Aurora buys a Portuguese pot, the caterpillar goes down – Motley's Fool

The stock market changed little on Tuesday morning, with modest moves despite a favorable reading of consumer confidence and optimistic comments by Federal Reserve Chairman Jay Powell on the future developments in interest rates. and the monetary policy of the central bank. Shortly before 11:30 am EST, the Dow Jones Industrial Average (DJINDICES: ^ DJI) was just 3 points at 26,095. the S & P 500 (SNPINDEX: ^ GSPC) increased by 3 points to 2,799, and the Nasdaq Composite (NASDAQINDEX: ^ IXIC) took 2 points at 7.557.

Many investors are looking for ways to find growth while protecting themselves against a potential slowdown. The boom in cannabis stocks has drawn a lot of attention to marijuana growers, and Aurora Cannabis (NYSE: ACB) has announced a key strategic change to strengthen future growth. But more generally, concerns about the health of the global economy have weighed on caterpillar (NYSE: CAT)analysts have reacted negatively to the current situation on a global scale.

Aurora takes a stake in Gaia

Aurora Cannabis saw its stock increase by 4% after the Canadian cannabis giant announced the latest of its acquisitions. The company stated that it had acquired a 51% stake in the Portuguese company Gaia Pharm, with the aim of creating a local facility for the production of medical cannabis and related products. After the purchase, the company will take the name Aurora Portugal.

Gaia has just received Portuguese regulatory approval for a request to build a cannabis growing center that meets the European Union's marijuana requirements for medical purposes. Aurora expects the first phase of construction to be completed by the third quarter of 2020, with an initial production capacity of 2,000 kg per year and a production capacity of 4,000 kg per year. once phase 2 is completed.

As a result of this purchase, Aurora expanded the reach of its international network to two dozen businesses. Portugal, in particular, is a solid choice for Aurora because it has just authorized the distribution of cannabis for medical purposes to its own citizens in January. The company will be able to export to other countries of the EU.

The only missing piece was the amount paid by Aurora for the acquisition. Many have criticized the nascent cannabis giant for using its actions too freely to make strategic purchases. Nevertheless, Aurora has focused on growth at all costs, and this latest decision is consistent with its long-term strategy.

Caterpillar takes another shot

Elsewhere, Caterpillar shares fell 2%. The latest downtrend in the heavy equipment manufacturer's inventory came after negative comments from analysts at UBS warned that Caterpillar's cyclical recovery in recent years may soon come to an end. UBS made the rare decision to lower its stock-to-market rating and lowered its price target on Caterpillar by $ 29 to $ 125 per share.

In particular, UBS estimates that favorable construction industry windfalls in the United States and China, as well as oil and gas industries, are expected to peak in 2019, declining from 2020. profits of the company, which many investors are not willing to see. It already seems that equipment buyers are turning to the auction market to buy used machines at a discount rather than buying new machines.

The news is not a shock for those who followed Caterpillar, the stock has fallen after the financial report of the fourth quarter of late January. Nevertheless, it will be up to the company to strike a balance between price increases and the need to limit costs and take steps to increase demand. This needle will have to be carefully threaded to support Caterpillar's growth in the years to come.

Dan Caplinger has no position in the mentioned actions. The Motley Fool has no position in any of the actions mentioned. Motley Fool has a disclosure policy.