Illegal Pizza offers Illegal Brands CBD water and sachets and it has already proven popular with local diners.

Legislation pushes forward

There has been slight progress at the legislative level as well. Senator Kamala Harris has put forward a bill in the US to decriminalise cannabis at the federal level. Harris is hoping for additional tax revenues from this. A five percent federal tax on the sale of cannabis is planned in the states that have legalised cannabis.

The long term outlook for the cannabis sector remains excellent. However, the industry is currently in a period of consolidation. Shares of Aurora Cannabis, Canopy Growth, Cronos & Co have had to drop significantly in recent months. The values also slipped below the STOP rates of the shareholder.

That being said the mentioned stocks above all offer an interesting opportunity for investors, with the usual small-cap caveats in the case of WCVC.

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