4 Cannabis Ancillary Stocks Worth Watching

Today we’ve weeded out some little-known cannabis ancillary stocks that produce everything from vape cartridges and cultivation equipment to cannabis inventory management software

SmallCapPower | November 29, 2019: When considering investments in the cannabis industry, many investors only look at the cultivators and multi-state operators, as well as the retail companies that own the dispensaries where cannabis is sold. However, cultivators and dispensaries are not the only players in the cannabis value chain. One often overlooked segment of the cannabis market are producers of ancillary products, such as: vape cartridges, cultivation equipment, lighting, packing equipment, inventory and production management software, and point-of-sale technology. Today we have uncovered four little-known cannabis ancillary stocks that could benefit greatly from the growing global legal cannabis business.

*Share price data as at November 27, 2019, data obtained from S&P Capital IQ

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KushCo Holdings, Inc. (OTC:KSHB) – US$1.55
Cannabis Ancillary Products

Founded in 2010, KushCo Holdings is a wholesale distributor of specialized packaging solutions to the cannabis industry. Operating in the United States, Canada, and internationally, the Company offers a variety of products, such as pop-top bottles, vaporizer cartridges and heating technologies, and hydrocarbon gases. These products are used by medical and recreational cannabis dispensaries, urban farmers, and greenhouse growers. KushCo went public in 2016 and has seen tremendous growth since, with an addressable market of greater than $1B in annual revenue. On November 7, 2019, KushCo reported Q4/19 financial results, which were highlighted by revenue of US$47M, an increase of 13% sequentially.

  • Market Cap: US$247.6M
  • 90-Day Return: -53.7%
  • YTD-Return: -67.7%
  • 90-Day Average Trading Volume: 884,430

GrowGeneration Corp. (OTC:GRWG) – US$4.73
Cannabis Ancillary Products

GroGeneration owns and operates specialty retail hydroponic and organic gardening stores. Currently, GrowGen has 25 stores, which include 5 locations in Colorado, 5 locations in California, 2 locations in Nevada, 1 location in Washington, 4 locations in Michigan, 1 location in Rhode Island, 4 locations in Oklahoma, and 3 locations in Maine. GrowGen also operates an online eCommerce superstore for cultivators at heavygardens.com. GrowGen carries and sells thousands of products, including organic nutrients and soils, advanced lighting technology and state-of-the-art hydroponic equipment to be used indoors and outdoors by commercial and home growers. On November 25, 2019, GrowGeneration announced that it has been approved to commence trading on the NASDAQ, beginning on December 2, 2019, trading under the ticker symbol (NASDAQ:GRWG). GroGeneration recently reported Q3/19 financial results, highlighted by revenue of US$21.8M, a 12% sequential increase, net income of US$1M, and adjusted EBITDA of US$1.4M.

  • Market Cap: US$228.7M
  • 90-Day Return: -13.5%
  • YTD-Return: +108.4%
  • 90-Day Average Trading Volume: 110,850

TILT Holdings Inc. (CSE:TILT) – $0.54
Cannabis Ancillary Products

TILT Holdings is a vertically-integrated infrastructure and technology cannabis company. The Company provides software, infrastructure, financing and additional services to cannabis retailers. The Company is organized in two units: Software & Services and Consumer Devices & Packaged Goods, to deliver end-to-end services and customer solutions. On November 20, 2019, TILT reported Q3/19 financial results, highlighted by revenue of US$46.1M, an 18% sequential increase, and net income of US$26.1M with adjusted EBITDA of US$2.7M.

  • Market Cap: $165.5M
  • 90-Day Return: -20.6%
  • YTD-Return: -85.4%
  • 90-Day Average Trading Volume: 14,530

Dixie Brands Inc. (CSE:DIXI.U) – US$0.255
Cannabis Ancillary Products

Dixie Brands designs, manufactures, and distributes marijuana-infused products. DBI focuses on segments of the value chain that include extraction, product development, manufacturing, branding and distribution and avoids the more capital-intensive segments, such as cultivation and retailing. The Company has over 100 products across more than 15 different product categories, representing the industry’s finest edibles, tinctures, topicals and connoisseur-grade extractions, as well as world-class CBD-infused wellness products (relaxation, immunity development, and pain management) and pet dietary supplements. As of June 30, 2019, DIXI had $2.3M of cash on hand, with a burn rate of $4.1M per quarter. On September 23, 2019, Dixie announced it had extended it warrants, though the warrants have an exercise price of $1.32 per share.

  • Market Cap: $42.9M
  • 90-Day Return: -60.8%
  • YTD-Return: -56.0%
  • 90-Day Average Trading Volume: 500

Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.

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