Following the legalization of recreational cannabis in Canada, we have noticed a significant increase in the number of companies that are developing branded cannabis products for the recreational market.

In 2019, the Canadian cannabis branding opportunity has become much more significant and this comes ahead of the expected legalization of cannabis infused products and cannabis concentrates later this year. The legalization of these cannabis derivative products would be a major catalyst for the companies that are levered to the Canadian market and we have been following how these companies are approaching this opportunity from a branding standpoint.

Although Canadian Licensed Producers (LPs) like Canopy Growth and Aurora Cannabis have launched leading Canadian cannabis brands, we believe that there are several premium Canadian cannabis brands that have a significant opportunity to become a leading Canadian brand. Today, we have highlighted three premium Canadian cannabis brands that we are excited about and that are closely following.

Aurora Cannabis: Working to Create Global Cannabis Brands

When we are looking for a company that owns a portfolio of leading cannabis brands, Aurora Cannabis (ACB.TO) (ACB) is one of the first companies to come to mind. Through a series of acquisitions, Aurora Cannabis has positioned itself as a leading Canadian cannabis producer and this is an opportunity that we continue to monitor.

Going forward, the name of the game for Aurora Cannabis is execution and we believe that the company is led by a management team with a proven track record of success. When looking at the acquisitions that the company has completed, we are impressed with diversity of the assets in place.

During the last few years, Aurora Cannabis has acquired organic cannabis producers, cannabis producers with a major focus on cannabis oil, as well as cannabis producers with attractive medical and recreational focused brands. The company has also been able to expand into several major international cannabis markets and is working on creating brands that are recognized all over the globe.

Over the next year, we expect to see Aurora Cannabis report massive growth and this is an opportunity that is very much on our radar. We believe that the company has a great opportunity to create a global cannabis brand and will monitor how the team continues to execute.

WeedMD: An Under-appreciated Growth Story

One of the brands that we are most excited about will be launched by WeedMD Inc. (WMD.V) (WDDMF) later this month. Last week, the Canadian cannabis producer announced the launch of Color Cannabis, a premium brand that will be exclusively available to distributors and select retailers across Canada. The product line will include a variety of strains that come in multiple formats and have been developed with the same high-quality cannabis that consumers have come to expect from WeedMD.

When we visited licensed cannabis retailers in Toronto, we were unable to purchase any of WeedMD’s product. We found out that the company’s products are one of the first to sell out and we are impressed with this. Over the next year, WeedMD should see a massive increase in the amount of cannabis that it is producing, and we are bullish on this. Once WeedMD has completed its expansion, its combined indoor and outdoor production footprint will be over 5.2 million sq. ft. and expects to have a projected total annual output of 150,000 kgs in 2020. At these levels, the company will have ample supply to capitalize on the increased demand for its products.

Color Cannabis was developed specifically for a diverse recreational market that reflects the range in tastes and preferences of today’s cannabis consumers. In addition to premium dried flower, Color will launch new product formats in the coming months (pre-rolls, oils and gel capsules), with further consumption formats in development. This represents a significant opportunity for WeedMD to increase its overall market share and this is something to monitor.

Earlier this month, WeedMD secured Health Canada approval for 27 acres of low-cost, outdoor cultivation on its Strathroy property and we believe that the market does not associate much value with this project. We believe that the market is missing out on something big and are favorable on the growth prospects associated with this approval. Once WeedMD starts producing cannabis from this outdoor operation, total production capacity will spike higher and this should be a significant catalyst.

This week, the Canadian cannabis producer will commence planting more than 20,000 clones with plans to harvest in fall 2019. This project will end up increasing the company’s total potential production output by an additional 27,000 kgs and we find this to be significant. Earlier this year, we had the privilege of being able to visit WeedMD’s Strathroy facility and were impressed with the operation.

When compared to its peers, WeedMD has an attractive valuation for state-of-the-art cultivation facility, first mover outdoor potential, large distribution network and many options for growth in retail, technology and international expansion. We believe that this opportunity has been flying under the radar for too long and is due to re-rate.

Aleafia Health: The Emblem Acquisition Enhances the Overall Platform

Through the acquisition of Emblem, Aleafia Health (ALEF.TO) (ALEAF) is highly levered to the Canadian cannabis market and represents an underappreciated opportunity. In late May, Aleafia Health received an upgrade from Eight Capital which issued the company a Buy rating and a $3 price target. Aleafia is trading well below this price and we believe that this is an opportunity with significant catalyst for growth.

One of the reasons we are excited about Aleafia Health is due to the growth potential when it comes to its Canadian footprint. The Canadian cannabis producer is in the middle of a major expansion of its three cultivations facilities and once completed, the company expects to reach an annual production capacity of 138,000 kg of dried flower across indoor, greenhouse, outdoor and strategic supply agreements, as well as extraction capacity of 50,000 kg.

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