A Look At 2014’s Leading Cannabis Stocks
Alan Brochstein
April 23rd, 2014
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Even though cannabis-sector stocks have dropped more than 50 percent since the March peak, the Benzinga 420 Marijuana Index is still up 244 percent YTD.
The burst at the beginning of the year came after widespread media coverage of Colorado’s recreational legalization, but along with NASDAQ, the MJ market has recently corrected.
Heightened scrutiny by FINRA and the SEC (which has now suspended five cannabis-related stocks) has made the cannabis sector more volatile.
With the big “420” celebration behind us, investors will be paying attention to several catalysts over the remainder of the year, including the implementation of Canada’s new medical marijuana program, the roll-out of retail marijuana in Washington this summer, and the November elections, where Alaska (recreational) and Florida (medical) are both expected to legalize marijuana.
Not all stocks in the sector move with the rest of the group, with performances varying. Investors have become wary of some names and enamored by others.
With the market beginning to bounce from oversold conditions, let’s take a look at some of the largest names in the sector:
Despite their recent SEC suspension, Advanced Cannabis Solutions (OTC: CANN) is still trading up 589 percent in 2014.
The company’s March halting appears to be the result of restricted shares being traded by a non-insider. Investors seem encouraged by the innocence of the company’s insider-holders, as well as their expansion into Canada.
CANN has a powerful business model that is based on leasing their facilities to cultivators, providing consulting and ancillary products to their clients, while supporting them with access to capital.
CannaVest (OTC: CANV) has gained less than one percent in 2014 after giving up the massive gains from the beginning of the year. After a large insider trade, negative publicity from Forbes, and an earnings restatement, investor confidence has plummeted. The company’s business model appears to be at risk, as the barriers to entry for hemp production seem likely to fall.
Tranzbyte (OTC: ERBB) is trading up over 1800 percent this year, with investors focused on a marijuana based vending machine known as ZaZZZ. The pink-sheet company is yet to disclose that the first ZaZZZ customer is simply the result of a consulting contract with a related firm.
Creative Edge Nutrition (OTC: FITX) has rallied over 1400 percent since the turn of the calendar. The company, which is in the process of building a large new growth facility in Canada, has also expanded through the acquisition of Hemp Technologies.
FITX, which also trades on pink-sheets, expects to complete two years of audits by the end of April, which will allow them to up-list to a more respectable market.
This move, as well as the recent addition of an independent Chairman to their board, seems to raise the company’s odds for success.
Shares of FusionPharm (OTC: FSPM) (which is also traded via pink-sheets) have increased almost 600 percent. The company (and investors) have benefit from cultivation expansion in Colorado and Canada.
While the company’s fundamentals appear to be strong, investors should be wary of a large block of convertible preferred stock that was issued to the CEO and his brother. This preferred stock could boost the shares outstanding to 155mm.
GW Pharma (NASDAQ: GWPH) is up 11 percent despite NASDAQ’s very weak bio-tech sector. The company’s shares dropped at the beginning of the year due to the the issue of additional shares at $36 in January.
From there, the stock exploded up to almost $87, but has sharply corrected in the last month.
Investors are excited about upcoming P3 trials for GWPH’s leading drug, Sativex.
Along with that drug, there is potential for an anti-seizure medicine, Epidiolex, to obtain orphan status with the FDA (which would protect them from the emerging competition). GW Pharma appears to be one of the strongest plays in the sector.
Hemp, Inc. (OTC: HEMP) has gained about 320 percent this year.
This fellow pink-sheet has engaged in several transactions with other penny-stock companies as part of a “consulting service,” and has pre-announced sales of over $5 million for Q1 in mid-April.
The market appears to discount the report, as it is likely that the sales are not tied to cash flow. In 2013, the company reported stock received from an affiliate as revenue, later dumping the depressed shares into a spin-off.
mCig (OTC: MCIG) has jumped 522 percent thus far, and has become the largest vaporizor accessories company in terms of market capitalization.
See also: 1st Annual Cannabis Investor Conference In June 2014
mCig’s CEO Paul Rosenberg cleverly donated his stake in spin-off VitaCig, a move that will allow the company to show positive equity on the balance sheet (while retaining the shares). With funding from the CEO, mCig also recently acquired a table-top vaporizer company, Vapolution.
Though Medbox (OTC: MDBX) shares have only increased 18 percent so far, the company issued a 100 percent dividend in January that consisted of restricted stock.
Assuming that the value of the restricted stock is $5.00, (which is the level the stock traded at in 2013) the gain is about 45 percent.
The company’s founder has stepped down from the Board of Directors, which spurred the appointment of a couple of independent board members, as well as a new employee.
MDBX recently up-listed from pink-sheets to the OTCQB market.
Medical Marijuana, Inc. (OTC: MJNA) is up almost 37 percent YTD. The company is yet to resolve litigation related to its Red Dice Holdings subsidiary.
The company has little cash on hand, and the plunge in the value of their investment in CANV has likely weighed on the stock. MJNA also has no ability to issue more shares unless management is willing to remove its “management-imposed cap” of 950 million authorized shares.
The company has embraced a multi-level marketing strategy by partnering with a new multi-level-marketing firm, Kannaway.
Nuvilex (OTC: NVLX) has gained 250 percent this year.
While the company has other aspects to its business beyond cannabis, the enhancement of its Scientific Advisory Board for its Medical Marijuana Sciences unit has played a role in attracting investor interest.
Dr. Mark Rabe presented at the Americans for Safe Access meeting in Washington, D.C. earlier this month.
GrowLife (OTC: PHOT), which is currently suspended until April 25, is (or was) up 233 percent as of April 9.
The company is probably the most widely held security in the sector in terms of market cap, most likely due to a strong positive perception of their management team, easy access to capital, and the “picks and shovels” business model that is tied to the build out of cultivation facilities.
The SEC notice was somewhat vague, pointing to “concerns regarding the accuracy and adequacy of information in the marketplace and potentially manipulative transactions in GrowLife’s common stock.”
PHOT management issued a press release that failed to add clarity to the situation.
Terra Tech (OTC: TRTC) has increased 436 percent so far this year, with investors appreciating their balanced business model.
The Edible Gardens brand (a branch of TRTC), which is sold in the NYC metropolitan area as well as in Florida and Indiana, offers consumers very high quality hydroponically-grown produce, but investors are likely more interested in the company’s plans to pursue a medical marijuana license in Nevada.
To learn more about the expanding cannabis financial industry, check out the 420 Investor on Marketfy.
Disclosure: 420 Investor has positions in FITX, GWPH, MCIG, PHOT and TRTC in one or more model portfolios.
This article was published by CFN Enterprises Inc. (OTCQB: CNFN), owner and operator of CFN Media, the industry’s leading agency and digital financial media network dedicated to the burgeoning CBD and legal cannabis industries. Call +1 (833) 420-CNFN for more information.
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