The 3 Best Hemp Stocks for 2020

2020 holds significant promise for the hemp and CBD industry. Here are 3 companies that could become the best pot stocks of 2020.

2018 was a landmark year for the hemp industry, as in December of that year, President Trump signed the Farm Bill of 2018. This Bill legalised the commercial production and manufacture of industrial hemp (which has over 25,000 applications). With its Schedule 1 status a thing of the past, a booming industry was born, and a few of the best hemp stocks took significant steps to take advantage of the CBD green rush.

Hemp and marijuana are to cannabis as oranges and lemons are to citrus. The primary difference between the two is that hemp has little to no THC (the compound that gets recreational users high) and is very rich in CBD (the compound most associated with the wellness elements of the cannabis plant).

According to the Brightfield Group, the CBD industry is expected to grow to over $22 billion by the end of 2022. A massive industry fuelled by the CBD-derived wellness craze that has spread to all over the globe.

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However, the flip side of this opportunity is the relatively low barrier to entry associated with bringing CBD products to the market. Never mind the grey area the industry currently operates in given the FDA and DEA's lack of clarity towards the compound and how, and where, it can be used.

In 2019, even the best hemp stocks saw their share price continue to fall, as the industry was plagued with oversupply, with hemp acreage around the US rising by more than 500% in 2019, overproduction of CBD products, and the rising uncertainty as some States banned the use of CBD in food and beverages altogether.

But even with these risks and hurdles, here are three companies we believe are the best hemp stocks in order to take advantage of ravenous CBD-derived product demand and overall industry growth.

Disclaimer: Past performance is not an indicator of future performance.

Canopy Growth

Canopy Growth (NYSE:CGC) is one of the largest and most recognizable cannabis companies in the world. The industry leader, and often used a litmus test for the rest of the sector, is one of the best hemp stocks on the planet, and a company of many, many firsts.

The first cannabis company to list on the Toronto Stock Exchange (TSE), the first cannabis producer to list on the NYSE, the first company to a billion-dollar valuation, and one of the first Canadian licensed Producers to enter the US hemp race.

Canopy is one of the most cashed-up cannabis companies in the world, thanks to Constellations Brands' $4 billion investment for 38% of the company in 2018. With the current capital crunch in full force, having a $2 billion-odd war chest is one of the primary factors we believe Canopy will be one of the best hemp stocks in 2020.

In 2019, Canopy entered the US hemp market, via a $150 million investment in a hemp industrial farm just outside of New York. The 308,000 square foot facility in Kirkwood is expected to be operational later this year. In addition to its New York operations, the company has also established offices in California and Colorado.

In May last year, Canopy acquired specialist CBD-derived skincare and sleep solution company – This Works. This has created the foundation for Canopy's expansion into the CBD-infusion skincare market – a market that is rapidly gaining momentum. Canopy also struck a deal with Martha Stewart to assist in the development of a range of CBD-infused products; starting with the pet industry.

And finally, in December 2019, Canopy Growth launched its first CBD-derived product range – First & Free. The range, which can only be bought online, now ships to a number of US States.

With cash in the bank, operational capacity, and boots on the ground in the US, Canopy Growth could certainly be one of the best hemp stocks of 2020.

Disclaimer: Past performance is not an indicator of future performance.

Charlotte's Web

Here, at the Green Fund, we have long been a fan of the US CBD market leader, and one of the best hemp stocks of the past few years, Charlotte's Web (TSE:CWEB). The company was founded by the Stanley Brothers in 2013, and named after Charlotte Figi who suffered from a rare and vicious form of childhood epilepsy. The unique strain significantly reduced the number of seizures Charlotte was having, and after Dr. Gupta featured the company on CNN, the brand exploded.

Charlotte's Web is the number one brand in the total hemp-derived CBD market in the US. Their growth and market share acquisition has been staggering, to say the least. Revenues increased 74% year on year to $69.5 million in 2018, with gross margins of 75% and EBITDA of $21 million. A profitable cannabis company – yes, they do exist – and another reason we believe Charlotte's Web to be one of the best hemp stocks in the market.

The company is looking to bring production and distribution in-house via its new Colorado-based 137,000 square foot GMP grade facility. The operations hub would allow for extraction, production, distribution and R&D expansion, and will act as the foundation for the company's strategy to handle high-volume national retailers. The facility is expected to come online in the coming months.

In addition, and in order to meet the booming and insatiable demand for hemp-derived products, the company increased its hemp acreage by over 180% in 2019. Planting and planning for future growth through increased production capability, and access to scale-driving distribution channels.

The company's US reach is impressive, with the number of retail outlets stocking their product range now through the 8,000 mark. Right now, with the regulatory uncertainty placing pressure on demand, Charlotte's Web is one of the best positioned to take advantage of a positive FDA resolution on CBD. Growth with regulative clarity could make this one of the best hemp stocks for 2020.

Disclaimer: Past performance is not an indicator of future performance.

Tilray

Tilray (NASDAQ:TLRY) has seen the best and worst side of the cannabis industry. After listing on the NASDAQ for $17 per share in March 2018, the company's share price quickly smashed through the $300 per share mark, making Tilray not only one of the best hemp stocks in the world but one of the biggest by market cap too. Tilray is the poster child for the opportunities that existed when investing in pot stocks.

However, much like the rest of the industry, 2019 was not favourable for the Canadian-based hemp giant, as its share price dropped by over 75% in just 9 months. What was once one of the most valuable cannabis companies in the world, and the darling of the stock exchange had come crashing back down to earth. But that's what makes it potentially one of the best hemp stocks for investors looking to capitalise on oversold hemp stocks.

Tilray made a very big statement of intent in its pursuit of dominating the lucrative US CBD market, when in February 2019, it acquired the US market leader in hemp food products – Manitoba Harvest – in a cash and stock deal valued (at the time) at CAD$419 million. 

This was a big move as Manitoba Harvest has a very large US footprint, in addition to its Canadian coverage and reach, and has multiple hemp products in its portfolio, including hemp oils and protein. Manitoba currently supplies over 70% of the US's hemp foods, and their Hearts range is sold in over 13,500 retail outlets across the US, most notably in Walmart and Costco.

In another move aimed to capture market share of what could be a $22 billion industry by 2022, Tilray signed an agreement with Authentic Brands Group (ABG) to become the exclusive supplier and producer of CBD-derived products which would be white-labelled and tailored to take advantage of the various iconic brands within the ABG portfolio.

While this may not have been one of the best-performing stocks of 2019, Tilray could well go on to become one of the best hemp stocks in 2020.


This could be one of the best investing opportunities of 2020

Legislative changes are blowing through the US, and with it, an ever-increasing number of states legalising cannabis for recreational use.

With the success seen in Illinois, which legalised for adult-use on January 1 and saw products moving off the shelf at an unprecedented rate, this company is primed to take advantage of the booming US recreational market.

They have secured partnerships with the biggest cannabis companies in the US, and their portfolio is second to none.

And with the sector-wide pullback of 2019, this company is now at a bargain-basement price.

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Mark Bernberg
Mark Bernberg

Mark Bernberg is a long-time cannabis investing enthusiast and founder of The Green Fund, Asia Pacific's preeminent media house, positioned at the forefront of the global cannabis industry.

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