Rally On, Traders!
The big Canadian growth stocks that have been riding the "green gold rush" have stepped back for the time being . . . I'm looking at the usual suspects, names like Tilray and Aurora and Canopy. Let them spin. They're creating space in the market for the next wave of smaller green stocks like CLS Holdings (CLSH) to step up.
There's a reason I just saw an analyst rate CLSH as a speculative buy that could rally to C$1.50 under the right conditions. The company is all over the map, growing as state after state lights up.
CLSH cut its teeth in the first wave of states like Nevada but the sights here are firmly fixed on Massachusetts, which only legalized in November and is already opening recreational retail outlets converting from the old prescription-only network. Baby steps but this is already a $12 million a month business in that little state . . . and as we'll see, the sky is practically endless.
"Little" might be selling it short. MA has 6.9 million year-round residents, 23% more than the Mile High mecca in Colorado. Easily a million of them are students. And it's at the heart of densely packed New England, where you just have to get in the car and drive a couple hours to change the map. Even New York City is only an hour plane ride away . . . talk about "day trips."
So if they're partying like they did in Denver back in 2012, CLSH can be like coming into the Denver boom six years ago, only with a much bigger customer base, right? Could be. All I really know is that a lot of the business in the early states was sewn up awhile back and took the sizzle along with it.
Those are pretty mature markets now. Ironically, the Northeast is now the equivalent of the "Wild West."And think back to 2012 . . . was Apple really available for $70 a share back then? Would you rewind the calendar if you could apply what you know now?
CLSH rewinds the calendar. They're already operating in Nevada, which is its own booming situation, only open since July 2017 and already ramping up FAST. This little company is already earning big-picture buzz out there among the casinos in between millions of tourists a year.
But in the East, CLSH saw the opportunity to capture a baby boom . . . literally the "green shoots" investors love to exploit . . . and they GRABBED it!
They just bought a Boston retail presence, the second-oldest prescription-only store in the state. It's got 18,000 customers already on the books and a full home delivery network. It's state of the art. Go into a Seattle store and compare.
These licenses are extremely rare. There's just 48 in the whole state, one for every 150,000 people. Let that ratio stew a little. CLSH has a license now. In theory it's responsible for seeing to the green needs of 150,000 people just within state lines, not counting Rhode Island and Connecticut and Vermont and even New Hampshire.
New Yorkers looking for a thrill. Tourists from overseas. Students. And so far CLSH only has 18,000 of them on the books. It needs to grow the business 700% just to cover its share of the home market!
And yeah, $12 million in the first two months is nice if you live in Denver back in 2012, but it's chump change today. Colorado green was a $1.5 BILLION business in 2017 so it only took five years to go from "green shoots" to full bloom. Remember, it's 23% smaller than MA in terms of population.
Will CLSH be chasing a share of $1.5 billion times 1.23 when 2024 rolls around? Could be smaller, could be a whole lot bigger. Either way, for a little company that was barely $0.02 per share two years ago, it's enormous. Growing into that opportunity should naturally drive a lot of fundamental upside.
Shareholders would smile in that scenario -- I'm not saying it WILL happen, only that it's the way startups tend to evolve. A company starts tiny with big dreams. Some never grow. Others grow into their dreams and the stocks respond. Those who were there early are rewarded for their insight and persistence.
When I show you the CLSH chart at the bottom of this page, you might blush. It's come a LONG way in just the last few weeks. It's obviously got a LONG way to go before it even matches its historical peak, let alone reaches for its ultimate potential.
Was this a $1 stock during peak green mania last year, when the mature giants were mating and everyone wanted a billion-dollar taste of the business? Yes it was. No wonder that analyst is so eager.
The Boston store might only do $60 million a year right now. That's OK. It's still huge by where MA green is today . . . and it's just a strategic stepping stone for CLSH. They want to add a few more retail licenses, consolidating their share of this hot new market.
And they're talking to a grower who can produce 14 TONS of product a year. Here's where things get interesting. As I mentioned, CLSH is already on the ground in other states. They have proprietary processes and extraction systems.
The goal appears to be vertical domination. CLSH grows the plant. It processes the raw material into value-added oils, extracts and so on. It distributes the material to stores. Now it's active on the store side as well, closing the "last mile" from back to front.
It isn't abstract or even especially esoteric. There's no jargon here or weird technology to get your head around, just a market that didn't even exist a year ago and now CLSH is a player.
At every step along the way, CLSH gets its "ticket" punched.Add up the steps and there's real money to capture here. Of course a lot of guys smell that money but this company is on the ground with the resources (expertise, commitment, connections, CASH) to roll up market share before the me-too players confuse the situation.
We bring them the sizzle, they deliver the buzz. But either way, if it's been a cold couple of months for you in the market, take a fresh look at CLSH and see if it lights your fuse.
Party like it's 2012! And speaking of which, here's that chart:
Happy, Happy, Happy Trading!
