The end of cannabis prohibition is providing the perfect opportunity for some unspectacular companies to make a miraculous transition, and generate incredible profits along the way.
Sometimes a company just can’t get it right.
Some of those are companies with infrastructure and expertise that, under the right guidance, could transform into a goldmine.
Whether it’s the CEO, a board that doesn’t understand accountability, or simply selling into an unprofitable market, some business ventures persist for decades with nothing to show for its efforts.
The stock price languishes, executives get replaced, and lawsuits get thrown around.
Changing fortunes can require dramatic moves, so it’s only fitting that the burgeoning cannabis industry is providing the perfect opportunity for many long-struggling companies.
But transitions take time, and most firms still have a lot to prove before warranting an investment.
Still, my team and I are keeping a close eye on those opportunities because there can be big payouts from a turnaround story. In fact, we’ve identified many potential top cannabis companies in our NICILytics database, and we revisit the companies frequently to see which ones warrant a rating change.
Not One for Chasing Fads
Now, I’m not talking about a penny stock scam that involves a business consistently changing how it operates to capitalize on every new investment fad.
You know the type.
Companies that were once “dot-com” wannabes, moved on to selling sub-prime mortgages, owned uranium mines for a while, switched to being all about the “blockchain,” and now grow and sell cannabis.
All the while, the CEOs and executives of those companies were getting rich by selling shares to unwitting investors who were motivated to buy shares thanks to paid stock promoters. What’s really terrible is that those executives knew their companies were junk, but they still felt comfortable taking advantage of the average retail investor.
But it’s not all bad.
Some of the companies I’m watching run honest operations, just not successful ones. However, a pivot to cannabis finally puts trustworthy executives in the right place at the right time.
And Neptune Wellness Solutions Inc. (Nasdaq: NEPT) could finally be in that perfect spot for a transition.
Struggling for a Payoff
When my team and I first looked at Neptune late last year, we saw a company that had been in business for 20 years, and yet, still couldn’t manage to build a profitable business.
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The company has sold nutraceutical oils sourced from marine animals, such as cod and krill. Its core competency was extraction – mostly as a third-party supplier – with little in the way of its own branded products.
Over the last five years, it has managed to survive off the C$100 million it raised in equity offerings and proceeds from the sale of intellectual property and inventory. Profitable years have been few and far between.
But in 2018, the company began tooling its extraction expertise and resources into producing cannabinoid extracts, which built upon the companies 20 years of oil extraction and nutraceutical product development experience.
Progress was halting at first, but now, momentum is building.
So far in 2019, Neptune’s stock price has skyrocketed.
And after a major leadership change and a series of deals with big players in the cannabis industry, the stock price could be sent into the stratosphere.
A Streak of Big Wins
The board has just put Michael Cammarata at the helm, replacing the CEO of the past four years.
Michael has been an innovator in the wellness industry for years. He co-founded Schmidt’s Naturals, which was ultimately sold to Unilever, and led the brand’s exponential growth. Cammarata will be spearheading several acquisitions and developments already underway from Hamilton’s tenure.
Neptune recently received amendments from Health Canada to expand its production capacity to 200,000 kg, which completes Phase 2 of its ethanol-based extraction installation.
It is also expanding production into the United States through a definitive agreement to acquire the assets of Sugarleaf Labs, a hemp processor, for US$18 million. That deal should close on or before July 31.
And as for customers, for over a year, it has had in place a multi-year agreement with Canopy Growth Corp. (NYSE: CGC) to supplement Canopy’s extraction, refinement, and extract products formulation capacity. Neptune also recently also won contracts with Tilray Inc. (Nasdaq: TLRY) and The Green Organic Dutchman (TSX: TGOD, OTC: TGODF). The total of all agreements signed to date amount to over 500,000 kilograms of cannabis product, much of which will be turned into CBD extracts to meet skyrocketing demand.
These are promising signs, and the transition may have created the conditions that, in my experience, lead to an explosive turnaround.
We’re taking a good, hard look at the company. Provided all the elements are indeed in place, we’ll upgrade the rating in what we like to call the “Millionaire’s Vault.” Perhaps, it may even be worth a recommendation to subscribers of the Cannabis Investor’s Report.
And finally, if you remember from yesterday, I promised you a special report from NICI Advisory Board Member and President of the CBD Strategy Group, Jenn Larry. Since we talked about how big of a moneymaker extraction is becoming, this report couldn’t have come at a better time. You can also access it by clicking on the image above.
Jenn moderated a panel about extraction, and she provides some great insight. I really appreciate her allowing us to share this report with all of our members.
Enjoy your weekend, and be on the lookout for my article tomorrow.
Executive Director, National Institute for Cannabis Investor’s
P.S. With the normalization of hemp CBD products, many major retailers are getting in on the action. In fact, not only did major drugstore chains CVS, Walgreens, and Rite Aid all jump on the CBD bandwagon, luxury retailers like Neiman Marcus and Barneys New York plan to as well. Simon Property Group, the nation’s largest mall owner, has even announced its partnership with a cannabis goods maker to open around 100 kiosks in malls around the country. With announcements like these popping up, it’s not hard to believe that experts predict CBD sales to grow 3,622% by 2022. And with growth like that, these two CBD companies could deliver 1,000% gains or more to investors who move now. To find out more, go here now.
9 responses to “Classic Turnaround Play Means Major Cannabis Profits”
July 12 2019