Invest in the ‘Berkshire Hathaway’ of the Cannabis Industry
November 17th, 2016
News, Top News
Warren Buffett has a simple strategy when it comes to investing: Find a high-quality company that’s undervalued, acquire a significant stake, and let management keep doing what works. The billionaire investor has accumulated these companies in Berkshire Hathaway Inc. (NYSE: BRK) – a former textile company that was converted into a holding company with a market capitalization that is nearing $400 billion and a modest P/E ratio of 17x.
In this article, we will look at a company that’s taking a similar approach in the burgeoning cannabis industry by acquiring successful companies. While these companies are certainly riskier than Berkshire Hathaway’s blue chip giants, they offer investors much greater potential for upside and a higher probability of success than any individual company.
A Proven Approach
Invictus MD Strategies Corp. (OTC: IVITF) (CSE: IMH) acquired an 82.5% stake in Future Harvest, a 20-year-old hydroponics and indoor growing company, as its first investment. In February, 2016 Future Harvest sold its lighting division to Sunblaster Holdings for $4.8 million in cash, which represented a 350% return on investment in just 11 months. Management used the cash to invest in its nutrients business and is returning $1 million back to shareholders.
The reinvestment into the nutrients business has paid off, judging by the business’ third quarter financial results. During the three-month period, Future Harvest’s revenue increased 50% year over year to $587,800 driven by increasing demand for its nutrients. The company has become so successful that management plans to spin out the business into its own public company in January of 2017 if shareholders approve the measure. Each shareholder of Invictus MD as of the date of record will receive the same number of shares in the spun-out Future Harvest public company.
The Future Harvest story illustrates management’s strategy to acquiring companies with proven brands, strong customer focus, and significant growth potential within the cannabis industry. While recreational legalization has opened the door to significant industry growth, the market remains extremely fragmented and ripe for management expertise. Invictus brings business planning and process integration to help unlock value in already-successful businesses.
Invictus MD Strategies has already expanded its portfolio beyond Future Harvest and has several acquisitions in its pipeline. As of mid-November, the company owns 100% of PODA Technologies – developer of a unique dry herb disposable vaporizer system.
PODA Technologies’ innovative dry herb disposable vaporizer is in the final stages of development and is anticipating a Spring 2017 launch. The vaporizer will provide customers with an effective, reliable, and convenient way to purchase and vaporizer consumable substances, while its digitally connected PODs will greatly enhance user experience by communicating real-time information about the contents of each POD to Bluetooth-enabled devices. Each POD is completely self-contained to avoid any product touching the heating element or the vaporizer unit. This not only adds longevity to the device but is also extremely convenient for customers.
Additionally, Invictus recently announced a deal to acquire up to 60% of a business in Las Vegas in the latter stages of applying for a cannabis cultivation license. The Nevada Medical Marijuana Cultivation License intends to complete a preliminary inspection in late-2016 and obtain its final license during the first quarter of next year. Upon issuance of the license, the company will have the option to acquire a 10% equity stake with the option to exercise another 50% expiring within six months.
The 10% valuation of the Nevada license was priced and announced prior to the recent elections in which Nevadans voted to make adult use of marijuana legal. Should the approvals come in as expected, this could end up being a great deal for Invictus and the company’s shareholders due to the greatly increased market in light of the new legalization.
Dan Kriznic, CEO of Invictus MD, commented, “These ballot results prove to be especially exciting for Invictus MD. Moving forwards, not only do we have the opportunity for expansion of Future Harvest Development’s fertilizer into the United States, but we can also reap the rewards of our upcoming Nevada cultivation license. Our analysis into the market let us jump ahead and secure an option for pre-ballot pricing, which will result in concrete benefits for our shareholders. I believe this new development illustrates Invictus MD’s dedication to matching industry growth and to excelling within the industry.”
Finally, Invictus has an agreement to acquire 49% of Zen Labs, a fully functioning microbial and environmental analytical testing laboratory in Kelowna, British Columbia. Zen Labs is awaiting a Section 56 Class Exemption Dealer’s license from Health Canada under the Narcotic Control Regulations, in which Zen Labs will be licensed and authorized to conduct analytical testing services for dried marijuana, fresh marijuana and cannabis extracts.
Invictus MD Strategies Corp. offers investors a unique opportunity within the burgeoning cannabis industry. Unlike many other investments in the space, investors can acquire a diversified portfolio of companies in a single stock – much like Berkshire Hathaway. The company’s management team has already demonstrated its acumen with Future Harvest and there are several near-term catalysts for the stock ahead.
For more information, visit the company’s website at www.invictus-md.com.
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