Sorting through the Rubble for Diamonds in the Post-Canada Cannabis Pullback (CGC, KNHBF, APHQF)
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Following the official announcement of recreational “Adult Use” cannabis legalization in Canada two weeks ago, the pot stock space has seen some dramatic selling. We believe this is a process of sorting – of separating the wheat from the chaff. Value will float, garbage will sink.

In an effort to identify some ideas in the space that look poised to float, we take a look at Canopy Growth Corp (NYSE:CGC), ICC International Cannabis Corp. (OTCMKTS:KNHBF), and Aphria Inc (OTCMKTS:APHQF) below.

Canopy Growth Corp (NYSE:CGC) engages in growing, possession, and sale of medical cannabis in Canada. Its products include dried flowers, oils and concentrates, softgel capsules, and hemps.

According to its own materials, the company offers its products under the Tweed, Black Label, Spectrum Cannabis, DNA Genetics, Leafs By Snoop, Bedrocan Canada, CraftGrow, and Foria brand names. It also offers its products through Tweed Main Street, a single online platform that enables registered patients to purchase medicinal cannabis from various producers across various brands.

In the company’s words, “Canopy Growth is a world-leading diversified cannabis and hemp company, offering distinct brands and curated cannabis varieties in dried, oil and Softgel capsule forms. From product and process innovation to market execution, Canopy Growth is driven by a passion for leadership and a commitment to building a world-class cannabis company one product, site and country at a time.”

This is also one of the most geographically diversified players in the cannabis space, with operations in 12 countries across five continents.

And there has been plenty of PR work here. The Company is proudly dedicated to educating healthcare practitioners, conducting robust clinical research, and furthering the public’s understanding of cannabis, and through its partly owned subsidiary, Canopy Health Innovations, has devoted millions of dollars toward cutting edge, commercializable research and IP development. Through partly owned subsidiary Canopy Rivers Corporation, the Company is providing resources and investment to new market entrants and building a portfolio of stable investments in the sector.

One of its most important divestitures and strategic interests is Canopy Rivers Inc., a unique investment and operating platform structured to pursue investment opportunities in the emerging global cannabis sector. The company works collaboratively with Canopy Growth to identify strategic counterparties seeking financial and/or operating support.

The company has developed an investment ecosystem of complementary cannabis operating companies that represent various segments of the value chain across the emerging cannabis sector. As the portfolio continues to develop, constituents will be provided with opportunities to work with Canopy Growth and collaborate among themselves, which the company believes will maximize value for its shareholders and foster an environment of innovation, synergy and value creation for the entire ecosystem.

Canopy Growth Corp (NYSE:CGC) pulled in sales of $25.9M in its last reported quarterly financials, representing top line growth of 63.3%. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($659.8M against $130.6M).

ICC International Cannabis Corp. (OTCMKTS:KNHBF), together with its subsidiary, engages in the cannabis business in Canada and internationally.

The company has been establishing traction in both South America and the EU, suggesting this is a prime place to look for post-Canada growth potential in the sector.

It holds a license to cultivate, manufacture, supply, hold, import, export, and transport cannabis and derivative products; and engages in procuring and distributing medical cannabis products and cannabis derivatives.

The company was formerly known as Kaneh Bosm BioTechnology Inc. and changed its name to ICC International Cannabis Corp. in September 2018. ICC International Cannabis Corp. was incorporated in 2006 and is headquartered in Vancouver, Canada.

According to recent report published by Arcview Market Research, in partnership with BDS Analytics, worldwide consumer spending on legal cannabis is expected to reach USD 57 Billion by 2027. Recreational cannabis spending is projected to cross the USD 35 Billion mark, while medical cannabis spending is anticipated to hit USD 19.1 Billion.

By region, the North American segment will account for most of the total spending, growing from USD 9.2 Billion in 2017 to USD 47.3 Billion by 2027 and at a compound annual growth rate (CAGR) of 18%. Consumer spending on legal cannabis in the rest of the world is projected to grow at a higher rate of 47%.

The stock has held key support in the $0.50 area several times and shown very clear relative strength in the process over the past two weeks.

Aphria Inc (OTCMKTS:APHQF) commands a market cap of $3.46B as a leading global cannabis company driven by “an unrelenting commitment to our people, product quality and innovation.”

The company pulled in sales of $13.3M in its last reported quarterly financials, representing top line growth of 117.2%. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($314M against $54.9M).

Headquartered in Leamington, Ontario – the greenhouse capital of Canada – Aphria has been setting the standard for the low-cost production of safe, clean and pure pharmaceutical-grade cannabis at scale, grown in the most natural conditions possible. Focusing on untapped opportunities and backed by the latest technologies, Aphria is committed to bringing breakthrough innovation to the global cannabis market.

The Company’s portfolio of brands is grounded in expertly-researched consumer insights designed to meet the needs of every consumer segment. “Rooted in our founders’ multi-generational expertise in commercial agriculture, Aphria drives sustainable long-term shareholder value through a diversified approach to innovation, strategic partnerships and global expansion, with a presence in more than 10 countries across 5 continents.”

The company touts itself as one of Canada’s lowest cost producers, produces, supplies and sells medical cannabis. The company is truly powered by sunlight, allowing for the most natural growing conditions available. “We are committed to providing pharma-grade medical cannabis, superior patient care while balancing patient economics and returns to shareholders. We are the first public licensed producer to report positive cash flow from operations and the first to report positive earnings in consecutive quarters.”

The stock has suffered a bit of late, with shares of APHQF taking a hit in recent action, down about -19% over the past week.

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