Warren Buffett may be the world’s greatest investor, but he’s not exactly a trailblazer. It took him forever to invest in technology stocks because he didn’t understand it, but when he did he went whole hog. Apple now…
accounts for a whopping 42.5% of his entire portfolio!
Buffett doesn’t own any marijuana stocks yet, but he also said investing in airline stocks was a bad idea, and he eventually did that, too. And the three cannabis companies below just might be far better bets than the airlines that ended up burning Buffett so badly he dumped them at the bottom.
So let’s see what Columbia Care (OTC:CCHWF), Scotts Miracle-Gro (NYSE:SMG), and Trulieve Cannabis (OTC:TCNNF) have that would convince Buffett a marijuana investment would be a good long-term addition to his portfolio.
Staying focused on what’s important
Rich Duprey (Columbia Care): While Buffett doesn’t always follow his own rules, the vintage Buffett often invested in companies that had relatively simple businesses to understand. Think Coca-Cola, See’s Candies, Fruit of the Loom, and Duracell. They generally did one thing, and did it well.
While Buffett has also always invested in more complicated issues, I’d like to think the Oracle of Omaha would find marijuana dispensary leader Columbia Care one of those focused businesses that does its one thing well.
The multi-state operator has 99 dispensaries, is licensed in 18 states, runs 31 cultivation and manufacturing facilities, and has wholesale distribution in 13 markets. That makes it one of the largest vertically integrated operators, and seems in keeping with its ambition to get to scale as quickly as possible.
Columbia Care just entered Virginia’s new medical marijuana market with some of the state’s first whole flower sales for patients under its under Seed & Strain and gLeaf brands. It is anticipating the state to expand such sales to personal and recreational use in the future, a development that is key to the MSO’s growth potential.
Columbia Care says its revenue triples or quadruples when local markets expand usage parameters such as going from solely being medical use to also allowing adult usage. Because twice as many states allow for medical marijuana as personal usage, it provides the MSO with an opportunity to see sales rapidly advance as states adopt additional incidences of use.
Last month Columbia Care reported second-quarter financial results showing revenue more than tripled year over year to a record $109.7 million, generating adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $16.4 million, which was a $21 million swing from last year and a 58% increase from the first quarter. It’s also forecasting as much as $530 million in revenue for the full year and adjusted EBITDA of between $95 million and $105 million.
Columbia Care has been on a buying spree, but it has kept the acquisitions in its wheelhouse to ensure its main business keeps growing. That seems like the kind of smart management tactic Buffett would approve of.
Fertilizer is always in style
Alex Carchidi (Scotts Miracle-Gro): Scotts Miracle-Gro doesn’t need to grow a single marijuana plant to make billions of dollars in revenue and power shareholder returns. Instead of selling cannabis directly, Scotts makes a galaxy of plant nutrients, hydroponics gear, pesticides, and gardening equipment, all of which it sells to burgeoning marijuana businesses and consumers via its retail outlets. There’s a lot that Warren Buffett would like about Scotts…
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