Gardening and More – 3 Ancillary Cannabis Companies for Your Portfolio
Cannabis stocks have been hyped over the past year, with many companies P/E ratios going totally out of whack. The “green rush” is certainly bringing opportunities for traders who can successfully ride out the sector’s volatility.
For help with long term investing I took a look at what Ken Mahoney, CEO of New York-based Mahoney Asset Management, who offers clients retirement solutions, is advising. The asset manager was quoted as acknowledging that there’s a lot of uncertainty anytime a new concept comes to market and “it’s hard to find an ultimate winner.. it’s hard to be a stock picker.” Instead of purchasing individual stocks of licensed producers Mahoney suggests a “pick-and-shovel” strategy, where one invests in companies providing the underlying technology behind producing cannabis rather than cannabis growers. These target companies, which provide services such as soil, fertilizers, real estate, packaging etc. have well-established businesses they can use to hedge investment in the cannabis green rush.
Here are three companies that provide services to the cannabis industry to consider for your portfolio.
The Scotts Miracle-Gro Company (NYSE:SMG)
The Scotts Miracle-Gro Company is a manufacturing firm with a history of over 150 years. The company provides fertilizers, plant foods, seeds, soils, and pest control products. Jim Hagedorn, CEO of the Marysville, Ohio-based company, was quoted in Forbes three years ago talking about how he wanted the company to invest “half a billion [dollars] in the pot business.” He followed up by acquiring hydroponic equipment maker Sunlight Supply Inc. in a deal which was valued at $450 million. Sunlight Supply will be folded into SMG’s new gardening division: Hawthorne Gardening. This subsidiary holds Scotts’ hydroponic assets in addition to other goods associated with marijuana cultivation. Sunlight Supply and Hawthorne Gardening combined are expected to hit annualized sales of approximately $600 million. Scotts has more than 1,000 retail locations spread across major legal marijuana states in the United States.
GrowGeneration Corp (OTC:GRWG)
Denver, Colorado-based GrowGeneration Corporation is an agriculture solutions company that owns and operates hydroponic and organic gardening supplies stores geared towards the cannabis industry. The company has 23 retail gardening stores in 8 states where medical or recreational marijuana has been legalized. The company services commercial and small cannabis growers through these stores. They sell soil, hydroponic and aquaponic equipment, advanced lighting technology, organic nutrients, and various other products for growers in key cannabis markets in the United States. The company has over 100 product specialists with solid agricultural experience to service and consult with commercial grow facilities. The company also provides supply chain services to commercial hemp growers through its Hemp Corp Subsidiary.
General Cannabis Corp (OTC:CANN)
Denver, Colorado-based General Cannabis Corporation is a holding company that provides a wide range of ancillary services to cannabis producers and businesses in the marijuana industry. The company owns a diverse portfolio of businesses within the cannabis space. The company provides security and cash management services under the subsidiary Iron Protection Group. Chiefton Supply Company is a cannabis-inspired lifestyle clothing brand owned by General Cannabis that provides apparel, hemp products and design and branding services. Next Big Crop, another subsidiary, is a cannabis consulting firm that provides its services to every phase of the construction, cultivation, processing, and sale of marijuana including operations management, dispensary management, cultivation technology solutions, and license applications. GC Capital provides loans, equity investments, real estate development and leasing, and passive investments in the cannabis space.
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