2021 3 TOP CANNABIS STOCKS - Midas Letter
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2021 3 TOP CANNABIS STOCKS
3 TOP CANNABIS STOCKS
COLUMBIA CARE INC.
(OTCMKTS: CCHWF
CNSX: CCHW)
Website: https://col-care.com
Investor Relations: https://ir.col-care.com
You could still argue that New York is just a small piece
Weighted average common shares outstanding of Columbia Care’s pie. The footprint and scale of this
- basic and diluted: 264.7M company is second only to Curaleaf Holdings Inc. - trading
at almost 5X Columbia Care’s market cap.
Market Capitalization (At market close March 31, 2019):
US$1.9B Columbia Care has licenses in 18 U.S. jurisdictions and
Cash & Cash Equivalents: US$61M operates 27 U.S. cultivation facilities with 87 dispensaries.
2020 Revenue: US$197.9M All-in-all the company has over 1 million square feet of
production and 300 plus acres of outdoor cultivation
Y/Y Rev. Growth: 151%
capacity at its growing disposal.4
Q4 Revenue: US$81.8M
Q/Q Rev. Growth: 51%
*as of December 31, 2020 unless otherwise stated
As New York became the 15th U.S. state to legalize
recreational cannabis for adult-use1, it begs the question
which weed stock is poised to benefit the most from
state-by-state recreational legislative change?
New York will quickly become one of the largest adult-use
markets in the nation. With a population of around 19.5
million2 , New York is touted to generate up to $7 billion in
annual sales once the market is fully established.3 *These picks are not in order of priority or
New York City headquartered Columbia Care Inc. could expected performance. They are in alphabetical
find itself best positioned to captain the new legal Empire order. Do your own due diligence, and only invest
(State). The company is vertically integrated in all of the with the advice of a registered investment
markets it operates in and already has wholesale
professional in your jurisdiction.
distribution, a cultivation/manufacturing facility, and four
dispensaries in New York.
1 https://www.nytimes.com/2021/03/31/nyregion/cuomo-ny-legal-weed.html
2 http://www.populationu.com/us/new-york-population 4 https://d1io3yog0oux5.cloudfront.net/_
3 h ttps://www.businessinsider.com/guide-new-york-legal-marijuana-timeline- fe270c2c6e3bf48c50a3a306a395bf60/colcare/db/354/2637/pdf/
stocks-investor CCHW+Presentation+Q4+2020+_+vFINAL%282%29.pdf
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3 TOP CANNABIS STOCKS
These impressive stats allow Columbia care to have The company purchased Green Solutions - the largest fully
an addressable market of over 53% of the total U.S. integrated operator in Colorado. Green Solutions adds 23
population. That’s a population of 173.6 million people dispensaries and six cultivation/manufacturing facilities
generating estimated 2021 sales of $14.28 billion - and that are expected to generate approximately US$88.5
that sales figure is expected to almost double to $27.86 million in revenue and US$18.5 million in adjusted EBITDA
billion by 2026.5 in FY 2020.6
The positive news for shareholders is out of the 18 Next, Columbia Care completed the acquisition of Project
jurisdictions Columbia Care operates in, only seven have Cannabis. Project Cannabis creates the foundation for
full recreational legality. As discussed with the conversion scaled success in California. Project Cannabis adds over
of New York state, the company is well-positioned in states 100 dispensaries to its wholesale distribution network
that could come online in the future. Florida, Pennsylvania, throughout California and immediately turns Columbia
and Virginia are just three examples of states that the Care’s Californian operations to adjusted EBITDA and cash
company has already established itself within for the flow positive.7 California is the world’s largest cannabis
medical market - these states will have significant upside market with annual sales above $4 billion. Expect California
potential if the states were to eventually allow recreational to be one of the biggest stories with MSOs this year.
sales - let alone federal de-prohibition.
As mentioned, the two previous acquisitions establish
Columbia Care made three major acquisitions in late 2020, Columbia Care in the two largest cannabis markets in the
which positions them for solid growth in the future. world, California and Colorado. But perhaps more
importantly, its acquisition of Green Leaf Medical expands
Columbia Care's operational scale and footprint into four
key, limited license markets.8 The deal enhances the scale
5 https://d1io3yog0oux5.cloudfront.net/_
fe270c2c6e3bf48c50a3a306a395bf60/colcare/db/354/2637/pdf/ 7 https://ir.col-care.com/news-events/press-releases/detail/95/columbia-
CCHW+Presentation+Q4+2020+_+vFINAL%282%29.pdf care-signs-definitive-agreement-to-acquire
6 h ttps://col-care.com/2020/09/01/columbia-care-completes-acquisition-of- 8 h ttps://ir.col-care.com/news-events/press-releases/detail/109/columbia-
the-green-solution/ care-signs-definitive-agreement-to-acquire-green
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3 TOP CANNABIS STOCKS
and capabilities of its seed-to-sale operations and
substantially expands its footprint and operating scale
in the Northeastern states and the Mid-Atlantic.
The Northeastern coastal states that Green Leaf Medical
opens for Columbia Care are the states coming online for
legal adult consumption. New Jersey and New York were
the most recent to be approved for recreational sales.
Green Leaf Medical also brings vertical integration to
Pennsylvania and Maryland, immediately positioning
Columbia Care as a leading wholesaler in those states.
Those two states have also already seen legislation to
legalize recreational sales.
Columbia Care reported 2020 annual revenue growth of
151% up to $197.9 million, helped by its fourth-quarter
revenue increasing 51% QoQ to $81.8 million.9 These record
company results, along with its gross margin expansion,
show the success of its expansion and acquisition strategy.
The company ended the year with $61 million in cash,
having raised $149.5 million from a bought deal public
offering, which supports any long-term continuation of its
growth initiatives.10
Columbia Care has provided Pro Forma 2021 revenue
guidance of up to $530 million. However, this does not
include any additional revenues coming online in newly
legalized states such as New York and New Jersey.
With revenues expected to reach over half a billion without
any recreational approvals, shareholders could see
significant upside in the future.
The company has a market cap of $1.1 billion - a valuation
significantly cheaper than the largest MSOs. With large
revenues and margins expected to keep improving from
recreational successes. In the state that never sleeps,
could Columbia Care find itself king of the hill and top
of the heap?
9 https://col-care.com/2021/03/16/columbia-care-reports-record-fourth- 10 https://ir.col-care.com/news-events/press-releases/detail/113/columbia-
quarter-and-full-year-2020-results-reaffirms-2021-guidance/ care-announces-closing-of-bought-deal-public
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3 TOP CANNABIS STOCKS
GREEN THUMB
INDUSTRIES INC.
(OTCMKTS: GTBIF
CNSX: GTII)
Website: https://www.gtigrows.com
Investor Relations: https://investors.gtigrows.com/
investors/overview/default.aspx
Connecticut, Florida, Illinois, Maryland, Massachusetts,
Shares Issued and Outstanding: 213.2M Nevada, New Jersey, New York, Ohio and Pennsylvania.
Fully Diluted: 217.2M
The company’s growth strategy focuses on States with
Market Capitalization (At market close March 31, 2019): large populations and limited licenses. The company looks
US$6.5B to enter States with a strong medical cannabis market
Cash & Cash Equivalents: US$83.8M where recreational legalization is a real possibility in the
future. To keep this report concise, we focus on two
2020 Revenue: US$556.6M
specific States that we see as the key growth markets this
Y/Y Rev. Growth: 157.2% year; Pennsylvania and Illinois.
Q4 Revenue: US$177.2M
Cannabis is still illegal for recreational use in Pennsylvania
Q/Q Rev. Growth: 12.8%
but has a roaring medical market. Pennsylvania is the
*as of December 31, 2020 unless otherwise stated fifth-largest state by population and has exceeded original
projections for patient number growth.12 The State is
expected to bring in $1 billion in cannabis sales within the
next three to four years.13 This makes the State the fastest-
growing medical cannabis market in the U.S.
According to the Oxford dictionary, to possess a green
thumb relates to the natural talent of growing plants. Well,
the multi-State cannabis operator (MSO), Green Thumb
Industries Inc., may have expanded that definition simply
from growing cannabis plants to scaling its business.
Green Thumb has six brands that sell across 12 U.S. States.
The company has 13 production facilities, 56 stores, and 97
retail licences.11
Green Thumb’s brands are produced, distributed, and sold
in the following U.S. markets: California, Colorado,
11 https://investors.gtigrows.com/investors/overview/default.aspx
12 h ttps://mjbizdaily.com/pennsylvania-successful-medical-cannabis-market- 13 https://mjbizdaily.com/pennsylvania-successful-medical-cannabis-market-
brightens-recreational-prospects/ brightens-recreational-prospects/
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3 TOP CANNABIS STOCKS
Another key point to outline is the high barrier to entry/ cannabis sales were $109.1 million in March 2021 - a 204%
competition within the State regarding obtaining licences. increase YoY and 35% since the previous month.18 In 2020,
The State has a licensing cap limited to a specific number Illinois sold more than $1 billion of legal cannabis and has
of cannabis licences available. Green Thumb is one of the already seen an increase of 153% in sales this year
early entrants into this market and a clear beneficiary of compared to last. This upward trend is bound to continue.
such regulation. Green Thumb recently opened its 55th national store within
the Prairie State.19
As more states pass bills to legalize cannabis
recreationally, you could make a case for Pennsylvania to It is no surprise that the last two retail openings were in
be the next candidate. Recently, lawmakers have introduced these two States. However, it is important to point out after
a bipartisan bill to do precisely that.14 According to recent these store openings, Green Thumb is one retail location
polls, two-in-three voters support allowing the sale of shy of reaching its retail licence limit in both of these
adult-use cannabis.15 The companies with significant States. With only one more available store to open in these
market share and infrastructure already in the State will States, shareholders will be looking for major retail growth
take advantage of any change in this regard. Green Thumb in other locations such as Florida and New Jersey - but will
just recently opened its 56th national retail location within be confident with the increase in sales and already
the Keystone State.16 prominent market share within stores in PA and IL. Where
Green Thumb can continue to expand across all of its
Illinois is another state Green Thumb has established markets is its wholesale business pillar.
strong retail and wholesale presence within.
The cannabis wholesale is the other side of Green Thumb’s
Illinois became the 11th State to officially legalize coin, making the value proposition attractive. The company
recreational marijuana in 2020.17 Total recreational has invested heavily into cultivation to supply other
14 https://www.mpp.org/States/pennsylvania/
15 ttps://drive.google.com/file/d/18rM2UjQGvrqL0FHk64TR_dA-LzelHCgA/
h
view
16 h ttps://investors.gtigrows.com/investors/news-and-events/press-releases/ 18 ttps://www.idfpr.com/Forms/AUC/IDFPR%20monthly%20adult%20use%20
h
press-release-details/2021/Green-Thumb-Industries-to-Open-Rise- cannabis%20sales.pdf
Meadville-in-Pennsylvania-Its-56th-Retail-Location-in-the-Nation-on- 19 h ttps://investors.gtigrows.com/investors/news-and-events/press-releases/
March-31/default.aspx press-release-details/2021/Green-Thumb-Industries-to-Open-Rise-Lake-in-
17 https://www.illinoispolicy.org/what-you-need-to-know-about-marijuana- the-Hills-in-Illinois-Its-55th-Store-in-the-Nation-and-McHenry-Countys-First-
legalization-in-illinois/ Cannabis-Store-on-March-31/default.aspx
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retailers. This way, Green Thumb can benefit from the sales acquisitions and have kept dilution to shareholders to
growth within states without having to build new stores. a minimum.
Green Thumb’s wholesale revenue actually grew more
than its retail revenue last quarter, 150% vs 130% growth CEO Ben Kovler says he is excited to start 2021 with the
respectively.20 first sale of SEC-registered shares to U.S. investors.23 The
CEO has 26% stake in Green Thumb with nearly 59% of the
As the company completed its U.S. initial public offering voting power.24 With such significant ownership of the
(IPO), raising US$56 million by selling approximately 1.6 company, any future shareholder will be pleased to know
million shares of the company21, U.S. investors will now be that he has an incentive to maximize the company’s growth
keen to see how robust Green Thumb’s Financial into the future. As the founder of the company and its
Statements are. The company’s Q4 financial report a fourth stellar growth, Kovler is so far proving his thumbs are
consecutive quarter of positive cash flow from operations sufficiently green.
supported by a 157.2% yearly increase in revenue, and a
balance sheet current asset position of $183.9 million to
support further growth across the U.S.22
Green Thumb’s growth strategy involves organic growth
through licence applications. Unlike other MSOs, the
company has avoided state-by-state expansion through
20 https://investors.gtigrows.com/investors/news-and-events/press-releases/
press-release-details/2021/Green-Thumb-Industries-Reports-Record-
Resultsfor-the-Fourth-Quarter-and-Full-Year-2020/default.aspx
21 h ttps://investors.gtigrows.com/investors/news-and-events/press-releases/
press-release-details/2021/Green-Thumb-Industries-Raises-US56000000- 23 https://investors.gtigrows.com/investors/news-and-events/press-releases/
Selling-Approximately-1.6-Million-Shares-in-the-U.S/default.aspx press-release-details/2021/Green-Thumb-Industries-Reports-Record-
22 h ttps://investors.gtigrows.com/investors/news-and-events/press-releases/ Resultsfor-the-Fourth-Quarter-and-Full-Year-2020/default.aspx
press-release-details/2021/Green-Thumb-Industries-Reports-Record- 24 h ttps://www.morningstar.ca/ca/news/211008/stock-of-the-week-green-
Resultsfor-the-Fourth-Quarter-and-Full-Year-2020/default.aspx thumb-industries.aspx
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3 TOP CANNABIS STOCKS
TRULIEVE
CANNABIS CORP.
(OTCMKTS: TCNNF
CNSX: TRUL)
Website: https://www.trulieve.com
Investor Relations: https://investors.trulieve.com
Its vertically integrated, seed-to-sale operation boasts a
Shares Issued and Outstanding: 113.6M 51% market share stranglehold across the whole state.25
Currently, Trulieve has 79 out of the total 325 dispensing
Fully Diluted: 118.3M
locations in Florida - which over half of the state’s medicinal
Market Capitalization (At market close March 31, 2019): cannabis patients frequent.26
US$5.61B
Cash & Cash Equivalents: US$146.7M The total number of qualified Florida medical marijuana
patients is just over half a million people with estimated
2020 Revenue: US$521.5M
annual sales of around $1 billion.27 Even though Florida
Y/Y Rev. Growth: 106% doesn’t permit recreational marijuana use and sales,
Q4 Revenue: US$168.4M Trulieve’s widespread dispensary network and extensive
delivery services have still made the company $177.2
Q/Q Rev. Growth: 24%
million in December quarterly revenue. Florida patients are
*as of December 31, 2020 unless otherwise stated expected to boost cannabis sales to $2.6B by 2025 - a
CAGR of 25.3% from 2019.28 Speaking of growth, Trulieve
has doubled its sales every year for three years and said
they expect sales to continue to grow by at least 60%
in 2021.29
Florida is the home of Disney World, oranges, humidity
and Trulieve. Trulieve was the first and now the leading
medical cannabis company in the sunshine state.
The norm within the corporate cannabis industry has been
to expand operations into as many legal states as possible
- with the hope to capture the largest population of
cannabis patients/users. Trulieve has used a different
tactic that has seemingly paid off. Trulieve has used its
first-mover advantage to focus almost exclusively on the
medical market in Florida.
25 https://investors.trulieve.com 28 ttps://investors.trulieve.com/static-files/ed820945-78a9-44b5-8a11-
h
26 https://s27415.pcdn.co/wp-content/uploads/ommu_updates/2021/032621- bfe539ef420c
OMMU-Update.pdf 29 h ttps://investors.trulieve.com/events/event-details/trulieve-cannabis-corp-
27 Ibid. fourth-quarter-2020-results
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vertical operations, cultivation permits, and dispensaries
in West Virginia and a cultivation/processing facility in
Massachusetts.31
We are still at the beginning of Trulieve’s MSO expansion,
but future scaling opportunities across different states
could make shareholders truly believe in the companies
value proposition.
We have spoken with CEO Kim Rivers a few times
throughout the company’s history. Most recently, here
where she discusses Trulieve’s profitability. The story
hasn’t changed since then (in terms of business strategy),
only grown.
Trulieve’s command of Florida cannabis, in terms of Kim Rivers presently owns approximately 17M shares -
footprint, brand recognition, and high-quality product equating her inside ownership to 13.82% of the company.32
reputation, has provided the company with solid With a significant equity position behind her and the fact
profitability and positive free cash flow - a rarity in the Ms. Rivers is the founder of the company, there is a large
cannabis industry. Trulieve’s cash-flow margins of 46%, incentive to keep pushing the company’s strong financial
gross margin of 60%, and customer retention rate of 79% performance and commitments to grow, state by state.
speak loudly to these points and the companies success in
its dedicated market.30
Trulieve has been profitable since 2017!
The legalization of recreational cannabis in Florida would
be the largest valuation catalyst in the near-to-medium
term - supposing Republican senators were to follow the
lead of many other U.S. states.
With Florida in Trulieve’s back pocket, the company has
started to expand its successful business to new U.S.
states. West Virginia, Massachusetts, California,
Pennsylvania, and Connecticut are the first markets
Trulieve aims to break into. Each of these states is
expected to see a double-digit CAGR by 2025 without
considering potential U.S. federal regulatory changes.
Trulieve’s strategy for entering these new markets is
through accretive acquisitions. Trulieve has the free cash
flow from its Florida operations to acquire existing
companies with proven operations in their respective
states. Most recently, dispensaries, 2021, Trulieve acquired
Mountaineer Holding LLC - positioning them to have
30 ttps://investors.trulieve.com/static-files/ed820945-78a9-44b5-8a11-
h
bfe539ef420c
31 h ttps://investors.trulieve.com/news-releases/news-release-details/ 32 https://simplywall.st/stocks/us/pharmaceuticals-biotech/otc-tcnn.f/
trulieves-national-expansion-momentum-continues-acquisition trulieve-cannabis#management
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JAMES WEST
PUBLISHER, EDITOR & HOST OF MIDAS LETTER RAW
James West founded Midas Letter in 2008 and has since
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learn what James is investing in and why.
ALEXANDER ROBERTS, MSc
MIDAS LETTER ANALYST & CONTRIBUTOR
Alexander Roberts joined Midas Letter in 2018 after
LATEST INTERVIEWS, Visit the Cannabis
section of the website working in several investment service positions for leading
VIDEO CONTENT & banks. He obtained a Master’s degree in Finance &
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insights for educational and entertainment purposes but
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