When it comes to generating big profits, only one American cannabis company reigns supreme…
There’s a lot of money in the cannabis industry. In the United States alone, over $17.5 billion was spent on legal cannabis products last year!
It takes an amazing amount of discipline to ignore all that cash pouring in until you have a rare opportunity to take advantage of it.
As a business owner, it’s a mistake I’ve seen time and again with other cannabis companies.
When Canada first went recreational, investors were pouring millions into these mega-production sites that were doomed to fail.
Sure enough, a couple of years later, many of those producers are fire-selling incomplete properties and getting pennies on the dollar in return.
Had the companies been disciplined with deploying capital, they’d be making acquisitions to get bigger…
Not selling off chunks to gain profitability in the first place.
Needless to say, when I’m looking for a cannabis company to invest in, I look for one that has a proven track record of being smart with cash.
That’s precisely one of the reasons I love Trulieve Cannabis Corp. (OTC: TCNNF) so much.
And with this latest mega-deal, it’s clear that Trulieve’s strategy is about to pay off big time…
Trulieve’s Disciplined Approach Is Paying Off Big
Back when I first got into the cannabis business, I became close to one of the C-suite executives at Trulieve. In that time, I learned a lot about the company’s corporate philosophy.
Trulieve’s first priority has always been discipline.
You don’t put money into investments that have a good chance of doing well. Instead, you put cash into investments that are virtually guaranteed to do well.
That’s why Trulieve pursued a vertically integrated license in Florida. With the cap on cannabis businesses, it was almost guaranteed that Trulieve would make a killing.
And it has – capturing about half of the market share in a state that sold over $1.2 billion in medical cannabis products last year. (The only states that topped Florida’s sales were California, Colorado, and Washington…all of which are fully recreational markets.)
Trulieve didn’t just stand idly by. The company has been pursuing incredibly smart acquisitions over the last two years.
And its latest $2.1 billion bid for Harvest Health and Recreation (OTC: HRVSF) will secure Trulieve’s status as the most profitable cannabis company in America.
But numbers aren’t everything. What makes this acquisition truly special is that Harvest Health gives Trulieve a presence in new states that have limited license cannabis markets.
Where the Business Licenses Are Limited, the Profits Are Massive
You have to understand that in a state or city with a licensing cap on cannabis businesses, the existing licenses become unbelievably valuable. For example, in Oregon, where there’s a freeze on new producer applications, a grow license fetches nearly $200,000. And that’s cheap.
In other states, licenses sell for millions of dollars.
These limited licenses aren’t just valuable, either. They also ensure fewer companies make a lot more money, which leads to larger and safer profits overall for each licensee.
Getting into limited license markets like Arizona, Maryland, and Pennsylvania through Harvest Health was a brilliant move by Trulieve and its leader, CEO Kim Rivers.
Rivers has made it clear that Trulieve only wants to make acquisitions in markets that are easy to scale up.
In other words, Trulieve isn’t looking to jump into extremely competitive markets with a lot of players. It would rather pay up to get into limited markets that should provide an upward trajectory to profits.
It’s clearly looking towards the future with these acquisitions. Trulieve understands that federal legalization of cannabis is right around the corner, and in a federally legal market, spreading out production to get ready for delivery to all legal states is precisely the move to make.
With this acquisition, Trulieve will gain 3.1 million square feet of production capacity. That’s more than enough to send sales soaring once the federal government passes cannabis reform.
The bottom line is that Trulieve’s acquisition of Harvest Health is the smartest move the company has made since it first entered Florida. There’s no doubt that Trulieve is doing exactly what it should to become the number one player in the American cannabis market.
And it’s going to reward investors all along the way.
NICI Membership subscribers were the first to receive my colleague Danny Brody‘s full analysis of the Trulieve-Harvest megadeal as soon as the news broke. If you missed that special report, make sure you check it out here.
And if you’re not yet a NICI Membership subscriber, you’re free to click here to learn how to join and be among the first to receive exclusive cannabis investing content and resources that’ll help you make the most of this booming industry.
All the best,
May 28 2021