This marijuana company is expected to grow by 169% next year.
Cresco Labs Inc. (CRLBF)
From Ian Wyatt’s Million Dollar Portfolio
A number of cannabis mergers have fallen through over the past year, not the least of which was the deal between Medmen Enterprises (MMNFF) and PharmaCann. That merger fell apart for reasons that are obvious (mostly falling valuations), but neither company actually admitted; after marijuana stocks fell, the merger didn’t make sense since the deal was paid for mostly in stock.
M&A activity in the industry has dropped off since then, mostly because no company wants to find themselves on the short end of the stick. It’s gotten so bad, even marijuana industry pubs that used to track M&A on a weekly basis have stopped, I’m guessing mostly from fear of reinforcing fear.
That’s not a bad idea from an editorial perspective; you don’t win many readers by giving them NO news.
But a major acquisition has closed—Origin House (ORHOF) and Cresco Labs (CRLBF).
I think this all-stock deal will likely open the floodgates, mostly because it had almost completely closed. Two relatively small cannabis companies managed to close a merger, even as the market remains challenging. That means even bigger companies, with plenty of cash to burn, could close a merger as well.
Right now, all of our cannabis holdings are “buys,” mostly because they could become acquirers or targets themselves. We’re at the phase of industry development where M&A is actually going to start creating value: Taking out weaker hands that potentially have greater value, if played correctly.
Recommended Action: Buy Cresco Labs under $10.
Ian Wyatt and Ben Shepherd, Ian Wyatt’s Million Dollar Portfolio, www.wyattresearch.com, January 24, 2020