As Pace Of Cannabis Sector Deals Heats Up, 3 Pot Stocks Worth Watching

Even as analysts continue raising their estimates regarding the actual size of the burgeoning marijuana market, key sector players continue jockeying for position within that market. It seems as if the pace of partnership announcements as well as mergers and acquisitions on both sides of the Canada-U.S. border have escalated, as participants attempt to stake their claims in the recreational, medicinal and edible cannabis segments.

And with each new announcement, investor reaction intensifies—pushing the needle higher on pot stock prices. The fluctuations are sometimes dramatic, often temporary, yet always noteworthy. These reactions only add to the frenzied state of sentiment toward this sector. Indeed, observers are no longer waiting to see what deal will be announced next, but rather attempting to get out ahead by determining which company could be making a move next.

Add to all that such fundamental drivers as comments such as those made by U.S. Attorney General William Barr, when he told Congress last week that he considered the situation “intolerable” that all various forms of marijuana continue to be illegal on the federal level, yet a growing number of states are legalizing it, indicating a softening of the federal government’s stance.

For investors, therefore, getting out ahead of the fundamentals, at least by knowing which companies are about to ink any deals is important, not to mention profitable. After all, each new agreement has the potential to influence stock prices in both the near- as well as the mid-term and longer term horizons.

Here are three companies to watch in the coming months, according to industry analysts and observers.

Quebec-based HEXO Corp. (NYSE:HEXO), (TO:HEXO) "could be busy on the merger and acquisitions front in 2019," says Michael Berger, founder of Technical 420, which specializes in research and analysis of cannabis stocks. Indeed, last month it acquired another Canadian marijuana company, Newstrike Brands (V:HIP), in an all-stock deal valued at C$260 million ($195.04 million USD).

Some, according to published reports, are speculating HEXO could be in talks with U.S.-based companies like the Campbell Soup Company (NYSE:CPB).

On Friday, HEXO shares closed on the NYSE at $6.30, up from the previous day's close of $6.20. Since the start of the year, the stock has gained 84%. The company has a market cap of $1.32 billion.

h2 2. The Green Organic Dutchman Holdings
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Considered a world leader in organic-grade cannabis, The Green Organic Dutchman Holdings Ltd (OTC:TGODF), (TO:TGOD) has been trading publicly for a little less than a year after raising C$132.26 million ($99.22 milion USD) last May in its initial public offering, the largest Canadian cannabis IPO to date.

The Ontario-based company is currently running growing operations in Canada, Europe and the Caribbean. It also recently signed a distribution agreement with Velvet Management a division of Canada’s largest wine distributor Philippe Dandurand Wines, for sales and distribution of its products to provincial liquor and cannabis boards across Canada.

The company also has plans to build a 40,000-square-foot research and development center with space to develop new products, including cannabinoid-infused beverages. It could be primed to ink a few more deals in the coming months.

Shares of The Green Organic Dutchman closed last Friday on the U.S. OTC market at $3.15, giving it a market cap of $9855.37. The stock is currently trading about halfway between it's all-time high of $7.79 and its $1.60 low.

h2 3. Aurora Cannabis /h2

Perhaps the most likely candidate to announce a major deal is Alberta-based Aurora Cannabis (NYSE:ACB), (TO:ACB). It's one of Canada's largest marijuana companies, with a specialty in medical cannabis.

What sets Aurora apart from the other big boys in the sector is that it has yet to announce a major partnership deal with any mega cap U.S. firm active in one of the many sectors—pharmaceuticals, beverages and consumer edibles for example—that are all poised for disruption by the legalization of marijuana. Investors, however, are betting that will quickly change.

Last month, the company hired activist investor Nelson Peltz as a strategic adviser. Shares jumped more than 13 percent on the news. His deal with the company gives him the option to buy 20 million common shares, a move that could make him Aurora’s second-largest stake holder.

In a statement issued outlining Peltz’s appointment, Aurora said he would:

"Work collaboratively and strategically to explore potential partnerships that would be the optimal strategic fit for successful entry into each of Aurora's contemplated market segments."

In addition, he'll advise on its continued global expansion.

Aurora’s stock closed at $8.88 on Friday. Shares are up more than 38% since the start of the year. The company has market cap of $8.85 billion.

Written By: Investing.com