2019 is here so I wanted to share my #1 cannabis stock for the year.
What does #1 mean? It’s not an exact science – it’s a stock I think has a high probability of generating a market-beating return in 2019.
Bigger picture – it’s a stock that I like a lot, and I think has a lot of long-term potential.
Australia Is Emerging as One of the Highest Growth Cannabis Markets in the World
Australia is following Canada’s footsteps when it comes to cannabis.
In a big legal breakthrough, medical cannabis was legalized on the federal level in Australia in 2016.
In January of 2018, Australia further strengthened its cannabis industry when it became the fourth country in the world to legalize medical cannabis exports.
In a Reuters article from January 3, 2018, Australia said they planned to score a piece of the estimated $55 billion global medical marijuana export business.
“Cannabis cultivation in Australia is still relatively small, as recreational use remains illegal. But the government hopes domestic medicinal use, legalized last year, and exports will rapidly boost production.”
Australia’s Health Minister, Greg Hunt, said, “Our goal is very clear: to give farmers and producers the best shot a being the world’s number one exporter of medical cannabis.”
As you can see, Australia has been quietly positioning itself to be a major player in the global cannabis market.
One of the best ways to try to potentially profit from this high-growth market is with a secret Australian micro-cap that has secured the same powerful first-mover advantage that Canopy Growth Corp (CGC) secured back in 2017 had.
In fact, this young Australian company shares many similarities to Canopy when it was in its infancy, like…
- Powerful, first-mover advantage with cannabis permits.
- Expansion into international markets.
- Partnerships with influential industry leaders.
This Early Industry Leader is Ready To Cash In on Australia’s High-Growth Cannabis Market
My #1 pick for 2019 is Auscann Holdings (ASX:AC8, OTC:ACNNF).
I like to call this stock the “Canopy of Australia.”
Auscann began trading on the Australian Stock Exchange in February of 2017.
Later that year, Auscann became the first Australian cannabis company to secure all the required licenses to operate across the supply chain – starting with seed genetics, to cultivation and all the way up to distribution.
Winning these permits is huge!
It gives Auscann an enormous head start on the competition. I expect this lead to pay off for years.
Beyond its powerful first-mover advantage, I see even more reasons why I expect Auscann to thrive in 2019.
Auscann is Ready to Disrupt Australia’s Medical Cannabis Market in Q1 & Q2 of 2019
Auscann just completed a 10-month clinical study on a new line of medical cannabis therapies that are expected to hit the Australian market in the first half of the new year.
More importantly, Auscann’s new cannabis treatments could be innovative game changers because of new delivery technology.
Auscann’s managing director, Elaine Darby, said the company was “thrilled” with the outcome of the recent trials. That’s because “AusCann has developed something truly unique in the world of cannabinoid medicines,” according to Darby.
Ms. Darby also said that “delivery of consistent and stable products has been an issue that plagues the cannabis medicine industry. This new hard capsule will be a game changer for doctors and patients as it is easy to use and will give consistent treatment outline every time.”
Auscann had filed for a patent to protect its new cannabis delivering technology.
In January of 2018, Auscann signed an agreement with Australian Pharmaceuticals Industries Limited (API), one of Australia’s largest pharmacy networks. Under the agreement, API will distribute Auscann’s medical cannabis products through its expansive national pharmacy network.
Auscann is Expanding into International Markets
Just like Canopy in its early days (and also now), Auscann is expanding into high-growth international markets.
Auscann had recognized South America as potentially one of the largest cannabis markets in the world after Argentina joined Columbia, Chile, and Uruguay in legalizing medical cannabis.
In order to capitalize, in 2016 Auscan expanded into South America, forming a joint venue with Fundacion Daya, one of Chile’s leading cannabis researchers. The joint venture called DayaCann, began harvesting cannabis in April of 2017 and continues to thrive and expand.
Canopy is Auscann’s Largest Shareholder
The icing on the cake here is that Canopy is already Auscann’s largest shareholder. In May of 2016, Auscann announced that Canopy had taken a 15% stake.
This is an enormous win for Auscann that provides huge benefits.
In April of 2018, Auscann announced it was expanding its relationship with Canopy. The expansion includes an exclusive supply deal where Auscann will import cannabis from Canopy.
In the long run, I expect Canopy to purchase Auscann. That would be very good for shareholders.
Auscann Surged After the IPO, but Shares Are down More Than 60% from the All-Time High
Auscann surged higher in 2017, jumping almost 1,000% from its IPO price.
However, 2018 has been a very different story. Shares have been on the downswing for the last eight months.
This has been a tough pullback for current shareholders. For prospective shareholders, it’s an opportunity to buy on a huge pullback.
Auscann Trades on the Australian Stock Exchange and US OTC Markets
Auscann shares trade in Australia and the United States.
In Australia, shares trade on the Australian Stock Exchange under the ticker AC8. I see average daily trading volume of 727K, so this ticker is plenty liquid.
In the US, Auscann trades on the OTC (over-the-counter) market under the ticker ACNNF. I see average daily trading volume of 113K, so once again this ticker is also plenty liquid.
The Big Picture on Auscann
Auscann reminds me of Canopy back in 2016. It has a powerful first-mover advantage over the competition and is positioned to cash in on Australia’s high-growth cannabis market.
Despite the strong outlook, shares are trading well below the 52-week high. This looks like an opportunity to buy a future industry leader at a sharp discount.
About the Author
Michael Vodicka is an equity analyst with more than 20 years of experience trading and investing. His research has been featured in some of the industry’s most respected publications. He has been investing and leading investors in the cannabis sector since 2013.