Our Top 4 Hemp Stocks for 2019

When President Donald Trump signed the Farm Bill of 2018, it changed the game for Cannabis. This is an extremely large piece of legislation that is only reviewed every 5 years (since 1933), and outlines the regulations governing everything from food stamps to how land can be used for environmental purposes.

The Hemp Farming Act of 2018 was a proposed law to remove hemp from Schedule I controlled substances and making it an ordinary agricultural commodity. Its provisions were incorporated in the 2018 United States farm bill that became law on December 20, 2018.

– Wikipedia

2018's Bill legalised industrial Hemp and the production of Cannabidiol (CBD) oil from the hemp plants. Industrial hemp has over 25,000 recorded uses. You read that right. It can be used to manufacture cotton, plastic (Lego have just invested $20 million into a project to investigate building Lego blocks out of hemp), paper (cheaper to produce, using less space, and being far more environmentally friendly), biofuels, and many, many more.  

CBD 

As big as that is, the Hemp-derived CBD market is also a monster. CBD is the new buzzword in the wellness world. Now an ingredient in cocktails, wellness drinks, and cosmetics, CBD generated over $350 million in sales in 2017. By 2022 this is expected to have grown to over $22 billion!

This is a watershed moment for CBD in the United States.

– Bethany Gomez

Gomez, Director of research, at the cannabis market research organisation Brightfield Group, projects a 55% compound annual growth rate, in the Hemp-derived CBD market, over the next five years.

Industrial hemp-CBD contains less than 0.3% THC, the psychoactive ingredient associated with marijuana (and getting high).

In mid-2018, the DEA reclassified FDA-approved, Hemp-based pharmaceutical CBD drugs containing less than 0.1% THC, from Schedule 1 (alongside Heroin and Cocaine) to Schedule 5 (the DEA's lowest category, alongside prescription cough syrup).

However, the 2018 Farm Bill removes hemp from the Drug Schedule altogether. And herein lies a problem. This creates a grey area covering both legality and prescription.

Epidiolex GW Pharmaceuticals
GW Pharmaceuticals' FDA-approved Epidiolex

Under the DEA, CBD-approved products (like GW Pharmaceutical's Epidiolex) require doctors prescriptions to be issued, but under The Farm Bill, no prescription at all would be required.

Does this mean that new Hemp-based CBD products that come to market, now fall under the remit of the USDA, and hence require no DEA approval? Does the farm bill completely override the DEA?

The US is now officially open for business for the production and sale of Hemp-derived CBD pharmaceuticals and nutraceuticals, and there are four companies primed to take full advantage of what could be a $22 billion market by 2022.

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

Charlotte's Web

In 2013, CNN featured young Charlotte Figi, who using a special CBD-based formation from the Stanley Brothers, had made a remarkable recovering from her very serious illnesses. This customised Hemp-CBD extract formed the foundation for Charlotte's Web.  Fast forward to 2019, and Charlotte's Web is now the undisputed market leader in the hemp-derived CBD market.

The Colorado-based, vertically-integrated business, operates on over 300 acres of irrigated farmland, with a 50,000 square foot in-house production and manufacturing facility. They also have contract farming agreements for their hemp in Kentucky and Oregon.

With a direct to market sales platform via their e-commerce site, and wholesales distribution through their network of 2700 retailers, they were able to produce over $40 million in revenue in 2017 (an increase of 172% on the previous year) with EBITDA of $14 million.

First quarter sales increased approximately 70% year-over-year within the range of our expectations. Our sales volumes increase monthly and March closed with record sales of approximately $8 million for the month.

– President and CEO of Charlotte's Web, Hess Moallem

The company published preliminary Q1 2019 results in May this year, predicting organic consolidated revenue of $21 million to $22 million, with a gross margin in a range of 70-75 percent.

Charlotte's Web confirmed that its' retail presence has surpassed 6,000 doors as of May, while its' hemp acreage planting is planned to double this year.

With the #1 CBD brand in the US, a very strong management team with deep experience (and track record) in cultivation, distribution, sales and finance, Charlotte's Web is in pole position to take advantage of the booming Hemp market in 2019.

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

CV Sciences

Founded in 2010, this vertically-integrated business manufactures, sells and markets it's hemp-derived CBD brands across the US. There are two distinct divisions to CV Sciences. They have a pharmaceutical division and a consumer-products division.

The pharmaceutical division focuses on the research and development of new CBD based drugs. Their current focus is on CVSI-007, a CBD-based drug intended for the treatment of smokeless tobacco. However, given they are only in preclinical stage (and hence revenue is a long way off) and do not have any associated patents for the product, this division of the company does not really hold any meaningful value to investors.

Their consumer products division, however, is a whole other story. Their PlusCBD brand is sold nationally through their network of retailers and has more than 50 products in the range.  These cover verticals such as beauty care, nutraceutical and vape to name but a few. Given the range of products and their current reach, this is certainly no early-stage company.

We continued to expand retail distribution of the PlusCBD Oil™ brand and drive sales growth during the first quarter. We generated 85% revenue growth over prior year, achieving another record quarter, with strong gross margin performance.

– CEO of CV Sciences, Joseph Dowling

For the 9 months ended September 30, 2018, CV Sciences generated $34 million in revenue (up 153% from the previous year) with a gross profit of $24 million. Extremely profitable and well-positioned to take advantage of the US Hemp market, the stock was one of the best performers of 2018, and we see no reason why it couldn't be one of the best in 2019.

They have a great balance sheet, solid management, and if they could look to uplist from the OTC to one of the bigger exchanges in 2019, the stock could really perform well. Thus far the company has been performing well this year, reporting $14.9 million in revenue for Q1 2019, an increase of 85 percent when compared to the same quarter in 2018.

This is not the first time we have mentioned this company, and it certainly won't be the last.

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

Elixinol

Elixinol has been one of our favourite stocks from quite some time now. We first covered it in detail in September 2018, when the stock was trading at around $1.50 and predicted there was good upside. Currently trading above $2.80 the stock has performed well, and we continue to believe there is significant upside in 2019.

Elixinol Global, which operates in the industrial hemp, dietary supplements and emerging medicinal cannabis sector, comprises three separate companies.

Elixinol US is the main business unit. The company manufactures and distributes hemp-based dietary and skincare products to the US market and exports to another 40 countries globally (including the first-ever CBD-based product to Japan in mid 2018).

With revenues of $12.5 million in the first 6 months of 2018 (up 119%) and a growing relationship with Kelsey AG in Colorado, this business should see significant growth in 2019 and is in our opinion, the only part of the company offering real value to investors right now.

The company also expanded its US operations further this year, after acquiring a 25 percent stake in Altmeds LLC, the creators of the market-leading Pet Releaf hemp-based CBD pet line. According to sales figures, Pet Releaf accounted for roughly 65 percent of the pet market's CBD product sales in 2018.

We've long enjoyed our relationship with Pet Releaf. This deal strengthens our supply arrangements and mutual and synergistic distribution networks. It ensures Pet Releaf products, which so many dog and cat lovers rely on, will have scalability and ongoing quality of supply.

– President of Elixinol, Gabriel Ettenson

The other two companies both operate out of Australia. Hemp Foods Australia sells hemp foods and seeds via both a retail network and wholesale channels. Although it produced over $2 million in revenue in the first 6 months of 2018, we are not excited about this division as see much better upside for investors in their US business.

And finally, there is Elixinol Australia, a late-stage medicinal marijuana applicant, that will be looking to produce premium medicinal marijuana for the emerging Australian medicinal market. Too early to call just how big this company might be, but we have previously valued it at ~$100 million when fully up and running.

Elixinol reported strong Q1 2019 earnings, with group revenue of $8.2 million, representing a 21 percent increase on previous corresponding period. The company is also expected to experience further revenue growth in Q2 2019, following the rollout of national distribution sales for the US.

An initial order has already been lodged by a large-scale "bricks and mortar" retailer for 13 Elixinol branded CBD topical and dietary product lines. The launch will initially see Elixinol brand products stocked in 330 stores, before eventually expanding to more than 1000 nationwide.

A great performer in 2018, we continue to believe that Elixinol has huge upside in 2019, and with the passing of the Farm Bill, are very well placed to grow their US market share and capture more of the global CBD opportunities.

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

Ecofibre

Ecofibre Limited (ASX:EOF) is a relative newcomer to the ASX—having only listed in March 2019—but it's already been making considerable headway into the hemp market.

The Brisbane-based company managed to raise $20 million from an IPO of $1 per share and subsequently listed with a market capitalisation of more than $300 million. Ecofibre plan to use the funds to push the development of Hemp Black—a range hemp-based textiles developed in partnership with Thomas Jefferson University—closer to commercialisation.

The chairman of Ecofibre, Barry Lambert—said that the company's recent IPO was well-timed due to the passing of the US Farm Bill late last year, which has prompted a surge of interest in the hemp industry.

Consumers are increasingly aware of [hemp's] many benefits and regulators have responded by making hemp products more accessible.Our vision is to become the global leader in hemp technologies by providing innovative solutions which address emerging health and resource sustainability issues.

– President and CEO of EcoFibre, Barry Lambert

The company's activities are currently split between the Australian and US markets, and although the company is based in Queensland it's currently deriving the lion's share of its' income from American consumers.

Ecofibre is already well established in the US wellness market and produces a number of popular CBD-based topical creams, salves, and nutraceutical products for humans and animals. Thanks to robust US sales the company managed to take home $5.7 million in fiscal revenue for 2018, while the last six months have produced unaudited returns of $13.3 million.

Unfortunately, Ecofibre's US products are still unable to be legally produced in Australia, which has limited its local business efforts to focusing purely on the hemp food market.

The company's full-year loss has remained at $8.7 million for the last two years, and as of 21 March, 2019 Ecofibre stock was trading at 2.160 a share.

The Bottom Line

I will be covering each of these companies in more detail in the coming weeks, but honestly believe they are in prime position to take advantage of a booming Hemp-derived CBD market.

They all exhibit the same characteristics, being high growth companies (annual revenue increases over 100%), and have bucked the trend in 2018, showing significant share price growth in a market that fell dramatically late in the year.

Investors that get in early could really take advantages of the highs (even though you cannot actually get high from hemp).

And they told you money doesn't grow on trees

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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.

There are 9 Comments in this post

  1. Hi Sherry
    I would suggest the TD Webbroker coming from TD bank. However, I have not looked into QUEST TRADE where they advertise no fees or discounted fees. Fee at TD are $9.99 to buy any amount of stock or to sell stock. $$ all quotes in Canadian dollars. I am fairly new at this but have learned many situations revolving around the stock market.
    You must read about the company(s) to learn "WHY" your stock is up or going down.
    I have more to discuss if you wish email me at SteveL@cogeco.ca or find me on Messenger
    Some info I left out as I would need to learn if you are from US or Canada
    Steve Leonard

  2. Not knowledgeable on these things but would love to invest in the little I have. Any info on how to get started. Currently an affiliate of Hempworx products and loving all the wonderful testimonies. It never occurred to invest in Hemp til this week.

  3. Judy, if you are still interested in investing I can help you if you would like as I have been investing in the stock market and in the Hemp/Cannabis space as a whole and have received great returns on my investments. I have been doing this long enough now to know what companies are going to dominate the market share and also the companies that you should stay away from. Email me at dwalexander47@gmail.com if you would like to discuss this matter in further detail. Thank you.

  4. I am new to stocks. I currently use Hempworx myself and absolutely believe in this stuff. I am thinking about investing but definitely not educated. Where does one start?

    1. Sheryl – thanks for the comment. We would suggest you start in the investor's section and read up on stocks, markets, shares and anything else you might want to learn about. We have it all covered. Do reach out if you need more help

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