The drumbeat is getting louder. Can you hear it? We can’t hear anything else. It sounds like this: “Pot Stocks! Pot Stocks! Pot Stocks!” And on and on.
Check out the marijuana ETF (ticker: MJ). Check out Aurora (ACB) or Tilray (TLRY). Check out GRWG making new all-time highs this month. Check out the AdvisorShares Pure US Cannabis ETF (MSOS). The whole space is skying.
That means it’s time to start to digging around for unappreciated and excessively promising stories – the overlooked plays in the space that haven’t gotten the same fanfare, but may start to draw attention. That’s where the opportunity may be at this point.
And, with that in mind, our attention turns to Cannabis Strategic Ventures (OTCMKTS:NUGS), an interesting story on the OTC as a rapidly growing and potentially underappreciated cannabis stock with strong metrics and signs of increasingly productive positioning in the ecosystem of the booming California cannabis market.
The story for NUGS right now is about timing, luck, and execution – and raw numbers that tell a story of performance that can’t be easily dismissed.
Firing on All Cylinders
It was easy to look away from the cannabis market earlier this year after the pandemic got going at full blast. And, it turns out, most companies in that space seem to have done just that, with reduced headcounts, lowered production, and chopped investments in capacity and innovation.
The result was an undersupplied market for cannabis that hit the end market as an actual shortage in many places in May and June.
But Cannabis Strategic Ventures (OTCMKTS:NUGS) was one of the few players that went the other direction, stepping up its investment, driving increased product quality, and adding to its production capacity as its competitors were pulling back.
It was a contrarian bet that has paid off in a big way, but investors and market participants don’t seem to realize it yet, suggesting there may be an opportunity here.
Our thesis is that this type of contrarian bet doesn’t just lead to a short-term burst in superficial growth rate – by stepping into the gap in the market. But it leads to a sticky upgrade in market positioning as end market retailers come to rely on a new a reliable source of high-quality goods when the context is one of scarcity.
The Big Point
That has a long-term impact on relationships. We would argue that we have seen precisely that type of transition for Cannabis Strategic Ventures (OTCMKTS:NUGS) so far this year.
If you look back through the company’s releases so far in 2020 and at the close of last year, you will see the following the sequence: a projection about revenues late last year looking for “$5 million in 2020 sales related to cannabis products”, a better than expected push to start the year, a series of investments in expanded production capacity and improved product quality, reports of increased pricing out the door on a per-unit volume basis for production, increased output as capacity increases start to pay off, and an unmistakable trend in sales growth across basically every conceivable period-to-period comparison.
Now, here we sit with results crushing guidance and every sign that the company has made undeniable progress in execution and market positioning in a sector with widely understood cyclical tailwinds in a massive structural growth boom.
Long story short: Cannabis Strategic Ventures (OTCMKTS:NUGS) ticks all the boxes right now and should be worth a closer look.
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