Cannabis stocks skyrocketed in the latter half of 2017 as the industry prepared for its two most significant adult-use markets to open in the new year, California and Canada. The trend was evidenced in MJIC’s North American Marijuana Index, which showed a 61 percent increase in December alone. It was an evenly spread out trend, as both U.S. and Canadian stocks caught fire in closing out the year, with the United States Marijuana Index increasing by 35 percent and its Canadian counterpart soaring by 65 percent. Major players in the sector such as Canopy Growth (TSX:WEED), Aurora Cannabis (TSX:ACB) and Aphria Inc. (TSX:APH) dominated headlines as their market caps grew, by some estimates, to overtake the size of the entire industry.
Marijuana futures dampened, however, as the promise of legalization took a hit in early January with the announcement that U.S. Attorney General Jeff Sessions would rescind the Obama-era policy known as the “Cole-memo” that allowed states with legalized marijuana free rein without interference from the federal government. Marijuana markets went into an immediate panic, shedding their late-year gains over a 24-hour period before CEO’s and industry insiders took to the press in an all-hands-on-deck effort to assure investors and shareholders that the industry would continue with business as usual. A small rally followed, but by week’s end, an all-out panic ensued in the market as cannabis stocks took their biggest hit in months.
Politicians and panics aside, it is hard to ignore the steady growth of the marijuana economy over the past year. With legalization spreading like a (no pun intended) weed across the globe, cannabis stocks are right behind bitcoin as the hottest investments to hit Wall Street since dot-coms first burst onto the market. Experts and analysts alike argue that marijuana is a speculative market; a bubble destined to explode at any minute now, but there is no denying the appeal of sin stocks even to the average investor. While many new to the green game may lament missing out on players like Canopy and Aurora, or even new media darlings such as MedReleaf Pharmaceutical Company (TSX:LEAF) and Namaste Technologies (CSN:N), there are still plenty of plays to be had in the sector.
Here are the top cannabis stocks you are currently overlooking in 2018:
Insys Therapeutics (NASDAQ:INSY)
Somewhere between 2015 and November of last year, Insys Therapeutics shed about 90 percent of its value, in no small part by its own doing. To review, while the company is a player in the cannabinoid-based drug market, it casts a wider net over the pharmaceutical sector. Unfortunately, for Insys, it cast that net with the opioid-based drug Subsy. The drug is a sublingual synthetic opioid designed for breakthrough cancer pain containing fentanyl, which found itself in the headlines recently as the primary driver behind the opioid epidemic.
Further decimating Insys’ bottom line were allegations of fraud leveled at, among others, company founder John Kapoor. Authorities charged Kapoor with bribing physicians to prescribe Subsys in exchange for “speaking fees” for events which the physicians neither spoke at nor attended. By November of 2017, the company was losing money on a quarterly basis, up to $57.8 million.
Why They Deserve A Second Look
Looking past their legal troubles, Insys is taking the cannabinoid-pharmaceutical market by storm with their Food and Drug Administration (FDA)-approved drug, Syndros. The drug treats nausea and vomiting caused by chemotherapy in cancer patients as well as anorexia in AIDS patients. While not wholly moving away from the opioid market (the company recently announced their buprenorphine sublingual spray had had its application accepted by the FDA) Insys is making waves when it comes to cannabis-based pharmaceuticals. In December the FDA granted the company fast-track designation for a new cannabidiol oral solution designed to treat Prader-Willi syndrome.
Experts foresee $200 million in annual sales within the next five to seven years for Insys. On December 1 the company traded at $5.25 per share before skyrocketing up 60 percent over the next month, to a high of $13.38. While they have come back to earth a little the past week, falling to $8.84 per share, that is more a sign of the marijuana market as a whole. For investors that can take a little risk, this stock has a huge potential reward.
Corbus Pharmaceuticals (NASDAQ:CRBP)
Corbus Pharmaceuticals makes the list based on the potential of its only clinical-stage drug anabasum. The drug is currently in the testing phase for four separate indications, with the company recently announcing phase three of their study on its effects on diffuse cutaneous systemic sclerosis. It is effective in preclinical models of inflammation and fibrosis. What gives many investors pause about Corbus is that anabasum is the company’s sole property, meaning they rise and fall on its success.
Some analysts are apathetic about the company. In December BidaskClub dropped their rating on Corbus from a hold to a sell. Back in September ValueEngine did the same. In the last trading, session Corbus closed at $8.20 per share, which is well below its 52 week high of $10.00. Worse yet, Wall Street was bearish on the company this past year, as the trial on anabasum showed the drug underperforming.
Why They Deserve A Second Look
The company announced in mid-December that the FDA granted anabasum Orphan Drug Designation and Fast Track status for systemic sclerosis treatment and the EMA also granted the drug Orphan Drug Designation. According to an article by Economics Money earlier this month, Corbus is trading 3.5 percent higher than its average trading volume over the past twelve months, a sign of increased investor activity. While many analysts are neutral on the stock, there is a considerable upside should anabasum continue successfully through further clinical trials. Some experts believe it could be a $1 billion a year drug. Investors not too worried about a company throwing their eggs all in one basket ought to take another look at Corbus.
Kush Bottles Inc (OTCMKTS:KSHB)
Kush Bottles is a unique player in the marijuana market as it is a company that has no contact with the cannabis plant whatsoever, nor does it deal in any THC or CBD products. Instead, the company works in the ancillary market, developing things like child-safe packaging for cannabis products, as well as labels, vapes, and other items. With offices in states with legal marijuana, the company is well-positioned to be a significant player in the next few years. However, in even the ancillary market Kush Bottles suffers from the same problems as other cannabis companies, with trouble finding banking options at the top of the list. Regarding revenue, they have recorded just $18 million in the past year.
Why They Deserve A Second Look
There is not much that Kush Bottles does wrong. As far as their core business, since California implemented child-resistant packaging as one of their core regulations for legalized marijuana, Kush Bottles has quickly shot up to the top of their sector. As noted by The Street, they operate on the Oracle Cloud, a sign that Kush is primed for future growth. Financially the company is stable, with $916,000 in cash versus only $724,000 in debt, which, according to experts, shows that they can meet their obligations. For investors apprehensive about going all in on the cannabis market, Kush Bottles is an ancillary play that could pay dividends in the near future.