In the words of most marijuana stock investors, “goodbye and good riddance to 2019!” While 2019 was supposed to be the year that cannabis stocks put everything together and delivered profits, this didn’t turn out to be the case. Persistent supply issues in Canada, high tax rates in a number of recreationally legal U.S. states, and a resilient black market throughout North America, made sure that pot stock investors had a bad time…
However, 2020 brings a clean slate to the marijuana industry, and hopefully will deliver the green to investors. After all, this is an industry where tens of billions of dollars of product is being sold annually in the black market, and it’s not unrealistic to expect these sales to steadily transition to legal channels over time as new countries/states give weed the green light.
The question is: Which marijuana stock should you be buying to take advantage of the green rush?
While it had an abysmal 2019, my top marijuana stock for investors to consider buying in January is California-based ancillary player KushCo Holdings (OTC:KSHB).
But before I get into the meat and potatoes of why I consider it a buy, let’s first dig into the reasons behind its awful campaign last year.
Here’s why KushCo’s 2019 didn’t go as planned
First of all, KushCo was clobbered by the aforementioned supply problems in Canada. This is a company that sells vaporizers, provides packaging and branding solutions, and supplies hydrocarbon gases that are used in the production of cannabis oils. In other words, it relies on global cannabis sales increasing, which didn’t happen nearly as quickly as anticipated in 2019.
For instance, Health Canada has struggled to approve cultivation and sales license applications in a timely manner (e.g., it took Aphria north of 18 months to get the green light to plant at its flagship joint venture, Aphria Diamond), and it delayed the launch of derivative products by two months. Meanwhile, Ontario, the country’s most populous province, only opened two dozen retail locations a full year after adult-use sales began. These bottlenecks are all bad news up and down KushCo’s operations.
Secondly, the U.S. vaping-health scare really took the wind out of KushCo’s sails. As of Dec.27, the Centers for Disease Control and Prevention (CDC) had identified 2,561 persons hospitalized with cases of e-cigarette, or vaping, product use-associated lung injury (EVALI), of which 55 people had died. The CDC appears confident in having labeled vitamin E acetate as the EVALI culprit, but has recommended that consumers not vape liquids that contain tetrahydrocannabinol (THC), the cannabinoid that gets users high. Considering that KushCo generates the bulk of its sales form vaporizers, this was a clear concern to its top-line growth…
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