5 Cannabis Penny Stocks for Higher Returns
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Cannabis Penny Stocks to Make More Money
We’re up an average 46% on our previous cannabis stock picks with GW Pharmaceuticals jumping 80% on a buyout. In this video, I’ll show you how to find marijuana penny stocks for even higher returns and highlight five stocks to buy right now. We’re talking cannabis penny stocks, today on Let’s Talk Money!
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Bright Future for Cannabis Companies
Nation, cannabis companies are about to become legit and U.S. federal legislation that boosts the industry could be just around the corner. That’s going to bring a boom in funding, liquidity…and higher stock prices!
We jumped on the trade in cannabis stocks last September, highlighting the coming legislation and investor sentiment. I highlighted three large-cap cannabis companies in that video, three stocks up an average 46% in the last six months and heading higher.
A 2019 Pew Research poll found that 67% of Americans favor federal legalization, 15 states already have legalized recreational use and 36 permit medical use… and none are facing the apocalypse as you might expect from legalizing such a horrible, dangerous drug.
And the biggest changes are still coming. A change to banking laws, something that was already passed in the House, and other federal regulation…and eventually the potential to list on the exchanges which could mean a wave of investors into these stocks.
Because you see, most marijuana stocks can’t trade on the established exchanges like the Nasdaq or the New York Stock Exchange so they trade over-the-counter, in the OTC market. That severely limits the institutional money that can flow into these and the opportunity.
But when that changes, it’s going to be the penny stocks that will benefit most, the companies under a billion market cap that will see investor interest jump. Those are the cannabis stocks I want to highlight in this video. I’ll start with a simple screener to find cannabis penny stocks, show you how to invest and then highlight five penny stocks to watch in the theme!
Before we get started, I want to get your opinion on this, are you investing in marijuana stocks yet and if not, what would get you to invest? So scroll down and let us know in the comments, What do you think is keeping more investors from getting into this theme?
To start our search, I’ll use the screener on Webull, and this is the basic penny stock screener I use whenever I’m looking for small cap stocks. I’ll start by selecting a few of these industries I want to search for cannabis companies; those in retail, food and beverage and consumer plays.
Probably the most important screen here, selecting companies with a market cap under one billion max but I usually like to limit it to even smaller companies, ones under $500 million or less. Finally I’ll change the price screen here. Now share price doesn’t really make it a penny stock, it’s really that company size but I’ll move the slider here to find only those stocks under $10 a share.
I’ll be putting each of these penny stocks into my paper portfolio on the app. Webull gives you a million-dollars on its stock simulator to test out your strategies. It’s a great resource for following your stock ideas and you’ll find all these OTC stocks on the app.
5 Best Cannabis Penny Stocks to Invest
First on our list of cannabis penny stocks is the smallest, $75 million BevCanna Enterprises, ticker BVNNF on the OTC and BEV on the Canadian exchange.
BevCanna is a white-label, end-to-end solution for cannabis beverage companies including cultivation, processing, product development and bottling. That gives it a lot of business flexibility across the supply chain.
The company owns a 40,000 square foot HACCP certified facility in Canada with bottling capacity of over 200 million annually along with a hundred-acre outdoor cultivation site.
It’s been aggressively signing partnerships and acquisitions to position itself as cannabis legislation opens new markets. The company acquired ecommerce platform Pure Therapy in September to expand its nutraceutical and cannabinoid-based products direct to consumer. Another partnership late last year with the top infused beverage company in the U.S., Keef Brands, which offers eight of the top ten selling cannabis beverages in Colorado and two in California, will see BevCanna act as exclusive licensee, manufacturing and distribution partner for the Canadian market.
Now the company is still building that revenue stream so there’s a lot of opportunity but also a lot of risk, as with any of the penny stocks we’ll talk about. A lot of the market cap is backed by assets, about $55 million in assets including the bottling facility, cultivation site and a alkaline spring aquifer that supplies its water resources. It’s got about half a million in balance sheet debt, so still plenty of financial flexibility to see these projects through. I’ll leave a link in the video description to the company’s investor presentation so check that out.
In retailing we have $250 million Alcanna Inc, ticker LQSIF on the OTC market and CLIQ on the TSX.
The company is a retailer of wine, spirits, beer and cannabis with 270 retail outlets in Alberta, Ontario and British Columbia. Its Nova Cannabis brand sells dried flower and pre-rolled as well as infused products and vapes in more than 30 stores.
So this one isn’t quite as directly tied to the trend to cannabis legislation in the U.S. or to the cannabis market in general but it’s a nice diversified play into wine and spirits with the marijuana story upside. Alcanna grew sales 21% in the year through 2019 to $650 million and has hit net profitability this year with $0.34 per share. That puts the stock at 18-times on a price-to-earnings basis and just 0.35-times sales. The balance sheet isn’t quite as strong with just $10 million in cash against $280 million in debt but it’s a stable, cash flow business.
Planet 13 Holdings just grew out of that penny stock market cap but it still very much has that penny stock feel and opportunity.
The company has two retail locations in Nevada with another opening in California along with in-house brands, a wholesale operation to 45 dispensaries and three cultivation facilities. That all makes it an interesting, vertically-integrated company to take advantage of every stage from cultivation to consumer.
And I like the ‘superstore’ experience the company has developed, setting itself apart from the small retail operations. The company saw more than a million visitors in 2019 with $63 million in sales, nearly a tenth the total Nevada cannabis sales.
Management is forecasting 17% annualized sales growth through 2025 to $1.5 billion in Nevada sales alone and should be able to grow total sales well beyond this with the planned 55,000 square foot store in Orange County.
This is going to be very much a proof of concept and funding story. The company has just $140,000 in balance sheet cash against $884,000 in long-term debt so it’s going to need funding but if it’s successful, it wants to open eight more superstores across the country in the next five years. It’s a little more expensive at 17.8-times sales so some of that potential growth already priced in but this is more than just a retailer and checks a lot of those cannabis growth markets.
Enwave Corporation, ticker NWVCF, is another smaller company at $135 million market cap, and its patented Radian Energy Vacuum technology that accelerates processing across the food industry but with special applications for cannabis and hemp including increased retention of terpene and cannabinoids.
The company benefits from a multi-stream income approach of licensing royalties, machine sales and its own packaged goods subsidiary NutraDried that’s sold in over 25,000 stores across North America.
Total revenue took a hit last year but still posted $33 million from just $23 million in 2018. Enwave booked 88% sales growth through 2019 and should be able to rebound to that growth this year as things get back to normal.
Now like we saw with Alcanna, cannabis is more of an ancillary play here. The company is expanding its drying technology into cannabis and hemp processing, so not a pure-play cannabis penny stock but a diversified play on the technology.
The smallest penny stock on our list, $55 million General Cannabis, ticker CANN, and shares just under one-dollar each.
The company is a full-service cannabis consulting firm and kind of a private equity fund seeking to buy cultivation, manufacturing and retail opportunities in Colorado. It owns a 17,000 square foot greenhouse operation in Boulder and has helped growers win licenses in 14 states as well as designing over 100 cultivation facilities.
General Cannabis closed a $3 million equity round last June for funding from Hershey Strategic Capital and Shore Venture though the balance sheet is still a little stretched with $730,000 in cash and $4.9 million in debt. It does have revenue, booking $5 million over the last 12 months so trading at about 11-times on a price-to-sales basis.
When I’m looking for cannabis penny stocks, I’m first screening for companies under a billion-dollar market cap and preferably even smaller at $500 million or less. That gives them the room to grow into multi-billion companies.
Which cannabis penny stock are you buying first?
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