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Capitalizing on Cannabis: GW Pharma and GrowLife Add Some Sizzle To The Sector

When I last reviewed the entire cannabis sector a month ago, I pointed to a big change: Not all of the stocks were moving in the same direction. My thesis was and remains the same: Investors are beginning to differentiate on both transparency as well as leverage to the big themes of recreational legalization and a more enthusiastic embracing of the medical benefits of marijuana. Again, the DOJ "hands-off" policy that gave the green light to Colorado and Washington to proceed with their implementations as well as Sanjay Gupta's reversal of his previously negative view on the medical aspects, both August events, paved the way for investors to sharpen their focus on these themes.

As I suggested then (note: here is a link to all of my previous articles on the sector), two of the better stocks to take advantage of these themes are GW Pharma (GWPH) for medical and GrowLife (OTC:PHOT) for recreational (but also medical). As you can see, these two stocks enjoyed a strong month:

 

 

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No Joy in 2013, but 2014 Should Be Better for Joy Global’s Stock

Joy Global (JOY) isn’t having a very good year, as its orders have plunged amidst a slow-down in capital spending in the mining industry due to tepid global growth. This is a very solid company that can be characterized as a ‘growth cyclical’, and the time to buy stocks like this, in my view, is when things don’t look so great. The earnings are likely to decline sharply in 2014 based on weak orders currently, but then pick up in 2015. If this proves correct, 2014 should be a better year for the stock as investors look forward to the upturn. I estimate that JOY could trade to 73 over the next year, which would represent a total return of 33%.

Background

Based in Milwaukee, Joy Global makes mining equipment that is used for coal and mineral extraction. The company competes closely with cross-town rival Bucyrus, which was acquired by Caterpillar (CAT) in 2011. The two companies were very similar, but JOY now differentiates itself for its direct selling, which puts it closer to the customer than CAT’s model of using a network of outside dealers, a strategy that should ultimately allow the company to gain market share. One key to understanding JOY is its early 2012 purchase of International Mining Machinery. While strategically sound, the buy of this Chinese company was very poorly timed.

JOY divides its business into two segments: Underground Mining Machinery and Surface Mining Equipment, both similar in size with respect to sales and operating income. Importantly, the company has a very large ‘aftermarkets’ business and doesn’t focus solely on new equipment sales.

 

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Carlisle Companies: EPS Hole Could Lead To Buy Opportunity

I have followed Carlisle Companies (CSL) for more than a decade and was attracted to the story in 2008 when Dave Roberts, then CEO of Graco (GGG), joined as CEO, with the promise of making it a better company. While the Great Recession initially impeded the operational improvements he intended, Robertson has done a terrific job of transforming the company and creating significant shareholder value, with the company producing record EPS in 2011 and all-time high stock price in early 2012, well ahead of the market and the industrial sector.

As part of his portfolio repositioning strategy, Roberts announced on the Q2 conference call the potential disposition of one of its operating segments, Carlisle Transportation Products, which was actually the origin of the company. CTP produces tires, wheels and industrial belts for several industries, including agriculture, outdoor power, power sports and ATVs. The company announced the disposition on 10/21 for $375mm, with the close expected in early 2014. With the Q3 earnings report and the call that followed, it is apparent that the capital won't be deployed until most likely mid-2014. Given the loss of earnings as well as lingering challenges in one of CSL's 3 core businesses, analysts are likely to lower their estimates for 2014. I would look to build a position in CSL on any sort of pullback in the coming weeks and believe that the stock could trade to 83 over the next year based on achieving 16PE on 2015 estimated earnings, with the potential in a more bullish capital redeployment to trade to 99 based on 18PE.

CSL: A Diversified Industrial Company

Based in North Carolina, CSL has been operating five segments,

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SHW: Profit From Paint

Sherwin-Williams (SHW) has been a highly successful company and is a great way to play the recovery of the housing market. The company has a unique model consisting of its own network of stores that caters to painting contractors as well as a large presence in home-improvement stores that allows it to serve consumers. The stock is no bargain, but it should be able to deliver reasonable returns driven by continued earnings growth, and it has a potential kicker if it can close a deal to expand into Mexico. SHW is a high-quality core growth stock that should produce 17% gains over the next year.

Background

Based in Cleveland, SHW has been in business since 1866. The company is a global leader in paint and other coatings, with a market that sells to both professionals and consumers in its own stores and in through other retailers. It has some fantastic brands beyond its own name, including Dutch Boy, Krylon and Thompson’s Water Seal. Its CEO, Chris Connor, has dramatically expanded its

 

 

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Three Companies Capitalizing on Cannabis Right Now

One thing 2013 has taught cannabis investors is that not all pot stocks are the same.  At 420 Investor, one of our goals is to separate the proverbial flower from the stem as we identify the companies that have potential and get prepared for new entrants that show promise while avoiding those companies that will likely never succeed.  As we enter the final few months of the year and begin to think about 2014, there are two big trends that I think will be important, including the rollout of legalization in CO and WA as well as the rapidly growing awareness of the potential of cannabidiol (CBD).  As I look at the current universe that I am tracking, three names jump out as being the most leveraged to these trends.

 

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Diego Pellicer: Leading the Charge to End Cannabis Prohibition and Create Tremendous Value

420 Investor had the great pleasure of hosting Jamen Shively, founder of Diego Pellicer, for two fascinating webinars.  One our four pillars of our service is to bring our subscribers outside experts and industry leaders, and we started at the top!  Shively's first presentation on October 1st, "The 'Dot Bong' Era: Jamen Shively Explores Capitalizing On Cannabis with 420Investor," covered all of this and more:

• The size of the coming legal cannabis market
• What a unique situation now exists with a market that size that has not one single established brand
• The opportunity that he sees for Diego Pellicer as a retailer of premium marijuana
• Challenges of establishing that brand with high-quality, consistent product
• Why being the leading, first-to-mind brand is so important
• The Diego Pellicer reality show… (yes really!)
• Why Diego has partnered with the Northwest Patient Resource Center to create a new medical brand named Prima
• What does the future of the legal cannabis market look like?

You can access this first webinar here (Jamen's presentation begins at minute 16) and, if you have time, the extended version here.

On October 8th, Jamen returned with his partner, John Davis, CEO of Northwest Patient Resource Center and a member of the Board of Directors of the National Cannabis Industry Association (NCIA).  The presentation, "Capitalizing on Cannabis:  The Imminent Collapse of Cannabis Prohibition," described the state of the emerging social-use cannabis market and conveyed the history of cannabis prohibition and recent regulations. Cannabis policy expert Davis explained in detail why he believes that the recent approvals by voters in Colorado and Washington will likely be followed by a significant number of states legalizing recreational cannabis in 2016. After hearing John’s perspective, investors had a much better gauge of the future pace of legalization.

 

You can access the second webinar here 

An Interview With Paul Rosenberg, CEO Of $MCig

When mCig (MCIG.OB) CEO Paul Rosenberg contacted me last month after having read my interviews with two other CEOs of companies in the cannabis sector, I was instantly impressed with several aspects of the story. I tend to be somewhat suspicious of many of the new companies that access the markets via a reverse merger, but MCIG, which is an SEC-filer, pursued what is really an acquisition of an existing technology company that it was considering as a technology provider. MCIG appears to offer transparency and a very simple business model. The company is about to launch its first product, the "mCig", a vaporizer based on the increasingly popular "eCig" (which is pre-packaged with a liquid that is vaporized) but designed for the consumption of whatever plant material the consumer chooses (hint: the "m"is for marijuana!). Given the 2014 implementations of legalized adult cannabis usage in Colorado and Washington, the mCig is launching at what seems like a perfect time. The stock soared recently to unsustainable levels, but it has pulled back.

CEO Paul Rosenberg was kind enough to send me a sample, and it matched the description on the company's website.  At 420 Investor, I serve as the "Cannabis Financial Analyst" and, unfortunately, not the product tester, but I was able to see how it worked and to appreciate its elegant design. I also really liked the USB charger that came with it. Given what I see as many positive characteristics, I wanted to share an exchange I had with CEO Rosenberg so that my readers might get a better sense of this potentially attractive story.

 

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Capitalizing On Cannabis: Many Prices Aren't Right Despite The 'Green Light'

The summer of 2013 breathed life back into publicly-traded cannabis-related stocks, reversing a sharp correction that began in February. First, Dr. Sanjay Gupta, the Chief Medical Correspondent for CNN, reversed his strongly negative views regarding medical marijuana in early August. Then, Attorney General Eric Holder and the Department of Justice gave what many, including me, see as a "green light" for the states of Colorado and Washington to proceed with their implementations of legalized recreational marijuana. In early September, the Senate held hearings that USA Today, which is as mainstream as a paper can get, called rightly the "first-ever hearings of its kind." This is an understatement, as it served to acknowledge that we are at a tipping point in history.

These events, in my opinion, are game-changers. On the medical side, despite lots of evidence about potential benefits that go beyond palliative care, there hasn't been an advocate of Gupta's stature to help enlist broader support. He documented several cases of patients, including young children, finding relief from debilitating diseases from one of the many components of cannabis, cannabidiol ("CBD"), which lacks the psychoactive side-effects of THC. None of this was new, and it is a shame that the U.S. is so far behind other countries in doing the research necessary to better understand the potential and any risks, but now it's in the eye of the public.

On the recreational side,

 

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Capitalizing on Cannabis: Alan Brochstein's Articles on the Cannabis Sector

For Alan's most current views on the cannabis sector, please visit 420Investor.com.  If you are interested in learning more about the sector, you can sign up to receive for free  "The 420 Investor Guide to Cannabis Stocks", where he describes the opportunities and risks in the sector and share his current list of 17 stocks that have a market capitalization in excess of $10mm.

The following list includes articles published on Seeking Alpha or that are shared with the public on 420 Investor (from oldest to newest):

• Reefer Madness: Pot Stocks In A Bubble

• Medical Marijuana Inc.'s Recent Transaction And Guidance Raise Questions

• Hemp, Inc.: Priced Way Too High

• Cannabis Science Masters The Art Of Shareholder Dilution

• Why Medical Marijuana Inc. Has Lost Its Buzz

• The Haze Lifts: 96% Of Medical Marijuana Inc. Q4 Sales FromQuestionable Transaction

• How Management Misled Investors When It Gained Control Of Medical Marijuana, Inc.

• Medical Marijuana Inc.: Whistling Dixie, Blowing Smoke

• Medical Marijuana Inc. Q1 Report Feeds The Bears But Gives Bulls Some Promise

• Investors Should Avoid AVT, Inc.

• Down 80%, Is Medical Marijuana Inc. Finally A Bargain?

• 3 Near-Term Drivers For Medical Marijuana, Inc.

• Avoid This 'Preferred' Way To Pick Pennies From Your Pocket

• Gupta's Reversal: A Game-Changer For Medical Marijuana Stocks?

• Medical Marijuana Inc.: The Party Is Over For Now

• Capitalizing On Cannabis: A Review Of Publicly-Traded Marijuana Stocks

• Nuvilex Investors Should Heed FINRA Warnings

• Capitalizing On Cannabis: Medical Marijuana Interview With Steve Gdula

• Medical Marijuana Inc. To Launch New Products

• Capitalizing On Cannabis: An Interview With Derek Peterson, CEO Of Terra Tech

• Capitalizing On Cannabis: An Interview With Sterling Scott, CEO Of GrowLife

• New Reverse Merger In Cannabis Space Worth Getting To Know

• Does Medical Marijuana, Inc. (MJNA) own Dixie Elixirs?

• MCIG: Here is the mCig

• How to Decide Between GWPH and GWPR

• Capitalizing on Cannabis:  Divergence Among the Pot Stocks

 

 

 

Capitalizing On Cannabis: The Imminent Collapse Of Cannabis Prohibition

420 Investor Webinar - Tuesday, 10/8 @ 7PM EST

REPLAY

 

After recently sharing his ambitious plans to create the world's first retail brand for legal, premium marijuana, Diego Pellicer, Jamen Shively joins Alan Brochstein, the first "Cannabis Financial Analyst" who just launched 420 Investor as the premier source of information for those looking to capitalize on the "Green Rush" through their investments, for another live webinar. Shively and Brochstein will be joined by John Davis, CEO of Northwest Patient Resource Center and a member of the Board of Directors of the National Cannabis Industry Association (NCIA).

Join Alan as he interviews these two cannabis industry thought leaders and learn about the recent history of cannabis regulations and why regulatory expert Davis believes that the recent approvals by voters in Colorado and Washington will likely be followed by a significant number of states legalizing recreational cannabis in 2016. After hearing John's perspective, investors will have a much better gauge of the future pace of legalization. Additionally, Jamen plans to unveil a major initiative that he believes could further accelerate the fall of "Big Prohibition."

Here is a link to the 75-minute webinar from 10/1 entitled:

"The Dot-Bong Era" - Jamen Shively Explores Capitalizing on Cannabis with 420 Investor

Jamen's presentation intro is here:

 

This was a big point that he made regarding how quickly the "Berlin Wall" of "Big Prohibition" is crumbling: