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About the Author Stone Fox Capital

Stone Fox Capital Advisors is a registered investment advisor founded in 2010. The firm offers portfolio management with a focus on opportunistic stocks providing secular growth trends at an affordable value. An emphasis is placed on fundamental analysis though charts are used for timing entry and exit points. Mark Holder graduated from the University of Tulsa with a double major in accounting & finance. Mark has his Series 65 and is also a CPA. Invest with Stone Fox Capital's model Net Payout Yields portfolio on IB Asset Management as he makes real time trades. The site allows followers to duplicate the model portfolio in their own brokerage accounts. You can find the portfolio and more details here: Follow Mark on twitter: @stonefoxcapital

This Cannabis Stock Is Running Full Speed Ahead

My original complaint regarding Village Farms International (VFF) was that the company wasn’t doing enough in the rapidly growing cannabis market. The latest moves has the company moving quickly toward CBD oil in the U.S. making the original joint venture to grow cannabis in Canada as only a small part of the growing cannabis picture.

Moving Ahead

In the last few months, Village Farms has gone from a vegetable farmer with a small joint venture in Canada focused on cannabis to an expanded Canadian cannabis operation plus multiple hemp plans in different states in the U.S. The company now has outdoor hemp plans in four U.S. along with the ongoing conversion of an existing greenhouse in Texas to hemp cultivation.

The recent passage of Texas House Bill 1325 sets up Village Farms to convert existing greenhouses in Texas. The company is already moving forward with 635,000 square feet of growing area in the Permian Basin. The greenhouse will grow and extract hemp-based CBD.

The company has an incredible 5.7 million square feet of greenhouse facilities in West Texas. This initial work is focused on only half of the 1.3 million square feet facility in the Permian Basin.

These plans follow an additional plan with Arkansas Valley Hemp to form a joint venture called Arkansas Valley Green and Gold Hemp that the company owns 65%. The JV plans to start production on ~120 acres along the Arkansas Valley in Colorado this year and expand to 500 acres in 2020. This deal adds to the additional plans to cultivate hemp outdoors in Virginia, North Carolina and South Carolina.

These facilities will allow Village Farms to sell CBD oil on a wholesale basis by early next year.

Surging Cannabis Revenue

In Q1, Village Farms saw the Pure Sunfarms 50% owned JV grow net income to $4.3 million in the quarter, though adjusted EBITDA was only $3.2 million. The operation saw total sales jump to $10.8 million, up from $2.8 million in the initial quarter of production.

Pure Sunfarms only recently started cultivation in the second half of the 1.1 million square foot Delta 3 greenhouse leading to 75,000 kgs of annual capacity by mid-2019. The company expects the existing 1.1 million square foot Delta 2 greenhouse to double projected annual production in 2021 to 150,000 kgs.

These initial results are very promising for a company focused on moving existing greenhouse operations to cannabis cultivation. The good news is that Village Farms already has quarterly revenues of $37.3 million and is quickly shifting from vegetables to high-value cannabis crops.


The key investor takeaway is that Village Farms is firing on all cylinders now by utilizing existing greenhouses to convert to high-value cannabis crops while also pursuing new outdoor growing opportunities. The major red flag is the Citron Research report questioning the connections with Pure Sunfarms, but the stock just appears too cheap at $13.50 with a market valuation of only $669 million.

The opportunity exists to double and further double cannabis production in Canada while further expanding CBD oil sales via multiple venues moving forward towards 2020 sales. One analyst has revenue reaching $320 million in 2021, but the number appears very low based on all of the expansion plans at Village Farms.  Use this selloff from $18.00 to $13.50 to own the stock with the knowledge that some red flags exist on the story.

To read more on the nitty gritty of what’s going on in the rising cannabis industry, click here.


Disclosure: The author has no positions in Village Farms stock.

Read more: Cannabis Stock Village Farms (VFF) Is on the Right Track


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