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Earlier this week, I showed you how Canopy Growth Corp. (NYSE: CGC) was the "King of Cannabis," the Microsoft of the legal marijuana sector. It's a huge, bona fide blue-chip pot stock and one every investor - not just those seeking the immense wealth potential of cannabis - should own.
Now it's time to visit the complete opposite end of the spectrum.
Because small industry players, like the stock I'm going to tell you about in a minute, can be an extremely profitable part of your expanding, rapidly appreciating cannabis holdings.
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Get Ready for the Next Leg Up
"Phase I" of the cannabis growth cycle - with a ton of startups and small, insurgent firms entering the market, jockeying for market share - is rapidly coming to an end, if it's not entirely over already.
"Phase II" is spinning up fast. We're starting to see massive consolidation, mergers and acquisitions (M&A), and big companies gobbling up smaller ones.
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What I want to show you today are those smaller companies - including one in particular - that have what it takes to be competitive with giants like Canopy.
We still want the kings of cannabis in our portfolio, but we've got to keep room for smaller players that can make their shareholders a lot of money.
Because during phase II, cannabis stock prices really take off for small companies...
A Cannabis Consolidation Success Story
An example of M&A activity for smaller companies I want to highlight is Cannabis One Holdings Inc. (CSE: CBIS). It's going on an absolute acquisition spree.
Cannabis One Holdings develops, markets, and provides packaging for cannabis-related products, and it is now bringing in actual cannabis products as part of its portfolio.
- On April 1, Cannabis One Holdings announced it would acquire certain assets from Fat Face Farms, a recreational cannabis grower in Colorado.
- On April 10, Cannabis One Holdings announced it would acquire certain assets from Honu Enterprises Inc., an award-winning cannabis-infused products brand.
- On April 22, Cannabis One Holdings announced it would acquire certain assets from Evergreen Organix, which operates an award-winning cannabis product line.
With all these moves, Cannabis One Holdings could have products, marketing, and packaging services, all under one relatively small "roof."
But can the small players really survive?
They can, and the soda industry, of all things, is the perfect example that showcases how small companies can still grab a piece of the pie.
Lessons from the Soda Market
As you can see in the graph below, if someone drinks a soda, virtually anywhere on the planet, it's probably going to be a Coca-Cola or Pepsi product.
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One of the lessons from this is that both companies grew to where they are today because of acquisitions. Coke bought Minute Maid in 1960 and bought a stake in Monster Beverage in 2015. Pepsi acquired Tropicana in 1998 and Naked Juice in 2007.
But you'll also notice that they don't control all of the market.
There is room for other beverage makers out there, and they can make a lot of money. That's also going to be true for cannabis companies, especially in phase II - another lesson to take note of.
A smaller company can either sell out to one of the big guys, or it can make nice returns on its own. Small companies can carve out their piece of a pie expected to reach $1 trillion, and early shareholders are going to be rewarded in the long term.
Take Jones Soda Co., for example.
Even though Coke spent $4 billion on advertising in 2018 and Jones Soda has a market cap of just $32 million, Jones still has been in business since 1987.
It's a carbonated beverage and has a huge cult following. It managed to generate $220 million for the quarter concluding on Jan. 26.
And how about Reed's Inc.?
Reed's makes small-batch craft soda, and it has a focus on using real ginger because of its health benefits. So far in 2019, the stock price for Reed's has climbed 55%.
This shows there's still a lot of room to carve out a good living in the beverage market for small players - and the same thing is going to be true for cannabis companies.
You don't have to take on the world if you don't want to. You just have to be pretty darn good at what you do.
America's Green Gold Rush Is Just Getting Started - Claim Your Stake Now
At this very moment, big investment firms and members of the Fortune 500 are building enormous war chests.
They're preparing to push billions upon billions of dollars into the cannabis market - and they could strike at any moment. So right here - right now - you have a once-in-a-lifetime opportunity to beat them to the punch and stake your claim.
About the Author
Greg Miller started working on Wall Street in September, 1987, just a month before the “Black Monday” stock market crash.
During his career there, he became an expert in just about every kind of publicly traded security - from blue-chip and small-cap stocks to municipals, junk bonds, and derivatives. As a portfolio manager, Greg was responsible for over $500 million of assets in mutual funds and insurance company accounts.
After leaving the Street, he designed a successful options trading strategy and made lucrative tech investments for a financial publication. He has also helped develop new products and worked with other editors to hone their strategies. He’s always been dedicated to deep, fundamental research - and he always will be - because he believes buying the very best companies at the right price is the best way to amass wealth in the stock market.