If you’re looking to make a fortune in the market, the booming legal and medicinal marijuana space is the perfect place.
A $10.4 billion industry has emerged in recent years thanks to a wave of legalizations across the United States.
A total of 11 states and Washington, D.C. have fully legalized recreational marijuana. That figure is expected to swell as 33 states already allow medicinal marijuana.
They’re expecting a $75.6 billion market by 2025.
I’m always looking for stocks that are directly or indirectly tied to this industry.
However, cannabis investing has been increasingly volatile.
That’s why we rely on a secret weapon to tell us which marijuana stocks to buy…
I use the Money Morning Stock VQScore™ .
This proprietary system assigns every stock a rating from 1 to 4.9. The higher the VQScore, the better the opportunity.
Most marijuana stocks don’t make this list because they’re not profitable.
But today, we’re unveiling the very first pure marijuana stock ever to record a “Strong Buy” score.
Buy This Deep Value Marijuana Stock
The first pure-play marijuana stock to earn our coveted perfect score is Cronos Group Inc. (NASDAQ: CRON).
The stock is currently trading at bargain prices. Shares have dropped roughly 50% since hitting all-time highs in February 2018.
The company has struggled a bit since the Centers for Disease Control and Prevention launched an investigation into vaping products and acute lung illness. Just last week, New York Governor Andrew Cuomo urged state residents to stop vaping. The CDC has noted 450 cases in 33 states.
But there’s another side to the story…
Like most moral panics in America, the overreaction is tied to something completely unrelated to Cronos Group and its products.
You see, the vaping problems are related to black market products that people make at home. Interestingly, the bulk of the cases are in states where recreational marijuana is still illegal. Many patients hospitalized have admitted to purchasing illegal THC e-liquids from unlicensed vendors.
Right now, Cronos is dealing with a public perception problem that is largely out of its control. But the recent bad news is a blessing in disguise for investors who missed the first wave of marijuana stock profits when the company listed on the NASDAQ…
How Cronos Is Moving Forward
Cronos’ management team operates much differently than others in the sector when it comes to raising capital. It has outright refused to perform a secondary share offering because that would dilute shareholder equity.
Instead, the company completed a $1.8 billion cash deal in March with Altria (NYSE: MO) in exchange for 45% of the company.
This cash infusion will allow the firm to make strategic acquisitions and build market share against its competition. It also provided Cronos Group with a major strategic partner in Altria.
The deal will provide significant marketing support and an easier path to expand its brands globally.
And unlike other companies in the space, Cronos centers its attention on being a leading cannabinoid (CBD) firm. It’s not attempting to beat its competition by flooding the market with cannabis.
The firm recognizes that simply producing cannabis can be unprofitable due to narrowing margins as more competition enters the market. Instead, CRON has built a network of contracted producers focusing on the sales of higher-margin CBD products.
This strategy has made the firm profitable.
In fact, Cronos reported profits of $323 million and $187 million in the first two quarters of 2019 after losing $14.6 million in 2018.
Year-over-year revenues increased by 120% in the last quarter. Looking ahead, Wall Street anticipates that the firm will generate $60.1 million in revenue this year. This would represent annual growth of 283%.
But the most important number to know is CRON’s VQScore. This is the first time that a pure-play marijuana stock has earned a perfect 4.9 rating.
Cronos currently trades at $11.43 per share.
But with the breakout upside of its VQScore, I expect Cronos stock to trade for $25 by the end of 2020.
That figure represents a potential upside of 118%.
— Garrett Baldwin
Source: Money Morning