3 CBD Stocks Perfectly Positioned to Profit from the Farm Bill

J. Frank Sigerson  |
  • The recently signed 2018 U.S. Farm Bill's legalization of hemp opens the doors to both new and established cannabis businesses.
  • Short term traders will have already priced the implication of this news into their trades but the true significance of hemp and cannabidiol (CBD) are about long-term gains.
  • A wide range of companies, including many not yet in existence, will ultimately benefit. Here are a few stocks to consider for the long haul, including one that may not seem as clear cut as the others.

In December, Congress approved and the President signed the 2018 Farm Bill legalizing hemp. Brightfield Group estimates put the U.S. domestic hemp market at $22 billion within four years. Most such estimates point to cannabidiol (CBD) as the driving force behind the market.

Canaccord Genuity puts the CBD beverages market at $260 million by 2022. But for the CBD industry to fully emerge will require many more steps and include the involvement of often slow-moving entities such as the Food and Drug Administration (FDA) and state government legislators.

The public companies prepared to benefit most from hemp's legalization share a track record of navigating often complicated terrain in the process of building businesses that will continue to face evolving, difficult conditions.

Some may become much bigger businesses over time and others will likely be acquired. In fact, with Big Pharma and Big Soda expected to get in on the game, all of these young companies are potential acquisition targets.

Charlotte's Web

Charlotte's Web Holdings Inc.  (CWEB:CNX)  (CWBHF) has received the most attention of companies expected to benefit from the legalization of hemp. Based in Boulder, Colorado, Charlotte's Web has the largest share of the U.S. market for CBD and related products. Currently listed in the U.S. on OTC Markets, Charlotte's Web previously stated they would seek to move to a major U.S. exchange if the farm bill passed.

Charlotte's Web grows its own hemp with a 2018 harvest ten times bigger than 2017. Since hemp can be dried and stored, any oversupply can be used in following years. In addition, given the strong response to the Farm Bill, it is likely that any additional needs will be more readily supplied by third-party growers in the future.

Hemp enters a new era. (Source)

Canopy Growth

As two giants of public cannabis companies, Canopy Growth Corporation  (weed:ca)  (CGC) and Aurora Cannabis  (ACB)  (ACB:CA) also received some attention off the back of the Farm Bill vote. Though based in Canada, each company is pursuing paths into the U.S. market. Both will clearly benefit from hemp legalization but in January Canopy Growth announced plans for a hemp industrial park in New York state. Suddenly Canopy Growth moved to the front of the line.

Analyst Keith Speights maintains that Canopy Growth is showing itself to be a stronger company than Aurora Cannabis. The hemp park move, fundable by the $4 billion investment from Constellation Brands, is innovative and positions them as a partner to the existing industry rather than just another player.

The Alkaline Water Company

The Alkaline Water Co.  (WTER)  (WTER:CA) is not known for CBD products but appears poised to become a major player in the CBD beverage industry. With Charlotte's Web possibly joining the game and New Age Beverages  (NBEV) definitely entering the arena, CBD beverages are set to be a major 2019 trend. The Alkaline Water Co. seems well-prepared with a new listing on the NASDAQ, continued expansion into new outlets nationwide and a new product line set to include CBD waters in early 2019.

Mugglehead points out that The Alkaline Water Company is now the "#1 selling bulk alkaline water in the U.S." as well as the "fastest growing premium water brand in the U.S." They now have a presence in all 50 states and over 47,500 locations. The race for CBD water dominance has begun and The Alkaline Water Company appears to be in the lead.

Picking CBD stocks for the long haul

The legalization of cannabis and the emergence of a new industry is a long unfolding process. Short-term speculators have many opportunities in the days ahead as surprise news announcements cut through the day's noise. Long-term investors also have the opportunity to get into a major industry in the early days. The smart ones will be looking past tetrahydrocannabinol (THC) profits to explore the coming world of CBD products.

DISCLOSURE: I have no financial interests or connection with any of the companies mentioned in this article.


The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
WTER The Alkaline Water Company Inc. 2.71 -0.09 -3.21 311,223 Trade
CGC Canopy Growth Corporation 44.38 -1.66 -3.61 6,625,132 Trade
weed:ca Canopy Growth Corporation
NBEV New Age Beverages Corporation 5.08 -0.27 -5.05 4,054,580 Trade
CWEB:CNX Charlottes Web Holdings Inc - Ordinary Shares 26.85 1.39 5.46 472,392
CWBHF Charlottes Web Holdings Inc 19.99 0.99 5.21 397,432
WTER:CA The Alkaline Water Company Inc. 3.66 -0.08 -2.14 49,180
ACB Aurora Cannabis Inc. 9.03 -0.54 -5.64 52,440,595 Trade
ACB:CA Aurora Cannabis Inc. 12.10 -0.68 -5.32 20,450,008

Comments

Watchlist

Symbol Last Price Change % Change
AAPL

     
AMZN

     
HD

     
JPM

     
IBM

     
BA

     
WMT

     
DIS

     
XOM

     

World Economic Forum at Davos 2019 - Ben Yablon Executive VP Salt Lending

Matt Bird sits down with Ben Yablon - Executive VP of Salt Lending - at the World Economic Forum in Davos January 2019