Aurora Cannabis: Savvy Deal Making And Good Timing

RV_ · November 18, 2018

There are a lot of companies emerging and listed on the US stock market. Although many sides recommended to go with TilRay, or Canopy Growth, I went with Aurora for a number of reasons. First it was still inexpensive, a penny stock if you will. Secondly Aurora had diluted their stock by trading stock to buy companies that had critical areas needed for long term success. A recent article on Seeking Alpha outlines the market well with a lot of good graphs and charts:

Excerpt:

"To management’s credit, the company has been able to assemble an impressive platform quite quickly. Today the company counts 11 cultivation facilities capable of over 500,000 kg in annual production capacity, some of this capacity is still under construction but is expected to come online by H1 2020. Aurora is now an industry leader in terms of revenue and production capacity.

The Market Growth Opportunity

Today Aurora Cannabis mostly serves the market for medical marijuana. Aurora primarily has operations in Canada but currently services nearly a dozen international markets. In the company’s October 2018 investor presentation, Aurora estimated the market size of the Canadian medical market at $9 billion per year and the global medical market at 180 billion per year.

Aurora plans to continue using Canada as its primary location for growing and packaging its products, but over time the company seeks to build a large export business globally through third party wholesalers. In Europe, which is currently the largest global market for medical marijuana, Aurora has partnered with Pedanious, Europe’s largest distributor of cannabis, for distribution. Over time, Aurora will seek more country approvals to sell its medical product, boosting its revenue growth. For example, in October 2018, Aurora received approval to ship its products to Poland.

The other large market opportunity for Aurora is the recreational market in North America. This year, Canada passed a law making recreational use of marijuana legal. It is a bit early to know just how large of an immediate opportunity this will be for Aurora because legal sales did not begin in Canada until October 2018. Canada’s Parliamentary Budget Office estimates that the recreational cannabis market is between 4.2 and 6.2 billion Canadian dollars per year."

Source article: https://seekingalpha.com/article/4222599-aurora-cannabis-savvy-deal-making-good-timing

Our decision to move to Colorado was not influenced by the legality of recreational marijuana, but instead for the ability to self medicate safely for pain from a body that has been rode hard and put up wet in the military and out. Skiing and Racquetball leave some lasting injuries/weaknesses as well. But now it also gives an opportunity to visit NBEV, one of my stocks which is headquartered there in Denver, and to visit and see how the growing and retail parts of legal marijuana work which may give rise to ideas about other long term investment opportunities in the explosive growth already seen and just beginning. I am betting on New Age Beverage (NBEV) and Aurora Cannabis (ACB) because New Age is already making health beverages and a profit, and is just now developing prepared CBD drinks, legal in most areas, and is testing the THC concoctions for areas where recreational use is legal. I think prepared drinks, like edibles, are a great way for folks unused to using MJ formulations, or making them. The edible market is larger than the smoking market with health being a main reason. I do NOT want to smoke another weed, even if it isn't addictive, after getting addicted to cigarettes for many years. I don't need a morning hacking cough when the pain killing effects can be had cleanly with edibles.

The above is a long term investment, like with Tesla when it IPO'd it took a couple of years to start the fast climb. So I used double that amount to start with and bought five times the shares in ACB as I held for eight years in Tesla, and the same number of shares in NBEV as I had in Tesla.

Now this is the stock market and YMMV. I May lose my money, but I doubt it. Next year, since we will both be 65 and older in May, we need to figure out if we want to liquidate all of our IRA funds and get better yields with our stocks if our two individual stocks do as well as I expect.

From today: