Rally On, Traders!
It's been a wild couple of months in the market, with some outstanding news in the green sector in particular riding the rollercoaster. No shock. You see that all over the market: outstanding news flow takes risk after risk off the table but the gloom is so deep it takes time to cut through it.
That's a classic divergence signal, a tightening screw. Sooner or later, all the news builds to a point where the market mood just CAN'T keep frowning any more. I mean, look at just the most recent headlines:
* Jeff Sessions is gone. He hated the green world and it wasn't fond of him either. Without his guiding hand at DOJ efforts to roll back the last decade now have no leader. Once again, the states are in control of their own regulatory destiny.
* The map is expanding. A month ago Michigan, Missouri and even Utah joined the party. That's another 20 MILLION potential consumers . . . big cities, Detroit and Kansas City, St. Louis and even Salt Lake. (Or more realistically, the Park City crowd.)
* Blue chips are circling for a taste. Big Beer paid $4 billion back in August to hook up its supply. Coca Cola is "watching." And now Big Tobacco wants Marlboro to go green, paying $1.8 billion for the privilege.
Headlines like that don't go away. They just circulate, building up force in the system. And that's why CLS Holdings (CLSH) is turning into a one-company green boom all its own.
Private investors are already lining up $40 million to get a taste while they still can. Think what a company this ambitious can do with that much cash! Go anywhere, do just about anything.
For one thing, CLSH is ramping about as fast as it gets. It’s active in Nevada, where green products have barely been legal a year and already does $420 million retail. That’s coming from ZERO and it’s double what the experts expected early on.
CLSH bought into Las Vegas retail a few months back via a company called Oasis, which currently does $850,000 a month in sales. That’s above what anyone expected. The covenants on the deal provide a million-dollar BONUS if Oasis does $20,000 a DAY.
If Oasis earns that bonus, it’s okay. It's a measure of firecracker SUCCESS. On that basis, we’re looking at a run rate north of $7 million a year. We can’t really forecast a growth rate yet, but even that’s only 1.6% of the Nevada opportunity as it stands right now.
Plenty of room to grow that share. And that's what CLSH is doing. They raised $5.75 million USD and another $13 million Canadian to expand. As the CEO put it recently, they need to TRIPLE production just to meet existing demand.
They've got extracts and other value-added products in 20 dispensaries now. With deep distributor relationships, they can go aggressively after the other 45 I'm seeing in the state.
Nevada green is all about tourists, by the way. 40 million party people a year, Las Vegas alone. The last time I was in a Vegas cab, the driver couldn't talk about anything but how the tourists always ask where they can get to the recreational store.
Monthly turnover in the state already reached $40 million . . . and it's still ramping up as fast as the party people can leave the airport and call their Uber.
That's the market CLSH has just opened up. Right here at home. They're ambitious. They think they can TRIPLE production by the end of the year and move that product into the store.
A lot of that product is branded and proprietary. CLSH is already a distributor here, selling "City Trees" in 20 stores from Vegas to Reno. Proprietary is usually a good thing for margins. We like that!
And it's still early stages. 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. The stock is flirting with $1 a share now. Production plans suggest at least a 3x revenue ramp, not counting any of the steps along the way. That's just the BASE!
The store can do $38,000 a DAY when Vegas is really humming. Last I heard the company's 22,000 square-foot warehouse had room for vast expansion. All local, all domestic. Subject to Nevada law.
They have a reason to be confident. Floor traffic in the store is tracking 400 people a day, each buying above $50 on average. What they're buying runs the gamut: oil concentrates, vape pens, tinctures, you name it.
Massachusetts is bigger. Bigger population than Nevada or even Rocky Mountain High itself. Getting into the state via a dispensary and 80% of a grow facility changes the game. There's a lot of students in Boston, Cambridge, Worcester, Amherst, etc. etc.
etc. Do the math.
CLSH is spreading to the East Coast. You don’t have to go to Canada to get exposure to these numbers. You don’t have to worry about what happens when you try to get back across the border or just call your greenbacks home.
It's been a cold couple of months But the news has been as hot as it gets. If you want the heat, the time to act is now.
Happy, Happy, Happy Trading!
