Cannabis Watch: Marijuana stocks to watch: Aurora Cannabis investments may be more valuable than its pot

The following article is part of a package of stories that MarketWatch is publishing to mark the start of full legalization of cannabis for adult recreational use in Canada on Wednesday. For more, go here.

Aurora Cannabis Inc. is a major pot producer, but if its bets on other cannabis companies continue to pay off, it may be able to stop actually growing weed on its own.

Aurora ACBFF, -7.45% ACB, -7.23%  said recently its investments were worth more than C$700 million ($540 million) as of Sept. 21, bolstered in part by demand for pot stocks ahead of full legalization of marijuana in Canada on Wednesday. As the entire sector has benefited, so has Aurora’s portfolio, boosting the company’s fiscal fourth-quarter profit to C$79.9 million, after a loss of $20.8 million the year earlier.

Read first: A guide to pot stocks: What you need to know to invest in cannabis companies

One of the company’s biggest and most profitable bets is a stake in the Green Organic Dutchman Holdings Ltd. TGODF, -3.19% TGOD, -3.17%  a C$55 million investment in the company at C$1.65 a share in January, that is worth C$5.53 a share as of Tuesday. That would value its stake at roughly C$184 million, which is equal to about 13% of the company. It has an option to increase that stake to more than 50%.

Aurora also disclosed investments in Hempco Food and Fiber Inc. HEMP, -4.85% CTT Pharmaceuticals Inc. CTTH, -3.23% Choom Holdings Inc. CHOOF, -0.53%  and a 20% stake in privately held Capcium Inc., which provides equipment to Aurora for making medicinal marijuana softgel pills.

Other marijuana stocks to watch: Tilray has global ambitions

The company spun out Australis Capital Inc. in September, as an investment company focused on the U.S. cannabis market.

What business is Aurora in: recreational or medical?

Aurora is active in both the medical and recreational marijuana markets. Within Canada, Aurora has a medical cannabis business, but is also growing its recreational capacity ahead of legalization. Like all Canadian producers, its international business is focused on medical pot.

Intellectual property

Aurora does not disclose how many patents it has obtained or how many are in the works. The company says it’s interested in four main areas of research and development: analytical science related to cannabinoid and terpene profiling, plant science, clinical studies including cannabinoid applications, and clinical science.

More marijuana stocks to watch: Canopy Growth is the cannabis business’s $4 billion gorilla

Supply agreements

The company says that it has signed supply agreements with every Canadian province and territory, representing 98% of the population. It does not have deals with New Brunswick or the Nunavut territory.

One of the company’s key initiatives for adult recreational use is its retail plans for Alberta. Via its investment in Alcanna Inc., the largest private liquor retailer in the country, the company plans to sell pot in the 37 stores Alcanna plans to open in Alberta — the maximum amount allowable by law in the province — and to pursue retail sales in Ontario. Ontario has said federally licensed producers are allowed to open a single retail location in the province, as part of regulations unveiled in September.

More marijuana stocks to watch: GW Pharma is a drugmaker that grows its own cannabis plants

Aurora currently has operations in several European countries such as Germany and Italy, as well as medical marijuana operations in Colombia, through its acquisition of MedeReleaf. It has also exported medical products to Australia, and has invested in Cann Group, a local medical producer.

How much weed does it grow and at what cost?

As of September, Aurora said it can grow an annualized run rate of 45,000 kilograms of pot a year. The company sold a total of 5,022 kilograms during fiscal 2018, up from 2,382 kilograms in 2017; Aurora produced 5,632 kilograms in the year, up from 3,037 kilograms in 2017.

For the fourth quarter, Aurora’s net selling price of dried cannabis equivalent per gram was C$8.02, up from C$7.30 in the year-ago quarter. It sold pot oil for C$13.52 a gram, up from C$12.83 in the year-ago period.

More marijuana stocks to watch: Aphria is positioning itself as a low-cost pot producer

Aurora’s cash costs for dried cannabis were C$1.87 per gram in the fourth quarter, up from C$1.80 per gram in same period last year. Oil cost C$1.70 up from C$1.53.

How much pot can it eventually grow?

According to its latest quarterly report, the company says it expects to be able to grow 100,000 kilograms of pot a year by the end of 2018, and is aiming for a 150,000-kilogram run rate. In the future, the company expects to be able to grow over 500,000 kilograms a year.

Aurora’s U.S.-listed shares have gained 50.4% in 2018, while the S&P 500 SPX, +2.15%  has gained 3% and the Dow Jones Industrial Average DJIA, +2.17%  has added 2.4%.

Be Sociable, Share!

Related Posts


MarketTamer is not an investment advisor and is not registered with the U.S. Securities and Exchange Commission or the Financial Industry Regulatory Authority. Further, owners, employees, agents or representatives of MarketTamer are not acting as investment advisors and might not be registered with the U.S. Securities and Exchange Commission or the Financial Industry Regulatory.

This company makes no representations or warranties concerning the products, practices or procedures of any company or entity mentioned or recommended in this email, and makes no representations or warranties concerning said company or entity’s compliance with applicable laws and regulations, including, but not limited to, regulations promulgated by the SEC or the CFTC. The sender of this email may receive a portion of the proceeds from the sale of any products or services offered by a company or entity mentioned or recommended in this email. The recipient of this email assumes responsibility for conducting its own due diligence on the aforementioned company or entity and assumes full responsibility, and releases the sender from liability, for any purchase or order made from any company or entity mentioned or recommended in this email.

The content on any of MarketTamer websites, products or communication is for educational purposes only. Nothing in its products, services, or communications shall be construed as a solicitation and/or recommendation to buy or sell a security. Trading stocks, options and other securities involves risk. The risk of loss in trading securities can be substantial. The risk involved with trading stocks, options and other securities is not suitable for all investors. Prior to buying or selling an option, an investor must evaluate his/her own personal financial situation and consider all relevant risk factors. See: Characteristics and Risks of Standardized Options. The educational training program and software services are provided to improve financial understanding.

The information presented in this site is not intended to be used as the sole basis of any investment decisions, nor should it be construed as advice designed to meet the investment needs of any particular investor. Nothing in our research constitutes legal, accounting or tax advice or individually tailored investment advice. Our research is prepared for general circulation and has been prepared without regard to the individual financial circumstances and objectives of persons who receive or obtain access to it. Our research is based on sources that we believe to be reliable. However, we do not make any representation or warranty, expressed or implied, as to the accuracy of our research, the completeness, or correctness or make any guarantee or other promise as to any results that may be obtained from using our research. To the maximum extent permitted by law, neither we, any of our affiliates, nor any other person, shall have any liability whatsoever to any person for any loss or expense, whether direct, indirect, consequential, incidental or otherwise, arising from or relating in any way to any use of or reliance on our research or the information contained therein. Some discussions contain forward looking statements which are based on current expectations and differences can be expected. All of our research, including the estimates, opinions and information contained therein, reflects our judgment as of the publication or other dissemination date of the research and is subject to change without notice. Further, we expressly disclaim any responsibility to update such research. Investing involves substantial risk. Past performance is not a guarantee of future results, and a loss of original capital may occur. No one receiving or accessing our research should make any investment decision without first consulting his or her own personal financial advisor and conducting his or her own research and due diligence, including carefully reviewing any applicable prospectuses, press releases, reports and other public filings of the issuer of any securities being considered. None of the information presented should be construed as an offer to sell or buy any particular security. As always, use your best judgment when investing.