CBD stocks have taken center stage as of late, and for good reason. Late last year, the 2018 Farm Bill passed in the United States. This bill opened the door to an entirely new industry.
With the Farm Bill, the United States legalized the manufacture and sale of hemp and its derivatives. A key derivative that is believed to have the most market potential is known as cannabidiol, or simply, CBD.
With a perceived benefit of relaxation and health benefits of inflammation relief, pain relief, epileptic seizure reduction, and more, it is expected that the CBD market will grow dramatically ahead. In fact, some estimates suggest that in the United States alone, the market will grow to be worth $22 billion per year by 2022.
With the expected growth in the CBD industry, there are several opportunities starting to emerge in the market. In my opinion, the 5 stocks below represent the largest opportunities in CBD.
#1: Canopy Growth Corporation (NYSE:CGC)
Canopy Growth is currently the largest cannabis company in the world by market cap. That’s a huge statement! While the company is referred to as a cannabis company, it’s not a one-trick pony. In fact, the company is working its way into the United States CBD market, where it is well positioned to dominate.
A big factor driving the company’s positioning to take the US CBD market by storm is a $4 billion investment from Constellation Brands (NYSE:STZ). Constellation Brands is a big money player that has a proven record of success in highly regulated markets in the United States and around the world.
This investment is key, as it not only gives the company a great partner, but it also gives Canopy Growth the funding that it needs to expand infrastructure in the United States. So, it’s not surprising that Canopy was one of the first Canadian cannabis producers to enter the space.
In fact, back in January of this year, the company announced that it received a license from New York State to process hemp. I don’t believe that this will be the last of the news we hear about the efforts that Canopy is making to break into the United States market, and with Constellation Brands as a partner and $4 billion to spend, the company has what it needs to take a controlling share.
#2: Aurora Cannabis (TO:ACB)
Aurora Cannabis is a massive Canadian cannabis producer that has a clear interest in entering the United States CBD market. In fact, in January, Aurora told Business Insider that it would unveil a plan to enter the United States CBD market relatively soon. While this plan has yet to be seen, I believe that there’s a reason for this.
For most of the year so far, the company’s balance sheet only had about $100 million in cash. This is a big issue when trying to enter a market like the United States and sustain a business as big as the one it’s operating.
Nonetheless, the company remedied this situation recently after announcing that it would pursue a $750 million fund raise. This capital raise will give the company the money it needs to continue expanding its global infrastructure. Most importantly, it will give the company the funding it needs to enter the United States market.
As a result of Aurora Cannabis’ leadership position in the Canadian and global recreational and medical cannabis markets, the capital raise that gives the company the funding it needs to invest in infrastructure, and a clear goal of entering the United States market, I believe that Aurora Cannabis could take a large portion of the US CBD market share.
#3: Veritas Farms (VFRM)
Veritas Farms is an interesting play in the United States CBD market because it is already incredibly active in the space. Before CBD was legal on a federal level, the company was already producing, refining, and manufacturing products containing the substance in regions within the United States where it was already legal.
As a result of its head start, the company is already well on its way to taking a large share of the market. In fact, not only is the company already active in the United States, but it has a strong line of products already on the market at various brick-and-mortar locations throughout the region.
Moreover, Veritas Farms is one of very few full spectrum companies that control the entire process. At a massive, more than 100 acre facility, the company grows the hemp, extracts and refines the CBD, manufactures the products, and ships them to retailers. With full control over the entire process, the company is able to avoid middleman fees, issues with quality, and delays!
In a recent press release, the company said that its products are on shelves at select CVS locations, making this the first public CBD-focused company to get its products into a big-box store. This shows that the company’s strategy is focused on expanding its retail footprint, a strong move in an emerging market.
At the end of the day, Veritas Farms is already established in the United States. This, combined with full control of the process from seed to sale, makes Veritas Farms a hard company to ignore.
#4: Tilray (NASDAQ:TLRY)
Tilray is yet another enormous Canadian Cannabis producer. However, like many, the company is also working to get into the United States CBD market. In fact, it is the company that has made the most expensive move to date to break into the industry.
In mid-February, Tilray spent more than $300 million to acquire Manitoba Harvest. This was an important move, as Manitoba Harvest is the world’s largest CBD-infused foods company. Located in Manitoba, Canada, Manitoba Harvest has a stronghold on the market in Canada and a stance that could give it a great chance in the United States space.
It’s also worth mentioning that Tilray played a big role in the Canadian medical cannabis market for several years and quickly became a leader in the recreational market when it opened. As a result, the company knows the ins and outs of the market and has the expertise and funding needed to move into the United States.
All in all, with the Manitoba Harvest acquisition, Tilray is well positioned from a product standpoint. With a strong history in the Canadian market, a decent balance sheet, and a desire to get into the United States CBD market, this is a stock that’s worth watching.
#5: Cronos Group (NASDAQ:CRON)
Cronos Group is actually a Canadian cannabis producer, but I believe that it has the strongest potential to take a large share of the emerging United States CBD market. There are a couple of very good reasons that I believe that the company has the most potential to take this market by storm.
First and foremost, Cronos received a $1.8 billion investment from Altria Group (NYSE:MO) back in December of last year. This investment was overwhelmingly important for the company and its investors. Not only did it give the company plenty of money to invest in the United States CBD space, but it gave the company a partner that has a proven record of success in a highly regulated industry.
With such a strong partner on its side, plenty of money to invest, and a strong history in the Canadian cannabis sector, I believe that an entrance into the US CBD market is coming soon for Cronos and that the company has the potential to take an incredibly large share of the market.
Final Thoughts
With the United States CBD market emerging, those that make the biggest moves now will likely generate the biggest profits later. The companies listed above are those that I believe have the most potential to take the market by storm. What companies do you think will take the US CBD market? Join the discussion in the comments below!