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Marijuana Set To Boom On A Global Scale: Investors Look For New Opportunities

|Includes: Aurora Cannabis Inc. (ACB), CGC, ICNAF
Summary

Popular Opinion Has Helped Build Investor Sentiment In Support Of Public Companies Within The Space.

North America Isn't The Only Continent Offering Opportunity.

Germany Could Be The Next Market For Companies To Target.

The North America green rush has become a force to be reckoned with since the early 2000’s but things have gotten kicked into overdrive since Colorado went full recreational in 2014.  We’ve now begun to see a second coming for the market as Canada prepares for national recreational legalization next year. But there’s much more to the story that investors should be considering right now.

Suppose you had to answer this question: Where is the largest lithium operation right now? Certainly popular opinion would say “the lithium triangle” but the facts show the large lithium operations right now are in Australia.  This is mentioned because investors have very slim but very direct access to less than a handful of companies set to benefit from this opportunity. 

Similarly, with cannabis, investors have yet to really look beyond what’s in front of their eyes right now (being Canada & the US) and broaden their knowledge on the global industry as a whole.  According to an article on MarijuanaStocks.com, in 2016, Canopy Growth (TWMJF) launched a joint venture with Entourage Phytolab S.A. to market medical marijuana in Brazil and earlier this year established Spectrum Chile SpA to expand their business into Chile. Furthermore, in September, Canopy announced a supply license agreement with Alcaliber, S.A, who is licensed to grow and market marijuana for medical and scientific purposes in Spain.

Today there are as many as 700 cannabis clubs in Spain and it has many calling this a “gold mine” of opportunity. The company has also set up subsidiaries or partnerships in Australia, Denmark, Germany, and Jamaica. 

Similarly, a recent entrant to the marijuana industry has also found itself rapidly expanding on a global scale and they haven’t even changed their name yet.  CNRP Mining (CRPGF) announced earlier this year that it was getting involved in the space through a deal with X-SPRAYS, a developer of 8 health care and life enhancement nutraceutical products that target pain relief, sleep, libido, and even recovery.  The main product lines are based around an oral spray that includes both CBD and THC solutions.

Today, the company announced that it had signed an exclusive distribution agreement with a distributor in Germany and it will allow them to supply products to Austria, Switzerland, and of course Germany.

CNRP Mining joins a short list of cannabis companies who are diversifying far beyond the North American markets. This also includes the likes of Aurora Cannabis (ACBFF) with a subsidiary going through the process of becoming a licensed producer of medical cannabis in Germany. The company also owns roughly 20% of a company that supplies medical cannabis in Australia. 

The Real Opportunity In Germany

Many countries are open to new cannabis regulation but few have reached the extent that Germany has.  The global medical marijuana market is expected to reach a value of $55.8 billion by 2025, according to a new report by Grand View Research, Inc.  Germany is home to Europe's largest medical marijuana market, according to a recent report on the European cannabis industry. 

Earlier this year, Germany passed one of the world’s most progressive medical marijuana plans. The new law will put weed in more pharmacies and require public insurers to cover the costs of cannabis products, as they do other pharmaceutical prescriptions, when cannabis is prescribed for “severe conditions.” Germany will also start growing its own weed. 

The major impact for companies like CNRP Mining is that the climate for Germans is already leaning toward more “natural means” of self-medicating than taking a prescription pill. The news published this morning highlights the fact that CNRP Mining signed an agreement with a 10-year history and multiple existing retail channels, including pharmacies, drug stores and a robust online presence. 

For near term opportunity, the company said that it will begin shipping products to the Distributor in early Q1-2018, pending necessary approvals. With a population exceeding 82 million people and federal insurance coverage for cannabis, Germany represents the world’s largest legal cannabis market. 

Catalysts Ahead? 

Obvious growth for North America is in the immediate present but with countries like Germany expanding at a rapid rate, investors could look for opportunities with companies that are casting a more wide net on the cannabis industry.  The global climate has changed considerably over the last 5 years and popular opinion has grown in more favor of universal legalization.

As far as companies go, Canopy Growth, CNRP Mining, and Aurora Cannabis have maintained a presence not only in North America but also in Europe and further abroad.  As more countries legalize, it would make sense to look one step ahead to see which direction the trend will head.

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

Additional disclosure: Contributor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.