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As Pace Of Cannabis Sector Deals Heats Up, 3 Pot Stocks Worth Watching

By Investing.com (Brenda O'Farrell/Investing.com)Stock MarketsApr 15, 2019 06:30AM ET
www.investing.com/analysis/pace-of-cannabis-sector-deals-heats-up-as-pot-stocks-gain-traction-200406616
As Pace Of Cannabis Sector Deals Heats Up, 3 Pot Stocks Worth Watching
By Investing.com (Brenda O'Farrell/Investing.com)   |  Apr 15, 2019 06:30AM ET
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Even as analysts continue raising their estimates regarding the actual size of the burgeoning marijuana market, key sector players continue jockeying for position within that market. It seems as if the pace of partnership announcements as well as mergers and acquisitions on both sides of the Canada-U.S. border have escalated, as participants attempt to stake their claims in the recreational, medicinal and edible cannabis segments.

And with each new announcement, investor reaction intensifies—pushing the needle higher on pot stock prices. The fluctuations are sometimes dramatic, often temporary, yet always noteworthy. These reactions only add to the frenzied state of sentiment toward this sector. Indeed, observers are no longer waiting to see what deal will be announced next, but rather attempting to get out ahead by determining which company could be making a move next.

Add to all that such fundamental drivers as comments such as those made by U.S. Attorney General William Barr, when he told Congress last week that he considered the situation “intolerable” that all various forms of marijuana continue to be illegal on the federal level, yet a growing number of states are legalizing it, indicating a softening of the federal government’s stance.

For investors, therefore, getting out ahead of the fundamentals, at least by knowing which companies are about to ink any deals is important, not to mention profitable. After all, each new agreement has the potential to influence stock prices in both the near- as well as the mid-term and longer term horizons.

Here are three companies to watch in the coming months, according to industry analysts and observers.

1. HEXO Corporation

Quebec-based HEXO Corp. (NYSE:HEXO), (TO:HEXO) "could be busy on the merger and acquisitions front in 2019," says Michael Berger, founder of Technical 420, which specializes in research and analysis of cannabis stocks. Indeed, last month it acquired another Canadian marijuana company, Newstrike Brands (V:HIP), in an all-stock deal valued at C$260 million ($195.04 million USD).

Some, according to published reports, are speculating HEXO could be in talks with U.S.-based companies like the Campbell Soup Company (NYSE:CPB).

HEXO Weekly YTD
HEXO Weekly YTD

On Friday, HEXO shares closed on the NYSE at $6.30, up from the previous day's close of $6.20. Since the start of the year, the stock has gained 84%. The company has a market cap of $1.32 billion.

2. The Green Organic Dutchman Holdings

Considered a world leader in organic-grade cannabis, The Green Organic Dutchman Holdings Ltd (OTC:TGODF), (TO:TGOD) has been trading publicly for a little less than a year after raising C$132.26 million ($99.22 milion USD) last May in its initial public offering, the largest Canadian cannabis IPO to date.

TGODF Weekly YTD
TGODF Weekly YTD

The Ontario-based company is currently running growing operations in Canada, Europe and the Caribbean. It also recently signed a distribution agreement with Velvet Management a division of Canada’s largest wine distributor Philippe Dandurand Wines, for sales and distribution of its products to provincial liquor and cannabis boards across Canada.

The company also has plans to build a 40,000-square-foot research and development center with space to develop new products, including cannabinoid-infused beverages. It could be primed to ink a few more deals in the coming months.

Shares of The Green Organic Dutchman closed last Friday on the U.S. OTC market at $3.15, giving it a market cap of $9855.37. The stock is currently trading about halfway between it's all-time high of $7.79 and its $1.60 low.

3. Aurora Cannabis

Perhaps the most likely candidate to announce a major deal is Alberta-based Aurora Cannabis (NYSE:ACB), (TO:ACB). It's one of Canada's largest marijuana companies, with a specialty in medical cannabis.

What sets Aurora apart from the other big boys in the sector is that it has yet to announce a major partnership deal with any mega cap U.S. firm active in one of the many sectors—pharmaceuticals, beverages and consumer edibles for example—that are all poised for disruption by the legalization of marijuana. Investors, however, are betting that will quickly change.

Aurora Weekly YTD
Aurora Weekly YTD

Last month, the company hired activist investor Nelson Peltz as a strategic adviser. Shares jumped more than 13 percent on the news. His deal with the company gives him the option to buy 20 million common shares, a move that could make him Aurora’s second-largest stake holder.

In a statement issued outlining Peltz’s appointment, Aurora said he would:

"Work collaboratively and strategically to explore potential partnerships that would be the optimal strategic fit for successful entry into each of Aurora's contemplated market segments."

In addition, he'll advise on its continued global expansion.

Aurora’s stock closed at $8.88 on Friday. Shares are up more than 38% since the start of the year. The company has market cap of $8.85 billion.

As Pace Of Cannabis Sector Deals Heats Up, 3 Pot Stocks Worth Watching
 

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As Pace Of Cannabis Sector Deals Heats Up, 3 Pot Stocks Worth Watching

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Comments (7)
Jud Cox
Jud Cox Sep 15, 2019 11:29PM ET
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tgod is going to be the winner in cannabis stocks.
Jean Nadeau
Jean Nadeau Apr 21, 2019 6:53AM ET
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TGOD has virtually no sales and has no track record yet. Instead, consider Organigram (OGI) is a much superior company and is still fairly priced.  Expect partnership or M&A event in 2019.
Andrew Lim
Andrew Lim Apr 20, 2019 6:00PM ET
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cgc all day. sorry folks.
Don Kennedy
Don Kennedy Apr 20, 2019 5:21PM ET
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I'm living that acb & hexo life
Marshall Hiepler
Marshall Hiepler Apr 15, 2019 11:53AM ET
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Ixnay on the Buzz J. As regulations continue to relax on marijuanna, the profit margin offered, will relax as well. In localities that have legalized its use; there is little incentive save for mere convenience sake, for folks to purchase ****at a retail mark-up. Literally, anyone with space in their home for a clay pot (no pun intended) can grow their own. Thus, the market for canabis exists primarily on the current delay of the spread of legal reform to surrounding areas. However, this is sure to be a temporary and declining value, as the laws are activly moving toward legalization in all directions. If you must subscribe to the hype, regarding investing in the marijuana industry, at least do yourself the courtesy of viewing it as a quick "in and out" endeavor, with a solid exit strategy in mind ... lest you witness your financial stash going up in smoke. There are many far more solid sectors to invest in, which involve far less risk in the long run.
Trey Wilkins
Trey Wilkins Apr 15, 2019 11:25AM ET
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Add PYX to the list. Its Becoming an attractive price
David Tuchalski
David Tuchalski Apr 15, 2019 11:03AM ET
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BMMJ
 
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