It’s the hottest trend in the cannabis sector in 2018.
It’s been leading to huge gains for investors.
And right now, it’s about to strike again. Here’s how you can potentially profit.
2018 is turning into the year of the cannabis megadeal.
Some of the most powerful consumer brands in the world are suddenly investing billions in the young cannabis industry.
It all started on August 1 when Hexo Corp (TSX: HEXO, OTC: HYYDF), one of the largest cannabis companies in Canada, announced a deal to develop cannabis-infused drinks with Molson Coors (NYSE: TAP), one of the largest brewers in the world.
The deal gave Hexo’s share price a big jolt, jumping more than 100% in the next four weeks, leading to quick and easy gains for shareholders.
Just two weeks later on August 15, Canopy Growth Corp (TSX: WEED, NYSE: CGC), the largest cannabis company in the world, announced it had accepted a record $3.8 billion investment from Constellation Brands (NYSE: STZ), one of the largest alcohol companies in the world.
It was a groundbreaking, record investment that marked a new high for the cannabis sector.
The deal sent shares of Canopy soaring 47% in one day and more than 100% in the next four weeks, leading to another round of quick and easy gains for shareholders.
News of these mega partnerships between cannabis and the world’s most popular consumer brands are creating great opportunities for investors.
One way to profit from this trend is to simply buy shares of a cannabis company after it announces a new deal. As you can see this strategy has been very profitable for both Hexo and Canopy.
However, a better way to profit from this wave of cannabis mega deals is to buy shares before an official announcement hits the Street.
Right now, it looks like the biggest ever cannabis deal is brewing – and it could send shares of an early industry leader deep into a new all-time high.
Rumor has it that Coca-Cola (NSYE: KO), one of the most powerful and recognized consumer brands in the world, is about to make a big investment in the cannabis industry.
Here are some more details from Bloomberg.
Coca-Cola says it’s monitoring the nascent industry and is interested in drinks infused with CBD — the non-psychoactive ingredient in marijuana that treats pain but doesn’t get you high. The Atlanta-based soft drinks maker is in talks with Canadian marijuana producer Aurora Cannabis to develop the beverages, according to a report from BNN Bloomberg Television.
A deal with Coke would mark a new phase in the cannabis industry. It would provide even more credibility, billions in fresh capital, and access to one of the best distributions networks on the planet.
The lucky cannabis company that hooks up with Coke is going to be sitting pretty.
And Aurora looks like a perfect candidate.
- Early permit winner and early industry leader.
- Low-cost provider against smaller competition.
- Early and growing international presence.
Aurora Cannabis (TSX: ACB, OTC: ACBFF) is an early cannabis industry leader. It’s one of the largest cannabis companies in the world, one of the lowest-cost producers, and has international reach.
Aurora has been rapidly expanding cannabis production capacity ahead of October 17, when Canada goes legal.
For example, Aurora is in the final stages of completing its Aurora Sky facility, a 1 million square foot, state of the art cannabis greenhouse strategically located near the Edmonton International Airport.
This location close to a major international airport plays perfectly into Aurora’s international business model. Aurora is an early leader in some of the fastest growing international cannabis markets, including Germany, Italy, Australia, and Columbia.
Aurora Still Trading 35% Below the 52-Week High
Aurora shares jumped more than 20% on September 17 after the Coke story hit the Street.
Despite the recent 20% jump, Aurora is still trading 35% below the 52-week high. Looking forward, this is another cannabis stock I expect to close the year trading at an all-time high.
The Big Picture
Coke is looking to invest in the young cannabis industry and Aurora Cannabis looks like a great target. Aurora is one of the largest cannabis companies in the world, a low-cost producer and very international. I would expect any deal with Coke to send Aurora shares jumping into a new all-time high. Even if Aurora doesn’t sign a deal with Coke it looks like only a matter of time before this early industry leader finds a bigger partner to invest billions.
Michael Vodicka owns shares and call options of Canopy Growth Corp and Aurora Cannabis.
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.