What stock will be the Amazon of the marijuana boom? – The crazy fool

You may have heard some people compare the "environmental rush" of marijuana stocks seen over the past two years with the cybercrime boom of the late 1990s. And most of these comparisons have probably put highlighting the fact that the internet business boom has resulted in a collapse of most internet companies.

If I remember correctly, Webvan, an online grocery retailer, was worth $ 1.2 billion before it collapsed. There have been a lot of similar point-com type failures. Of course, there have been some successes too. The most important is Amazon.com (NASDAQ: AMZN). Its stock is up more than 2,400% since the peak of the Internet bubble and more than since its IPO.

The three largest marijuana stocks on the market today are Aurora Cannabis (NYSE: ACB), Cover growth (NYSE: CGC), and Tilray (NASDAQ: TLRY). Which of these stocks is most likely to be the Amazon of the pot?

The secrets of Amazon's success

Many people have tried to identify the reasons for the tremendous success of Amazon. The reality is that there is not a single secret of success for Amazon; there are several of them.

My colleague Brian Stoffel wrote last year about what he called "20 years of wisdom" from Amazon CEO Jeff Bezos. Brian has collected the best quotes from Bezos' letters to shareholders over the years. This is a good read, and I think this has highlighted several critical factors of Amazon's outstanding performance.

For example, from the beginning, Bezos pointed out that Amazon was focusing on the long term. He wrote in 1997: "Because of our insistence on the long term, we can make decisions and weigh compromises differently from certain companies".

Amazon's success also stems from the search for multiple growth paths (that is, optional). Knowing which paths to take and which paths to take was the key. Bezos wrote in 2006 on the criteria of Amazon in the choice of new opportunities.

Bezos wrote on many other things that might explain why Amazon was successful while many other internet communication companies did not do it. The company is focused on customers. He learned from his mistakes. Amazon favored free cash flow over earnings. But these two key areas of a real long-term perspective and the search for multiple growth pathways seem to me to be probably the most important success factors for Amazon that translate very well for the marijuana industry.

Long-term prospects for marijuana

I think the management teams at Aurora Cannabis, Canopy Growth and Tilray all have long-term perspectives. Their public statements certainly seem to indicate that they are doing it.

Aurora was slow to obtain a permit to grow cannabis for medical purposes in Canada. But the company has caught up by making a series of acquisitions. In June 2018, the company's chief executive, Cam Battley, said at a virtual conference for investors that Aurora was engulfing so many people. businesses so quickly because it was in the middle of a "land grabbing". He noted that many did not appreciate the long-term global opportunity of marijuana for medical purposes.

Canopy Growth co-CEO Bruce Linton seems to have a long-term vision. Linton said in an interview with the Financial Post Last year, "you have to work for five or six years, then plan another four or five years to create the value that is attributed to us today."

Linton thought many cannabis companies would fail in the next few years because they did not think of themselves as companies. He added: "A business is just a company that has shares that you can buy, while a company makes decisions for the next ten or twenty years."

Tilray's CEO, Brendan Kennedy, highlighted his long-term prospects for the global marijuana industry in an interview with CNBC's Jim Cramer in September 2018. He told Cramer that there would be no Future "companies of several hundred billion dollars" in the cannabis industry.

Multiple paths to growth

It is difficult to differentiate the three major marijuana stocks according to the long-term vision of their leaders. But what about the pursuit of multiple growth pathways?

Aurora Cannabis, Canopy Growth and Tilray are targeting the same opportunities for the most part. All three are key players in the Canadian market for recreational marijuana. All three are tackling the global market for medical marijuana, particularly in Europe and Latin America. However, Aurora could be somewhat left behind its two rivals in a potentially lucrative sector, the US hemp market.

Canopy Growth is investing between $ 100 million and $ 150 million to develop a major hemp production facility in the state of New York and plans to market cannabidiol-based hemp products by the end of 2019. Tilray acquired Manitoba Harvest, the largest hemp in the world. food company with products sold in more than 16,000 stores in the United States and Canada. So far, Aurora has not moved much in the US hemp market.

Bruce Linton of Canopy has perhaps the greatest thoughts about pursuing multiple growth pathways. He said in December that he thought his business could disrupt four multi-billion dollar industries: beverages, opioids, sleep-aid medications, and veterinary products. Canopy Growth is actively developing products for the four markets.

The amazon of the pot?

It's not too difficult to have a long-term perspective. Nor is it difficult to identify multiple growth pathways. The challenge is to make good long-term decisions and seize multiple opportunities when your financial resources are limited.

I think that Canopy Growth is likely to succeed in the long run among many failing rivals – like Amazon for example – because its financial resources are superior to those of its peers. Canopy invests $ 4 billion from a manufacturer of alcoholic beverages Constellation Brands was the largest infusion of money in the history of the marijuana industry. As a result, Canopy can grow in a way that other marijuana growers can only dream of.

While there are some similarities between the boom of the Internet bubble and that of marijuana, there are also some essential differences. The success of the marijuana industry depends largely on the production capacity, distribution networks and the ability to develop mainstream brands.

The only competitor close to Canopy Growth in terms of capacity is Aurora. The company has the best distribution network in Canada and arguably the best in the world. And with Constellation, Canopy has a proven partner in creating successful mainstream brands.

I suspect there will probably be a lot of marijuana companies that go like Webvan. But I do not think Canopy Growth will be one of them.

Maybe Canopy will not really become the Amazon of the pot. The business models of the two companies are very different, after all. However, if I had to put money on the marijuana stock that would be most likely to imitate Amazon, I would bet on Canopy Growth.