Billionaire hedge fund investor Leon Cooperman, founder of Omega Advisors and former partner at Goldman Sachs, confirmed to CNBC Wednesday that he has invested his personal money in the cannabis space.
His investments include CannTrust Holdings (OTC: CNTTF, TSX: TRST.TO) and Green Thumb Industries (OTC: GTBIF), whose founder, Ben Kovler, introduced Cooperman to the cannabis market.
“I meet with Ben and I’m impressed with him; he’s a smart young man. I put some personal money in,” Cooperman told CNBC. “They have a conference call [and] like a schnook I ask a question. The next thing I know, my picture’s in the New York Post as ‘The Cannabis King.’”
“It’s clearly a growth business, and I’ve never had so much fun with my pants on as I’ve had with these stocks,” Cooperman said. That’s a ringing endorsement if I’ve ever heard one.
Here’s what you need to know about CannTrust Holdings and Green Thumb Industries.
CannTrust Holdings (OTC: CNTTF, TSX: TRST.TO)
It’s no wonder why Cooperman was impressed enough by CannTrust (OTC: CNTTF, TSX: TRST.TO) to invest in it. The company is a major medical marijuana player in Canada, is getting into the country’s new recreational market, has a growing international footprint, and also happens to be one of the few cannabis companies that can say it boasts a healthy balance sheet and income statement.
To break into Canada’s new recreational market, CannTrust is expanding its production facilities. The company currently owns a 450,000 square foot facility and is adding another 600,000 square feet which should increase its production capacity significantly.
Cooperman isn’t the only investing heavyweight with his eye on CannTrust. John O’Connell, CEO of Davis Rea Investment Counsel, says what matters most with investing in pot stocks is finding those that are a well-run business with quality leadership, which is exactly what he sees in CannTrust.
“If you want to invest in a cannabis stock, first make sure that you don’t allocate too much money to it and secondly, invest in a non-promotional company that has a strong balance sheet but is big enough to withstand what I believe is going to be brutal pricing in the recreational market,” O’Connell said to BNN Bloomberg on Tuesday. “We own CannTrust, that’s the kind of company that you want to invest in.”
The company is trading at a reasonable valuation, is well-run, is a low-cost operator, and it is focusing on the future of the cannabis industry by focusing on its medical marijuana business and its budding international presence.
Analyst Russell Stanley at Beacon Securities agrees. He just initiated coverage of the stock, giving it a Buy rating with a twelve-month price target of $21 – 104% higher than the price as of this writing.
Stanley said of CannTrust: “The company is already one of the largest producers in the country and is currently winning a 36 per cent share of new medical patient registrations. It also leads its peers in terms of revenue mix, with 60 per cent of last quarter’s cannabis revenue coming from the sale of oils/extracts versus the 30 per cent average amongst its closest comparables.”
Green Thumb Industries (OTC: GTBIF)
Green Thumb’s (OTC: GTBIF) founder and chairman, Ben Kovler, confirmed to Investor’s Business Daily in August that billionaire Cooperman had invested in the company.
“It gives us confidence in the business plan,” said Kovler of Cooperman’s investment. “It legitimizes what’s happening. Here is a guy who has seen cycles over and over and understood how to create wealth over time.”
Cooperman confirmed that his investment was with his personal money and not part of the nearly $4 billion managed by his Omega fund.
“I’ve known Ben Kovler since birth – he’s an impressive young man,” Cooperman said to Marijuana Business Daily. “I think he has great vision for this industry.”
That’s high praise from Cooperman, and the company Kovler built is proving to deliver results. In its second quarter, the company reported revenue of $13.6 million – a nearly 300% increase over the same period the year prior. And net income for the quarter was roughly $400,000, a substantial improvement from the $1.6 million loss reported in the first quarter.
Green Thumb owns eight production facilities and bills itself as a company that manufactures and sells a range of cannabis products in the U.S. where the market potential for marijuana products far exceeds that of Canada’s market.
Its products include flower, concentrates for dabbing and vaporizing, edibles, and topical cannabis and markets its products through various retailers, while also operating 50 of its own retail stores under the RISE dispensaries brand.
Yesterday, Green Thumb announced it had closed $101.66 million bought deal financing which was led by GMP and included a syndicate of Cormack, Beacon, Echelon, and Eight Capital.
Following this financing announcement, GMP Securities analyst Robert Fagan resumed coverage of Green Thumb, giving the stock a Buy rating and a twelve-month price target of $35 – 93% higher than Thursday’s closing price.
“Pro-forma this financing, the company’s C$80m financing completed in August, and expected consideration of ~$90m to be paid for pending acquisitions in NY and FL, we estimate the company’s freely deployable cash position at ~$150–160m currently,” Fagan noted. “In addition to building out its wholesale and distribution capacity, we expect GTI could focus its use of proceeds on M&A activity. In respect of this, we also anticipate GTI could use equity to boost its buying power, employing a structure similar to that used by MMEN in AZ (20% cash, 80% stock), as sellers increasingly seek upside participation.”