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Cannabis Investors May Be Overlooking This Part Of The Market



  • Cannabis investors focus on direct operators extensively and may not be aware of ancillary companies.
  • I discuss six that trade on the NYSE or NASDAQ.
  • Performance has been good but could get better.

When I first began following the cannabis industry in early 2013, every single stock traded exclusively over-the-counter ("OTC"). Many of them didn't even file with the SEC! Fortunately, the market has evolved, and today most cannabis stocks trade on junior and senior exchanges in Canada as well as major exchanges in the U.S.

Those wishing to invest in companies that grow, process or sell cannabis but that are unwilling to invest in Canada or on the OTC face a very narrow universe, as major exchanges currently don't permit direct federally illegal cannabis companies to list. What this means is that those who want to buy a cannabis producer on the NYSE or NASDAQ are limited to Canadian licensed producers. This includes companies like Aphria (APHA), Aurora Cannabis (ACB), Canopy Growth (CGC), Cronos Group (CRON) and Tilray (TLRY), which each has a market cap in excess of US$1 billion. In total, the NYSE and NASDAQ have 10 companies listed that are direct cannabis producers.

While many may not be aware, there are a few companies that are leveraged to the American state-legal cannabis sector, providing ancillary goods or services, that trade on higher exchanges. These stocks have performed well in 2020, but I believe that they could continue to outpace the broad market as more investors become aware of them.

6 Ancillary Companies Trade on Major Exchanges

Akerna (KERN) is a relatively new company following MJ Freeway merging into a SPAC a year ago. The company, which was just added to the Russell 2000 index, has closed two acquisitions, and shareholders have just approved a third. For a company that has been around for a very long time providing essential software to the industry, it has generated disappointingly low revenue to date. The acquisitions add additional opportunity on several fronts, and I am hopeful that the company

This article was written by

Alan Brochstein, CFA profile picture
Leader of 420 Investor
Capitalize on cannabis with the help of a person on top of it for 10+ years

Alan Brochstein, CFA, was one of the first investment professionals to focus exclusively on the cannabis industry. He has run 420 Investor, a subscription-based due diligence platform for investors interested in the publicly-traded cannabis stocks that he has moved to Seeking Alpha, since 2013, and he is also the managing partner of New Cannabis Ventures, a leading provider of relevant financial information in the cannabis industry since 2015. Alan is based in Houston. He and his wife have two adult children.

Before focusing exclusively on the cannabis industry in early 2014, Alan had worked in the securities industry since 1986, primarily with the responsibility for managing investments in institutional environments until he founded AB Analytical Services in 2007 in order to provide independent research and consulting to registered investment advisors. In addition to advising several different hedge funds and investment managers, including Friedberg Investment Management, where he participated as a member of its investment management committee, Alan was also a senior analyst for the independent research firm Management CV. In 2008, he began providing a first-of-its-kind subscription-based service for individual investors, Invest By Model, which offered two different portfolios that investors could replicate in their own accounts. Alan also offered The Analytical Trader at Marketfy, where he used fundamental and technical analysis in a disciplined process to offer specific trade ideas geared towards swing traders.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Business relationship disclosure: At New Cannabis Ventures, we work with several publicly-traded companies, including Aurora Cannabis, Charlotte's Web, Cresco Labs, Fire & Flower, INDIVA, KushCo Holdings, Organigram, Plus Products, Schwazze (Medicine Man Technologies), TerrAscend and Vireo Health, providing each of them with Investor Dashboards. Please see our disclaimer for more detail: http://www.newcannabisventures.com/disclaimer/ . None of these companies has paid me to write this article, and I am not recommending investment in any company mentioned in this article, including the clients of NCV.

I don't personally own any of the stocks mentioned or any cannabis stocks at all, but I may hold stocks mentioned here in one or more model portfolios at 420 Investor. I am not making any investment recommendation in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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