Buying stock in innovative businesses is one of the great joys of investing. By throwing their money behind a company that’s making headway in uncharted territory, investors are betting on progress while providing fuel for the journey in the form of capital. In this vein, some people…
might suspect that there’s not a whole lot of new thinking going on in the marijuana industry — after all, how much is there to innovate on when it comes to an herb?
From my perspective, the cannabis industry is a hotbed of creative activity, assuming you know where to look. Let’s take a look at a compelling pair of businesses that are rewarding their shareholders by tackling new areas where there isn’t much competition.
1. Canopy Growth Corporation
If you believe that people enjoy smoking cannabis, it isn’t too much of a stretch to think that they’d enjoy drinking cannabis too. That’s where Canopy Growth Corporation‘s (NASDAQ:CGC) industry-leading lineup of cannabis-infused beverages comes into play. It has nine such products in total, with four containing cannabidiol (CBD) and five with tetrahydrocannabinol (THC). While such drinks only comprise 2% of the total net sales of cannabis in its home market of Canada, marijuana beverages as a category grew by 25% in the most recent quarter. And, the majority of the company’s infused drink brands are priced at a premium, which likely means they can be manufactured with healthy margins. Canopy is well-positioned to capitalize on the growth of the segment, especially considering that it already controls 34% of the cannabis beverage market in Canada.
Investors will be pleased to hear that the company’s drinks are gaining traction. Its Quatreau CBD-infused soda launched last quarter, and it’s already the leading brand of its type in Canada. Importantly, Quatreau is also on the market in the U.S., where it can be sold in states that haven’t yet legalized adult-use marijuana products. If federal marijuana legalization does occur, Canopy will have a strong advantage, given that it is already penetrating the U.S. CBD beverage market with help from its distribution collaborator, Constellation Brands.
While beverages aren’t the only thing that will drive Canopy’s growth over the next few years, management is highly optimistic. It predicts that net revenue will grow with a compound annual growth rate (CAGR) of up to 50% between now and 2024. Time will tell whether its beverage strategy will pay off for investors, but the early signs are positive.
2. GW Pharmaceuticals
Cannabis may be popular because people find it fun, but it’s important to remember that the plant provides serious medical benefits too. GW Pharmaceuticals (NASDAQ:GWPH) is a pioneer in using cannabinoid therapies to treat…
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