Diversification is a rare quality in the CBD space. We have tracked this niche for the past several years, and we have consistently noted the issue of what one might call “all eggs in the same basket” that has so often plagued stocks in this space. Furthermore, it doesn’t necessarily make sense to specialize in CBD and nothing but CBD, as it were.
As a result, we have tried to highlight companies that have been able to incorporate CBD into their business models without tethering themselves to the theme “come hell or high water”.
As a case in point, we want to highlight Gentech Holdings Inc (OTCMKTS:GTEH) this morning as an example of the alternative model of diversification that captures the powerful structural growth factor of CBD, without engaging in an all-or-nothing conception of that model
GTEH isn’t just a CBD play. It’s a gourmet subscription coffee opportunity as well. And, as of yesterday, it’s also a functional foods opportunity that suddenly finds itself sitting on a massive distribution network, which suggests it may be worth a close look before the crowd finds it.
This is a cheap stock right now. But, if the model pays off, that may not be true for long.
The CBD space is riddled with advocates talking about the certainty of long-term structural growth. After all, analysts seem to agree with remarkable consistency that there is a “mainstreaming” process underway here that echoes what investors may have seen when toilet paper first hit the scene: it’s good, and most people were unaware of the possibilities. But that changed over time.
In other words, it’s a matter of discovery, rather than marketing. That’s why one frequently see analyst research projecting growth of 200% per year for CBD-based products.
But the overall process of realizing that remarkable structural mainstreaming process is volatile. Companies able to navigate that process will have to find ways to substantiate their long-term prospects with a diversified basket of operational pathways.
We find GTEH interesting because it has demonstrated a capacity to turn that puzzle into an advantage.
As a case in point, the company just announced that it has now acquired “all of the assets, including inventory, revenues, goodwill, intellectual property, trade secrets, and trading relationships, of Sinister Labs, LLC, and its popular Sinfit Nutrition brand, a top-5 functional food brand currently sold in over 2,500 GNC locations in North America and over 10,000 global physical and e-commerce stores across more than 10 countries around the world.”
Who is GenTech?
Gentech Holdings Inc (OTCMKTS:GTEH) is now a wellness play, with strong exposure to both the gourmet subscription coffee and functional foods markets.
What makes this acquisition deal so interesting is the fact that Sinfit already has in place a massive distribution network and strong relationships with some of the most important distributors in North America.
But we would caution against the assumption that the functional foods and CBD beverage markets are so far afield. Both tend to cater to much the same strong and growing end-market force: wellness consumers.
“Sinfit Nutrition isn’t just a top brand with a strong global sales track record,” commented David Lovatt, CEO of GenTech. “It’s also a prime distribution footprint that overlaps with our Secret Javas product line with exceptional synergy in terms of end market definition. We hope our shareholders can see what we acquired here: Strong and growing revenues. Thousands of stores and e-commerce sales channel relationships for Sinfit products as well as current and future Secret Javas products. And a strong built-in relationship with the largest sports nutrition and supplement distributors in North America. In addition, we have already assembled a top sales team with over 20 years’ experience in the sports nutrition and supplement market to drive expansion looking ahead.”
The big point here is this: GenTech just jumped into commercial-stage operations and added a big sales team, to distributors, and 10,000 stores to its footprint, which has obvious implications for its expected sales growth path in its CBD segment.
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