Could medical marijuana be a millionaire stock? – The crazy fool

To answer the main question: of course, Medical Marijuana Inc. (NASDAQOTH: MJNA) could be a millionaire-maker stock – if we started as a multimillionaire, maybe.

Having said that, let's examine why Medical Marijuana's actions are probably not a good investment and discuss better alternatives, including: Cover growth (NYSE: CGC) – for those who want to invest in the cannabidiol (CBD) space derived from hemp. (CBD is a non-psychoactive cannabinoid, or a naturally occurring chemical found in marijuana and hemp, associated with various health benefits.)

Indeed, there are good reasons to want to be exposed to the realm of the CBD. The US Farm Bill, which came into force on January 1, legalized the cultivation and processing of industrial hemp throughout the country, opening up a potentially huge market for CBD products derived from hemp. According to research firm Cannabis Brightfield Group, this market is expected to grow from about $ 591 million in 2018 to $ 22 billion in 2022. It's four times more than in 37 years!

The medical marijuana business in a nutshell

Medical Marijuana, based in San Diego, was the first publicly traded cannabis stock in the United States. In March, it would be a public company for 10 years. Despite its name, the company is not involved in marijuana. It focuses mainly on the development and sale of products containing CBD derived from hemp. She also holds stakes in various other cannabis sectors. Hemp, the cousin of cannabis marijuana, contains a negligible concentration of tetrahydrocannabinol (THC), the psychoactive substance of marijuana that is responsible for the "high" consumption of users.

Medical marijuana: basic data on stocks and financial data

Data source: Yahoo! Finance. Data as of 22/02/19. TTM = last 12 months. MRQ = last quarter.

There are red flags here. On the one hand, a share of Medical Marijuana is trading at just over $ 0.07, making it a "penny stock". A big problem with penny stocks is that they do not collect institutional support – the institutions hold a negligible 0.2% of the outstanding shares of Medical Marijuana – and without this support it is very difficult for the courts to actions to increase or at least to be supported. Secondly, Medical Marijuana's liquidity situation is a source of concern. The company had only $ 3.3 million in cash at the end of the last quarter published, while it had $ 9.3 million in debt and $ 322.4 million in cash flow from operations. USD.

Performance of medical marijuana

One of the main goals that a potential investor in an action probably wants to know is how it is executed. Marijuana shares for medical purposes have worked poorly in the short and long term.

Data by YCharts.

Data by YCharts.

Best alternatives in the CBD space derived from hemp

CV Sciences (NASDAQOTH: CVSI) is probably the closest counterpart to Medical Marijuana. Its main purpose is also to manufacture products from CBD derived from hemp. It's also an American company, but it's not as small as Medical Marijuana, with a market capitalization of $ 474 million and a price per share of $ 4.90. Why prefer CV Sciences to medical marijuana? Its turnover is growing faster, it is profitable and there does not seem to be a problem of liquidity.

Canopy Growth – the largest stock of cannabis by market capitalization – is becoming a good way to become familiar with the hemp-derived CBD market in the United States. Canadian-based cannabis grower has begun to position itself to take legal advantage of hemp In the United States, before the Farm Bill was actually adopted, the bill was ready for operation as soon as the law came into effect . On January 14, Canopy announced that it had received a license from the State of New York to process and manufacture hemp products.

In the recent release of Canopy's financial results for the third quarter, founder and co-CEO Bruce Linton said hemp-based CBD products are expected to be commercially available in the US at this time. the fourth quarter (calendar) of this year or the first quarter of 2020. One of the main reasons for appreciating the stock of Canopy Growth in general is that the company has a lot of cash – more than any other cannabis producing company – after receiving $ 4 billion from the last giant of the liquor Constellation Beverages, bringing its stake in Canopy to 38%.

That said, the shares of CV Sciences and Canopy Growth have a good level of risk. CV Sciences' currently profitable businesses may suffer as large competitors (such as Canopy) enter its territory and there is no guarantee that Canopy will ever achieve profitability.