Today we have discovered some Canadian cannabis stocks with notably higher institutional ownership, possibly resulting in lower volatility
SmallCapPower | December 3, 2018: Ownership structure of a company can be broken down into four categories: (1) Institutional ownership, (2) intercorporate investments, (3) insiders, and (4) public/retail investors. Mature companies tend to have higher institutional ownership, often translating into lower share price volatility. BCE Inc. (TSX:BCE) is an example of a mature telecommunications company with institutional ownership of 45.5%. Industries in their infancy, such as cannabis, often have higher retail ownership as institutional investors tend to favour more established companies. Retail investors may be more sensitive to making emotional investment decisions, thus increasing a stock’s volatility. This was evident during the January run up and subsequent sell off, where some cannabis stocks initially posted gains in excess of 100%, and then fell by more than 50% in a time where the market was driven purely by speculation and not fundamentals. For investors looking for relatively lower volatility, we’ve identified three Canadian cannabis stocks that may offer greater price stability given their higher institutional ownership.
*Market Cap and share prices as of November 29, 2018. Institutional ownership data obtained from Capital IQ and is based on the latest quarter.
Canopy Growth Corporation (TSX:WEED) – $44.20
Canopy Growth Corporation is the largest cannabis company listed by market cap on the TSX and NYSE. To position itself in the Canada’s recreational market, the Company has secured agreements with the Provinces of Quebec, Prince Edwards Island, New Brunswick, and Newfoundland & Labrador to supply their adult consumer market with high-quality cannabis. The Company has the largest licensed production platform in Canada, with over 600,000 sq. ft. of production space. To further solidify their leading position in the market, the Company expects to have up to an additional 5,000,000 sq. ft. of production over the next 12 months. The Company has also acquired the necessary agreements to export medicinal cannabis to Australia, Brazil and Germany. On November 29, 2018, Canopy Growth announced it had entered a strategic supply agreement under which MediPharm Labs Inc. (TSXV:LABS) will supply up to 900kg of cannabis extract to Canopy over the next 18 months.
- Market Cap: $15.2 Billion
- 1-Month Returns: -8.7%
- YTD Returns: +36.6%
- Institutional Ownership: 15.04%
CannTrust Holdings Inc. (TSX:TRST) – $8.33
CannTrust operates a 60,000 square foot production facility located in Vaughan, Ontario and utilizes hydroponic technology to produce at 3,600 kg annually. CannTrust has also developed a 450,000 sq. ft. indoor cultivation facility located in Niagara, Ontario. Combined, the Company’s projected production capacity for 2019 is 100,000 kg. On October 18, 2018, CannTrust announced an exclusive partnership with Kindred, a subsidiary of Breakthru Beverage Group. Kindred is expected to use their sales technology to build a state-of-the-art platform for CannTrust to penetrate the adult-use cannabis market. On November 14, 2018, CannTrust reported revenues of just under $12.6M for the three months ended September 30, 2018. The Company also announced it had taken steps to list on the NYSE.
TerrAscend Corp. (CSE:TER) – $6.90
TerrAscend is a company that serves the medical cannabis market through its subsidiaries. These include Solace Health, a licensed producer of medical cannabis, TerraHealth Network, a clinical support and educational platform, and SolaceRx, delivering innovative and specialized pharmaceutical products for healthcare professionals with the goal of addressing unmet medical needs. On August 24, 2018, the Company announced that Solace Heath had entered into an agreement with Nova Scotia Liquor Corporation to supply the province of Nova Scotia with cannabis products for use in the recreational market. More recently, the Company secured a multi-year supply agreement with PharmHouse Inc. Under the terms of the agreement, PharmHouse’s 1.3 million sq. ft. greenhouse in Leamington, ON will supply TerrAscend with cannabis flower.
- Market Cap: $678.8 Million
- 1-Month Returns: -25.3%
- YTD Returns: +104.1%
- Institutional Ownership: 8.82%
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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