nvestors haven’t had much to complain about marijuana stocks this year, with returns that have generally clawed back all of their losses in 2018 and then some. With an impressive 45% return for the cannabis-concentrated ETFMG Alternative Harvest ETF (NYSEMKT: MJ), it hasn’t taken a ton of stock-picking talent to find winners in the pot space.
Most investors in marijuana have focused on the companies that have generated the most buzz early on, having already seen their market capitalizations jump into the midcap range and boasting high-profile collaborations with well-known companies in other industries. Yet given the success of the cannabis industry, you can expect to hear a lot more from smaller companies in the space throughout 2019 and beyond. Below, we’ll look more closely at Cresco Labs(NASDAQOTH: CRLBF), KushCo (NASDAQOTH: KSHB), and OrganiGram Holdings(NASDAQOTH: OGRMF) have outpaced their larger competitors in the cannabis industry and produced returns that have doubled what the marijuana ETF has given its investors.
| Stock | Market Cap | 2019 YTD Return |
|---|---|---|
| Cresco Labs | $1.75 billion | 84% |
| KushCo | $530 million | 12% |
| OrganiGram Holdings | $1.09 billion | 103% |
DATA SOURCES: YAHOO! FINANCE, YCHARTS.
Cresco makes a big buy
Cresco is one of many companies that find itself in a strange quandary. The medical cannabis specialist’s shares are listed primarily on the Canadian Securities Exchange, but its headquarters are in Chicago. Cresco offers dry flower, cannabis oil, and other related products, as well as cannabis-infused edibles. With 15 production facilities and operations in 11 states, Cresco boasts more than 50 retail licenses for medical marijuana in jurisdictions in which it’s legal at the state level.
IMAGE SOURCE: GETTY IMAGES.
Cresco largely flew under the radar until its early April announcement that it would buy Origin House (NASDAQOTH: ORHOF). The move should dramatically enhance the combined company’s exposure to the California cannabis market, with an all-stock deal that valued Origin House at roughly $825 million. As Cresco integrates Origin House’s distribution capabilities into its own operations, it hopes that it’ll be able to become what CEO and co-founder Charlie Bachtell called “the leading multi-state operator” in the U.S. cannabis market.
KushCo keeps picking and shoveling
One way that companies in popular industries make money is to help their industry peers get the things they need to work productively. That’s been KushCo’s strategy, as it’s primarily known for providing the packaging that cannabis cultivators have to use in order to meet regulations covering the marketing of their products. KushCo also offers branding solutions through an in-house design agency and automated label application system that can help start-up marijuana companies get moving more quickly.
The expansion opportunity that KushCo recently added to its arsenal involves producing various chemicals that assist clients in the manufacturing of cannabis oils and concentrates. As more marijuana companies look at products other than dried flower in order to boost margin and distinguish themselves from their peers, KushCo is putting itself in position to help them all — and its revenue growth already hints at the size of the addressable market.
OrganiGram keeps its focus on quality, cost
Boosting production has been a big goal of even the largest cannabis companies, but OrganiGram Holdings shows that you don’t have to have massive facilities in order to grow weed. With less than 500,000 square feet of growing space, OrganiGram still cracks the list of top-10 growers in Canada. That’s due largely to a three-level growing system that makes the most of the space the company has, and that level of efficiency has done a lot to keep overall costs low.
The real potential growth driver for OrganiGram involves the possibility of engineering cannabinoids from processes involving biotechnology. Through a collaboration with Hyasynth seeking to produce the key cannabis derivatives without actually using cannabis plants, OrganiGram stands on the edge of what could be an industry-transforming breakthrough. Combined with the company’s emphasis on high-quality products, OrganiGram is setting itself up for great potential success.
Keep your eyes on these stocks
Whether marijuana stocks keep rising or give back some of their gains, these three stocks have a lot of potential. Given the strategic moves they’ve already made and their visions for the future of the cannabis industry, these stocks belong on marijuana investors’ watch lists.
