2019 was, to say it mildly, not a good for Canada’s cannabis sector.
The feel good story that was Canada’s leadership role in the space turned into a horror show. Just about every name brand in the sector took double-digit losses? Canopy Growth? Down 27 per cent. CannTrust? Down 76 per cent. Organigram? Down 34 per cent. Aurora Cannabis? Down 59 per cent. HEXO was down 56 per cent, Cronos lost 31 per cent and Aphria was down 14 per cent.
You get the picture.
But what if we told you there were more than a few Canadian-listed pot stocks that actually posted gains in 2019? Yep, it’s true. And some of them did quite well, indeed.
A couple things to ponder about this list. There were a scant few pure-play growers in the top ten performers. Many of the rest are growing but have retail operations in the United States, are pharma-based or have an extraction business. Second, none of the big names operating in Canada are here, but a couple that make their money in the U.S. (Curaleaf and Green Thumb) made the cut.
On to the list. (Please note we have omitted stocks that were less than ten cents or had a market cap under ten million dollars.)
1. Valens GroWorks (Valens GroWorks Stock Quote, Chart, News TSXV:VLNS)
Market Cap: $415 million
Closing Price on December 31, 2018: $1.51
Closing Price on December 31, 2019: $3.43
Percentage Change: +127%
Taking top honours is cannabis extraction and product development company Valens, whose 2019 was a standout on a number of fronts. The Kelowna-based company acquired new facilities to push its extraction capacity to over a million kg per annum by the first half of 2020, while also expanding its white label capacity. Valens also nailed down a deal with Shoppers Drug, a five-year cannabis-infused beverage deal with Iconic Brewing, acquired Ontario-based hard cider manufacturer Pommies, and at the end of the year, announced an expanded agreement with SöRSE Technology for use of its proprietary emulsion technology in Canada, Europe, Australia and Mexico, significantly broadening Valens’ IP portfolio.
And Valens likely isn’t done yet, since the newly opened up Cannabis 2.0 will be right in the company’s wheelhouse. Analyst David M. Kideckel of AltaCorp Capital says things are looking up.
“The long-term outlook for Valens is mainly dependent on its white-label strategy,” Kideckel wrote in a client update on December 12. “Our bull thesis on VGW is based on its emphasis on building out a differentiated product offering and a unique IP portfolio, which we believe will enable it to secure white label contracts. So far, we observe VGW is progressing well in achieving its strategic goals.”
2. MediPharm Labs (MediPharm Labs Stock Quote, Chart, News TSX:LABS)
Market Cap: $497 million
Closing Price on December 31, 2018: $1.74
Closing Price on December 31, 2019: $3.86
Percentage Change: +122%
Extraction companies were definitely the right way to play cannabis, with the advantages clearly seen in the latest quarterly results from Barrie, Ontario’s MediPharm Labs. Where licensed producers struggled over the second half of 2019 to grow revenues, let alone register a profit, MediPharm’s top line grew by 38 per cent over its third quarter, delivered in November, while generating $10.1 million in EBITDA on gross margins of 38 per cent.
MediPharm operates five extraction lines in Ontario for a total throughput a 300,000 kg-per-year and has 80-per-cent ownership of an Australian extraction operation currently under construction. The company has a manufacturing agreement with major licensed producer, Cronos Group, and just recently made its moves into Canada’s newly-opened derivatives market through its first deliveries of vape cartridges to provincial distributors under MediPharm’s Shelter brand.
3. Village Farms International (Village Farms International Stock Quote, Chart, News TSX, NASDAQ:VFF)
Market Cap: $374 million
Closing Price on December 31, 2018: $4.42
Closing Price on December 31, 2019: $8.07
Percentage Change: +83%
The slow rollout of cannabis retail across the country and especially in Ontario did damage to Canada’s pot industry over the second half of the year, where wholesale prices plummeted, bottlenecks formed and the burgeoning market dealt with a sluggish start. That spelled trouble for most LPs, with Village Farms and its 50-per-cent owned cannabis subsidiary Pure Sunfarms being one notable exception.
The reason? Rock-bottom production costs, which dropped to a best-in-the-business $0.63 per gram as of VFF’s latest quarter. But that efficiency hasn’t come with a hit to quality, it seems, as the company had the top-performing brand of dried flower (by kilograms and by dollar sales) in the month of October, with three of the top seven-selling dried flower products.
4. Benchmark Botanics (Benchmark Botanics Stock Quote, Chart, News CSE:BBT)
Market Cap: $58 million
Closing Price on December 31, 2018: $0.245
Closing Price on December 31, 2019: $0.44
Percentage Change: +80%
Benchmark Botanics may be just finding its feet as a vertically-integrated cannabis company but the stock’s timing was good enough to put it high on the list for 2019. BBT rose to $2.10 per share during the early days of the pot frenzy in 2018 before trailing off and hitting its lows just as 2019 began, staying relatively steady over the course of the year.
Benchmark has cultivation and production in Peachland, BC, and is constructing extraction facilities there as well, while the company recently received a second cultivation license for its joint venture greenhouse in Pitt Meadows, BC.
5. Planet 13 Holdings (Planet 13 Holdings Stock Quote, Chart, News CSE:PLTH)
Market Cap: $329 million
Closing Price on December 31, 2018: $1.49
Closing Price on December 31, 2019: $2.57
Percentage Change: +72%
Planet 13 has intentions to move beyond its home base in the ultra-hot market of Nevada where it holds cultivation, production and dispensary licenses, but for the time being it’s all about the Superstore.
Dubbed the world’s largest cannabis outlet and set just off the Las Vegas Strip, the “Cannabis Entertainment Complex” has put Planet 13 on the map with its awe-inspiring numbers: almost 700,000 customers served in 2019 — roughly 1,900 per day — at an average ticket above US$90. That’s about $63 million in revenue from one location. Enough said.
6. Heritage Cannabis Holdings (Heritage Cannabis Holdings Stock Quote, Chart, News CSE:CANN)
Market Cap: $130 million
Closing Price on December 31, 2018: $0.165
Closing Price on December 31, 2019: $0.245
Percentage Change: +48%
The third company in the Top Ten with an extraction business, holding company and licensed producer Heritage has a number of subsidiaries including Voyage Cannabis, CannaCure and Purefarma Solutions. This past fall, the company announced supply agreements with both James E. Wagner Cultivation and Sugarbud Craft Growers and has won praise from PI Financial analyst Devin Schilling for Purefarma’s extraction expertise, which has given it a head start in the sector.
“Heritage has seen a recent uptick in contract announcements as of late which may be linked to LPs increasing their focus on higher-quality oils due to the recent bad press on vape related illnesses. We expect more deals like this moving forward in anticipation of the Cannabis 2.0 rollout later this year,” said Schilling in a November report.
7. Curaleaf Holdings (Curaleaf Holdings Stock Quote, Chart, News CSE:CURA)
Market Cap: $3.9 billion
Closing Price on December 31, 2018: $6.46
Closing Price on December 31, 2019: $8.18
Percentage Change: +27%
One of the heavyweights south of the border, Wakefield, Massachusetts’ Curaleaf had a wild ride in 2019 with some big-time acquisitions and just as big swings in share price. The stock rode the pot optimism over the first half of the year to highs in the $15.00 range only to fall back just as quickly.
But CURA’s presence in the US is huge. With interests in 19 states and 77 operating dispensaries, licenses for 54 more, 20 cultivation sties and 26 processing facilities, the company is projected to cross the US$1 billion mark in revenue this year.
8. Green Thumb Industries (Green Thumb Industries Stock Quote, Chart, News CSE:GTII)
Market Cap: $2.5 billion
Closing Price on December 31, 2018: $10.95
Closing Price on December 31, 2019: $12.79
Percentage Change: +17%
Organic growth, shrewd M&A and EBITDA margin expansion helped Green Thumb’s share price stay pretty solid through cannabis’ rougher days this past year. The Chicago-based multi-state operator is second only to Curaleaf in terms of dispensary footprint across the US with currently 40 pot shops in operation and licenses for 56 more.
And GTII is making a name for itself through its quarterly results, having beaten consensus estimates over the last two quarters with what analyst Robert Fagan of Stifel called in a November report the company’s “best-in-class operational execution.”
9. Neptune Wellness Solutions (Neptune Wellness Solutions Stock Quote, Chart, News TSX:NEPT)
Market Cap: $321 million
Closing Price on December 31, 2018: $3.46
Closing Price on December 31, 2019: $3.58
Percentage Change: +3%
A few years back, Sherbrooke, Quebec’s Neptune Wellness was a nutritional supplement company making its name extracting krill oil. Then came the decision to convert operations to hemp and cannabis, with completion of the conversion having just occurred. Now, having acquired a second extraction facility in North Carolina, Neptune is looking to ramp up to max capacity, which the company says would generate up to $900 million annually in wholesale oil sales.
10. Cardiol Therapeutics (Cardiol Therapeutics Stock Quote, Chart, News TSX:CRDL)
Market Cap: $116 million
Closing Price on December 31, 2018: $4.45
Closing Price on December 31, 2019: $4.58
Percentage Change: +3%
Pharma CBD play Cardiol Therapeutics uses GMP-certified chemically synthesized CBD both in a clinical capacity, where its CardiolRx CBD is in development for the treatment of heart disease, and as a commercial business in the production of high-concentration, pharmaceutical-grade CBD products for the natural health product markets.
The Oakville, Ontario, company completed its IPO in December of 2018 and managed to finish level at the close of a tumultuous year for cannabis.
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