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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

Curaleaf (CURLF): A Multi-State Cannabis Stock Play

Of the big themes in the cannabis sector for 2019 will be a focus shift to the American companies. The market spent most of 2018 obsessed with the large Canadian players that listed on major U.S. stock exchanges while some large American companies are still under the radar such as Curaleaf Holdings (CURLF).

Multi-State Play

Due to the fragmented nature of the U.S. cannabis market with legality based on state levels and illegal on a federal level, the companies involved haven’t garnered the press of the Canadian players with global plans and large partnerships. The interesting part is that a company like Curaleaf has an expanded presence in 12 states providing a larger market than the domestic opportunity in Canada.

At the end of 2018, Curaleaf operated 36 dispensaries, 12 cultivation sites and 10 processing sites. The company has already added another 7 dispensaries and a processing site this year. As additional states legalize cannabis, Curaleaf is positioned to grab an even larger market without having to expand to international locations where they’ll have to compete with local providers and exporters from other countries.

In addition, Curaleaf has agreed to acquire Acres Cannabis for a massive 19,000 sq. ft. dispensary in Las Vegas along with cultivation plans of 100,000 pounds of dry flower per year. The $70 million deal seems reasonable in comparison to some of the large Canadian deals, though financial forecasts of Acres weren’t provided.

Large Revenue Base with Catalysts

For the December quarter, Curaleaf reported revenues of $32 million for an annualized rate of $128 million. The number isn’t massive for a $4 billion market cap, but a substantial amount above the less than $5 million produced by Cronos that got a major deal from Altria. Before the recent selloff, Cronos was worth nearly double that of Curaleaf at a $7 billion market valuation.

The company generated revenues of $77.1 million for 2018 with a forecast to top managed revenue of $400 million in 2019. Maybe more importantly is the goal of generating $100 million in free cash flow for the year.

One still ends up with a stock that isn’t exactly cheap trading at about 10x those revenue estimates. Just assuming 50% revenue growth in 2020 and the stock is reasonably trading at about 6.7x a basic revenue estimate of $600 million in 2020 with plenty upside.

Several catalysts exist for the stock in 2019. The potential exists for Curaleaf to eventually uplist from the OTC market assuming the federal government finally approves cannabis operations. In addition, the CBD deal with CVS Health (CVS) for 800 stores has the ability to eventually expand to the majority of their 10,000 pharmacy locations. CVS has started selling CBD creams, sprays and lotions in eights states so one can easily envision the expansion possibilities with this deal alone.


The key investor takeaway is that Curaleaf, along with other American cannabis stocks, have been generally ignored due to the inability to list on major U.S. exchanges.  The stock isn’t exceptionally cheap, but Curaleaf is on a path to substantial revenue growth and scale while trading at a fraction of the market values of the large Canadian cannabis stocks that have valuations in the $10 billion range.

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


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