Profiting from the Cannabis Industry Legal Cannabis Stocks

Table of Contents

Cannabis Market Update: Q1 2019 in Review ...... 3 Cannabis Market Update: Q2 2019 in Review ...... 8 Cannabis Market Update: Q3 2019 in Review ...... 14 Top Canadian Cannabis Stocks Year-to-Date...... 19

Cannabis Market Update: Q1 2019 in Review

During Q1 2019, the marijuana industry continued its volatile movement as new exciting areas opened up in the US.

As cannabis investors continue to grapple with growing challenges for the early movers, excitement has arrived in the form of new markets in the US.

During the first quarter of the year, the marijuana market saw critical decisions in the US government that will have a direct impact on the way consumers and companies interact with the industry.

Here, the Investing News Network (INN) offers investors a closer look at the calendar Q1 for the marijuana market in 2019.

Cannabis Q1 2019: Hemp market gets boost in US

Elliot Johnson, chief investment officer at Evolve ETFs, told INN that his biggest focus in the quarter was the policy changes coming from the US. Johnson also acts as the portfolio manager for the Evolve Marijuana Fund (TSX:SEED).

Thanks to the passing of a US$867 billion farm bill in December 2018, hemp and its derivatives became legal in the country. This includes cannabidiol (CBD) produced from hemp.

“This is not cannabis and marijuana in the recreational sense, but a significant move forward in terms of the adoption of stuff that’s derived from that plant being used in the US,” he said.

This change in policy allowed for the burgeoning hemp-derived CBD market to expand into established retailers. A majority of these brands and products are focused on health and wellness.

During the quarter, pharmacy retailers Walgreens, a Walgreens Boots Alliance (NASDAQ:WBA) company, and CVS Pharmacy, a CVS Health (NYSE:CVS) company, confirmed separate plans to begin selling the products.

“I think that, in anticipation of the farm bill last year, many retailers were trying to come to a strategy for how they were going to address hemp,” Joseph Lusardi, CEO of multi- state operator Curaleaf Holdings (CSE:CURA,OTCQX:CURLF), said during a call with investors and analysts.

The Curaleaf brand of products was one of the first announced to be available with CVS.

“This marks the first of what we anticipate are many announcements where national chains will be opening their stores to hemp-derived products,” Charles Taerk, president and CEO of Faircourt Asset Management, told INN. He also acts as the sub-advisor to the Ninepoint Alternative Health Fund, which secured a 26.91 percent return over a year-to-date basis during the quarter.

He called the confirmation that CVS and Walgreens will carry CBD products the biggest news for the quarter in the entire sector.

Cannabis Q1 2019: Investor interest moves south of the border

So far in 2019, the US marijuana market has commanded the attention of investors. Some Canadian companies have even confirmed that their larger plans include a wide range of activities in the US.

During a conference call with investors in March, Tilray (NASDAQ:TLRY) CEO Brendan Kennedy said the company is now focused on deploying its capital in the most important markets for its growth: the US and Europe.

With attention from investors in the US space, two exchange-traded fund (ETF) operators confirmed plans to launch marijuana funds exclusively focused on the US.

Evolve Funds Group and Horizons ETFs Management are set to launch these funds later this year.

“We’ve had a lot of investor inquiries saying, ‘HMMJ is great, but I want exposure to the underlying US marijuana market directly,”’ Steve Hawkins, president and CEO of Horizons ETFs Management, told BNN Bloomberg.

Johnson told INN that the size advantage the US market has, even in its current fractured state, is an alluring prospect for an entry into the space.

Greg Taylor, chief investment officer of Purpose Investments, credited the success of the funds he manages to his ability to invest in “thematic opportunities, such as the rapid product innovation happening now in the US.”

In February, Taylor’s fund, the Purpose Marijuana Opportunities Fund (NEO:MJJ), posted returns for investors of 53.43 percent on a one year basis since its inception on January 31, 2018.

Cannabis Q1 2019: Acquisition deal highlights challenges for Canadian pure plays

Johnson indicated that, so far in 2019, the leading Canadian marijuana companies have rallied in the stock market due to the return of healthy expectations for the sector.

“I think what’s happened there is that, because of the volatility in the market in Q4 [2018], you’ve seen a lot of these [stocks] come rally back because people said, ‘We were worried about the markets in Q4 and everything is kind of running back to where our expectations are going to be for the growth in this market over the next year or two,’” he said.

When asked which important announcement in the quarter did not get enough attention, Taerk pointed to HEXO’s (NYSEAMERICAN:HEXO,TSX:HEXO) acquisition agreement for Newstrike Brands (TSXV:HIP,OTC Pink:NWKRF).

He said this deal represents one of the unforeseen challenges for the “late entrants” into the Canadian cannabis market.

“There are the larger incumbents that have access to capital and distribution agreements with the various provinces and international markets. However, there are also many others that do not have traction,” he said.

Taerk added that, despite Newstrike being well capitalized and having a strong balance sheet and a solid capacity of production, “the company felt that the path to success was too great and decided to be acquired.”

Cannabis Q1 2019: Trends to follow for rest of 2019

Retail will play a key role in Canada and, in particular, Ontario, where the market finally opened to consumers in April.

Due to the pressures of opening a shop in a tight time frame, several applicants to the first 25 mandated legal shops in the province cut deals with publicly traded marijuana companies. A combination of cannabis retailers and licensed producers secured stakes in the new market.

Investors in the Canadian cannabis market are also waiting to see the entry of edibles and other infused products into the mix of available options for consumers.

The Canadian government has implemented a deadline of October 17, 2019 to legalize these products.

Johnson is interested to see the breakdown for popular brands in the edibles space and which companies will be able to capture consumers with upcoming novelty products.

However, the executive is more interested to see the movements of policy in the US, in particular with critical bills that could significantly boost the entire industry.

In March, the House Financial Services Committee voted in favor of the Secure and Fair Enforcement Banking Act of 2019, otherwise known as the SAFE Banking Act.

This bill would allow legal marijuana businesses at a state level to safely access the banking system, despite the federal illegality of the drug.

“I think that the passing of the SAFE Banking Act could help to signal a larger shift in public opinion that may ultimately help legislation like the STATES Act to gain traction,” Marc Adesso, veteran cannabis attorney with law firm Waller Lansden Dortch & Davis, told INN.

The STATES Act is a policy designed to protect cannabis operations in states that have legalized the drug from the continued federal illegality of cannabis.

Johnson added that he is expecting to see a continued adoption of cannabis-based products from developed or established markets, such as pharmaceuticals or beverages.

“The biggest challenge in the US, frankly, has been that there is this discontinuity between federal legislation … and the state level legislation, where, on a state by state basis, it’s been approved,” Johnson said.

While projections and predictions for the STATES Act vary in range and approval, the issue of marijuana legalization in the US or protections for these companies will surely pick up interest.

One potential benefit this policy change in the US could unlock is the participation of Canadian banks in the American marijuana space.

In April, the heads of the Bank of Montreal (NYSE:BMO,TSX:BMO) and Toronto- Dominion Bank (TD) (NYSE:TD,TSX:TD) reaffirmed to the market that these banks are not ready to participate in the burgeoning US sector.

“Depending on what comes out [from policy changes in the US], we’d look at it and make sure it is appropriate for TD in terms of our risk appetite and whether it’s right for our customers,” Bharat Masrani, CEO of TD, said according to a report from Bloomberg.

While the major Canadian banks have shown acceptance of the general marijuana market, the risk in the US remains a challenge for these institutions.

Other independent financial firms have already launched coverage of US-based marijuana companies.

Cannabis Q1 2019 update: Investor takeaway

As the cannabis market continues its expansion, more options are becoming available for investors in the form of growth and diverse plays in the stock markets.

Companies have to present plans on branding, retailing and research now more than ever, since the maturation of the space represents the gradual shift away from pure cultivation plans.

The first quarter of 2019 showed the dynamism the industry is seeing and laid the foundation at a policy level for more significant changes in critical markets such as the US.

Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.

Cannabis Market Update: Q2 2019 in Review

The Investing News Network recaps the major highlights in the marijuana market during Q2 2019, from the rise of edibles to US market moves.

As another quarter wraps up for the marijuana sector, investors are getting a look at the value of the US marijuana play and learning when exactly edibles will hit the Canadian market.

While cannabis stocks suffered a challenging quarter in terms of performance, the growing US market and edibles stand out as the next big catalysts for the space.

Click here for a recap of notable events in the first quarter of the year or read on for a look at some of the key cannabis news in Q2.

Cannabis Q2 2019: Edibles to appear in mid-December

After growing anticipation from the industry, in Q2 the Canadian federal government finally unveiled its regulations for the edibles and infused market, set to become legal on October 17. That is one year after the legalization of adult-use marijuana.

However, due to the review process needed from Health Canada in coordination with cannabis producers, the federal government is projecting no edible items will be sold until the end of the year.

“It is expected that a limited selection of products will appear gradually in physical or online stores, and no earlier than mid-December 2019,” Health Canada said in a statement.

Cannabis edible items in Canada will face a limit of 10 milligrams of tetrahydrocannabinol (THC) per package.

During the quarter, two new projections on the edibles and infused market highlighted just how significant the impact of this space will be in Canada.

First, Deloitte published its annual study on the marijuana sector, focusing specifically on predictions for the value of edibles and infused products.

According to the research, the entire edibles space will be worth C$2.7 billion per year.

“The introduction of cannabis-infused edibles will clearly threaten the alcohol industry as consumers are using the product for similar usage occasions,” commented Jennifer Lee, a partner with Deloitte.

Lee indicated that the economic boost from the edibles market will take place on top of the current spending for cannabis products.

While novelty items like marijuana-infused beverages are expected to attract C$529 million per year, the main draw will be pure edibles, which will represent C$1.6 billion of the total edibles and infused market.

As part of this new spending, another study projects that the second stage of cannabis legalization could attract 1.5 million new consumers to the space.

During a presentation on the upcoming study, Ashley Chiu, strategic growth and risk leader with EY, and Jon Kamin, chief revenue officer at Lift & Co. (TSXV:LIFT,OTCQB:LFCOF), highlighted some of the consumer benefits this market will bring.

The duo also stressed how important the relationship between consumers and budtenders in cannabis stores will be for licensed producers.

It is expected that budtenders will act as guides for new consumers exploring the marijuana space away from smokeable products.

Watch our interview with Ashley Chiu here

Cannabis Q2 2019: US market sentiment on the rise

Cannabis experts have long been saying that the next stage of growth in the sector will be the US market.

Analysts and portfolio managers have been moving their attention to the state-by-state space and determining some early contenders by reviewing multi-state operators (MSOs), which are companies acquiring assets in legal US markets.

In addition to the continued performance of publicly traded companies operating in the US, Q2 saw one of the biggest marijuana deals so far.

The Canadian market saw its first major connection between a Canadian player and a US-based company when Canopy Growth (NYSE:CGC,TSX:WEED) announced its intention to acquire Acreage Holdings (CSE:ACRG.U,OTCQX:ACRGF) in a deal worth US$3.4 billion.

The transaction involved an initial payment to Acreage shareholders of US$300 million, and investors approved the deal in June. This acquisition will be triggered once marijuana becomes legal at the federal level in the US.

Steve West, vice president of investor relations at Acreage, previously told INN that the cash infusion allowed the MSO to hit the market and gain a bigger footprint before Canopy completed the transaction.

“We expect that potential acquisition candidates will have more confidence in the equity of Acreage given that it will be tethered to Canopy,” Alan Brochstein, cannabis analyst with 420 Investor, wrote following the announcement between the two firms.

While initially rumors spread about the potential for more deals between Canadian producers and MSOs, no others have been confirmed so far.

For now, the biggest question regarding the US cannabis market remains: When will marijuana become legal federally? While many disagree on how feasible the appearance of a sweeping legalization bill is, one respected analyst offered a novel possibility on what could happen.

During the Lift Cannabis Business Conference in Toronto, Vivien Azer, managing director for consumer research in the beverages, cannabis and tobacco markets for Cowen (NASDAQ:COWN), outlined a potential way for marijuana to gain legal protections in the US.

“We think that the (Trump) administration could very well (do it) ... it really just comes down to timing,” the analyst said during a panel at the event.

According to Azer, US President Donald Trump might feel compelled to move forward with a new cannabis legalization program or the existing STATES Act if his polling numbers drop ahead of the upcoming 2020 election.

The STATES Act is a proposed bill that would create protections at the federal level for cannabis operations made legal by policies at the state level.

Beyond the increasing trading volumes seen by MSOs that have gained the attention of investors, two new US-focused exchange-traded funds (ETFs) were created on an emerging Canadian exchange in Q2.

Competing ETFs from Evolve Funds Group and Horizons ETFs Management (Canada) launched in April to offer targeted exposure to the US cannabis market.

The Horizons US Marijuana Index ETF (NEO:HMUS) and the Evolve US Marijuana ETF (NEO:USMJ) held assets under value amounts of C$16.8 million and C$4.21 million, respectively, as of July 4.

Both ETF firms determined that investors were in need of a fund offering direct exposure to the MSOs many investors had already started exploring.

“Late last year, we saw most cannabis investment move to the US, and that has been the target of this year’s investment thesis as well,” Nawan Butt, associate portfolio manager with Purpose Investments, told INN. Purpose Investments maintains the Purpose Marijuana Opportunities Fund (NEO:MJJ).

As part of the new research on edibles from Deloitte, Lee indicated that Canadian firms are still well poised to be leaders at the international stage, but competition from the US demands a stronger effort.

“Cannabis companies with strong professional leadership and business fundamentals, a focused strategy, and a willingness to place bets — while playing the long game to wait out the changing regulatory environments — will be the ones who succeed and prosper,” she said.

The trend of investment in the US sector has clearly continued full steam ahead in 2019.

Cannabis Q2 2019: NEO Exchange sees boost in marijuana investments

While many investors are only now learning about the Toronto-based NEO Exchange, launched in 2015, its operators have been busy attracting listings from cannabis ETFs and novel marijuana MSOs active in the US market.

Jos Schmitt, president and CEO of the NEO Exchange, previously told INN that the exchange's operators made the critical decision to not block US marijuana investments, since the US market represents an area of growth for the cannabis space.

“Clearly we are moving now in a period where there was a lot of focus on US marijuana firms,” Schmitt told INN. “There’s a lot of interest in that space.”

Thanks to this open system, the exchange has seen the launch of the two ETFs mentioned above, which are dedicated exclusively to the US marijuana space.

As well, a recent round of MSOs such as Columbia Care (NEO:CCHW), AYR Strategies (NEO:AYR.A) and Jushi Holdings (NEO:JUSH) have elected for listings on the NEO Exchange instead of the Canadian Securities Exchange (CSE).

Columbia Care and AYR Strategies debuted with market capitalizations of over C$1 billion, representing two of the biggest stock launches on the exchange.

While marijuana investment has been dominated by Canadian players with senior Toronto Stock Exchange listings or those with US listings, investors have seen a rush of marijuana stocks to the CSE throughout the last year.

Now the NEO Exchange may be poised for more marijuana listings to attract investors.

Cannabis Q2 2019: Experts point to investment trends

A significant shift in investment sentiment during 2018 brought rising interest in the US market with the MSO play. According to Butt, that trend has moved on into 2019 as well.

However, Butt isn’t dismissing the Canadian market entirely. “Once the big guys start getting it right, you’ll see a lot more efficiency in the Canadian markets, which will lead to a lot more consolidation as well once the industry matures.”

Watch our interview with Nawan Butt here

The portfolio manager also expressed bullish sentiment for the potential impact that the edibles and infused products market could have in Canada.

“People who didn’t smoke their whole life are not going to smoke now, so what’s going to happen is once edibles come online you will get that incremental user. There’s still lots of opportunities left in Canada.”

As a projection of where things might be heading in the investment market, Butt identified Europe as a market that investors will want to keep a close eye on.

“We’ve carved space in our portfolio for international exposure. We think Europe is going to be very interesting within the next two to four years,” he said.

Elliot Johnson, chief investment officer and chief operating officer with Evolve ETFs, agrees with the bullish sentiment for the US market.

His firm launched a new ETF in 2019 focused exclusively on the companies south of the border and he is in charge of the actively managed fund.

Johnson also acts as the portfolio manager for the two ETFs his firm offers, the Evolve Marijuana Fund (TSX:SEED) and the Evolve US Marijuana ETF.

Watch our interview with Elliot Johnson here

Johnson told INN he will be keeping a close eye on the rollout of retail stores in Canada and the introduction of the legal edibles market.

Canadian players are also set to continue the path of global expansion currently seen.

“Whether you’re looking at Europe or South America or Australia, you’re seeing Canadian names popping up all the time … I think that global opportunity justifies a lot of the valuation of Canadian companies,” Johnson told INN.

While Johnson also pointed to some areas of interest for the Canadian market and its investors, in his view the US market is the sector to monitor; it offers the biggest revenues available and a significant discount to the valuation of its players due to the lack of federal legalization in the country.

Cannabis Q2 2019: Investor takeaway

During Q2, investors were hit with some declines in the market, with underperforming financials from the leaders in the sector as they adjusted to the demands of the Canadian recreational market.

The cannabis sector is at an inflection point thanks to the endless possibilities for companies. Investors will need to maintain close vigilance on the sector to monitor long- term bets and any fast trading action.

Editorial Disclosure: Acreage Holdings is a client of the Investing News Network. This article is not paid-for content.

Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.

Cannabis Market Update: Q3 2019 in Review

The Investing News Network recaps the major highlights in the marijuana market during Q3 2019, from the downturn in sentiment to scandals in the industry.

The marijuana stock market was rocked during Q3 2019 due to various bouts of volatility and a sharp decline in positive short-term sentiment for the industry.

As the nascent marijuana sector continues to go through growing pains, it also expanded its reach when it comes to product offerings and international operations.

A change in company management in the sector accompanied by a downturn in funds available for mid-tier marijuana firms caused a shift in the outlook for this market. But above all else, one of the biggest scandals in the Canadian market led to new doubts about the space.

Read on below to learn about the quarter’s biggest highlights, and click to see breakdowns of previous significant cannabis moves in Q1 and Q2 of this year.

Cannabis Q3 2019: Regulatory issues and a shift in management

An undeniable issue during Q3 was the CannTrust Holdings (NYSE:CTST,TSX:TRST) illegal growing scandal.

At the beginning of the quarter, Health Canada found one of the company's facilities in Pelham, Ontario, to be “non-compliant” for growing cannabis in unlicensed rooms, sparking an investigation into CannTrust's operations.

The shocking revelation was followed by the firing of former CannTrust CEO Peter Aceto and the forced resignation of former Chairman Eric Paul, who served as CEO before Aceto. This came after it was revealed they, along with other high-level executives, knew about the unlicensed rooms.

Most recently, Health Canada suspended CannTrust’s production licenses, furthering the company's troubles. CannTrust has also had recreational product returned by Ontario and Alberta.

The share price of the Ontario-based producer has dropped almost 70 percent since the firm first notified investors of the investigation.

While CannTrust has easily been one of the most troubled players in the cannabis space this quarter, others have also had their share of hardships.

In July, the US Food and Drug Administration (FDA) issued a warning letter to Curaleaf Holdings (CSE:CURA,OTCQX:CURLF) for making “unsubstantiated” claims about the effects of cannabidiol (CBD) and for selling products that had not been approved by the regulatory body.

Curaleaf quickly discontinued the sale of unapproved products and took down webpages that claimed CBD is an effective treatment for illnesses such as anxiety and ADHD.

After the letter was sent, the FDA released a statement in which Ned Sharpless, acting FDA commissioner, said the agency is looking into ways to protect public health while also marketing cannabis products.

“Selling unapproved products with unsubstantiated therapeutic claims — such as claims that CBD products can treat serious diseases and conditions — can put patients and consumers at risk by leading them to put off important medical care,” Sharpless said.

Apart from big scandals, there was also a management change that shook up the industry.

Bruce Linton, co-founder and former CEO of cannabis heavyweight Canopy Growth (NYSE:CGC,TSX:WEED), was dismissed from his position as head of the company in July.

Linton was terminated after Canopy's board of directors, driven by investment partner Constellation Brands (NYSE:STZ), were left unimpressed by less-than-stellar quarterly results.

“While we remain happy with our investment in the cannabis space and its long-term potential, we were not pleased with Canopy’s recent reported year-end results,” said Bill Newlands, CEO of alcohol maker Constellation Brands, at the time.

Linton said that once Canopy Growth received an investment of C$5 billion from Constellation Brands — Constellation has a 38 percent stake in the company — a conditional board adjustment was set.

After some time off, Linton is now back in the cannabis game as a special advisor to small CBD firm Better Choice Company (OTCQB:BTTR). He also has roles with Gage Cannabis and SLANG Worldwide (CSE:SLNG).

Cannabis Q3 2019: Critical US Congress vote for SAFE Banking Act

One of the biggest challenges facing American firms operating in the US cannabis market has been a lack of access to banking services at federal financial institutions due to the federal illegality of the drug.

“It’s a very strange scenario to be in when you’re in a fully fledged state legal industry that doesn’t have access to traditional banking,” Cresco Labs (CSE:CL,OTCQX:CRLBF) CEO Charlie Bachtell said in an interview with the Financial Post.

Cannabis is still listed as a Schedule I drug, which makes it illegal at the federal level, preventing federal institutions from engaging with companies that deal directly with the plant.

That’s where the Secure and Fair Enforcement (SAFE) Banking Act of 2019 comes in.

The bill was first introduced to the House of Representatives in March of this year and seeks to prohibit federal banking regulators from “penalizing a depository institution for providing banking services to a legitimate marijuana-related business.”

The bill quickly garnered bipartisan support as it moved through the House and a companion bill was introduced to the US Senate.

In September, the bill was approved in the House by a vote of 321 in favor and 103 against, representing the first cannabis-related legislation to pass through Congress.

However, the real challenge for the industry will now be getting the bill passed through the GOP-led Senate, according to experts.

At the industry level, cannabis experts are apprehensive about what the bill could mean for companies in the US if it manages to get past the Senate.

Nawan Butt, an associate portfolio manager at Purpose Investments, previously told the Investing News Network (INN) that the industry is cautiously optimistic as it watches the SAFE Banking Act’s journey.

“The industry is hanging onto the hope that this would make it a lot easier for a lot of these bigger plays to grow a lot quicker, capture market share and bring over the black market to legal channels,” said Butt.

Cannabis Q3 2019: Industry prepares for cannabis-infused drink barrage

This most recent quarter has also seen big strides in the cannabis-infused ingestibles space. Several companies have now thrown their hats into the cannabis-infused beverages ring.

Chuck Smith, CEO of Dixie Brands (CSE:DIXI.U,OTCQX:DXBRF), previously told INN he thinks cannabis drinks are eventually going to be able to challenge the alcohol industry.

“The format for beverages hasn’t become as consumer friendly in the THC world as it is in the alcohol space,” Smith told INN. “We think that’s going to change. We think ultimately consumers are going to be able to go into a consumption lounge and order a THC beverage.”

Dixie Brands has teamed up with AriZona to develop a line of AriZona-branded THC drinks. The firm says it has made a breakthrough in terms of solubility and time delivery for its drink additives.

When it comes to competing with alcohol, Zenabis Global (TSX:ZENA) has also strengthened its position in the Canadian cannabis-infused beverage arena by setting a partnership for the technology development of its planned drinks.

Zenabis CEO Andrew Grieve noted that cannabis-infused drinks could shake up the recreational beverage market — a space alcohol has long held dominion over.

“I believe that, if you have a beverage technology with a known onset and offset and limited calories and the flavor profile that people want, people will choose a cannabis infused-beverage for their recreational experience over an alcoholic beverage,” Grieve told INN.

Deloitte estimates that beverages could contribute C$529 million to the C$2.7 billion upcoming edibles industry in Canada.

Other players that joined the beverage space this quarter include well-known drink maker Jones Soda (OTCQB:JSDA), which is launching a branded line of CBD-infused drinks in the US with the help of an investment from HeavenlyRX, a CBD wellness company that is planning to go public.

There is also The Alkaline Water Company (NASDAQ:WTER,TSXV:WTER), which announced a merger with bottled water firm AQUAhydrate. It plans to expand the portfolios of both companies with lines of CBD-infused drinks and ingestible products.

Industry experts have expressed excitement about the growing cannabis drink market. In a previous interview with INN, Elliot Johnson, chief investment officer and chief operating officer with Evolve ETFs, said the market could see investment moves from big alcohol and beverage companies as winners emerge from the space.

According to Johnson, cannabis drink makers with early leads in the market could end up being acquisition targets moving forward.

Cannabis Q3 2019: Investor takeaway

With Q3 now over, the cannabis industry is still reeling from a summer slump that has been marked by scandal and investor pullback.

The marijuana sector could still rally, however. Johnson previously told INN that Q3 brought a “good growing up summer” for the industry, and opportunities will continue to spring up.

The portfolio manager for two marijuana funds from Evolve also said it is only a matter of time before the US follows Canada with its own cannabis legalization.

Investors could see a “significant repricing” of cannabis companies in the US, Johnson said, as the market readjusts to a growing American presence in the marijuana business.

Securities Disclosure: I, Danielle Edwards, hold no direct investment interest in any company mentioned in this article.

Top Canadian Cannabis Stocks Year-to-Date

INN runs through the top-performing cannabis stocks on the CSE, TSXV and TSX so far in 2019. Find out which stocks made the list.

The marijuana stock market has held investors' attention during 2019, even as sentiment adjusts and expectations for the industry change.

Companies have faced a volatile market this year, with a now recognized pullback dragging the space down. But while the overall sector has experienced a downturn, investors have still found opportunities for gains in the marijuana stock universe.

Read on to view the top cannabis gainers so far this year on the CSE, TSXV and TSX. All stats were current as of September 30, 2019; CSE and TSXV stocks listed had market caps between C$10 million and C$500 million at that time, and TSX stocks listed had market caps between C$1 billion and C$15 billion.

CSE top cannabis stocks

1. Captiva Verde Land (CSE:PWR)

This relative newcomer to the marijuana public sector started trading on the CSE in October 2018. It is a real estate company with investments in various areas, including cannabis operations.

While Captiva Verde Land did not have a quarter full of announcements, it did complete an acquisition of facilities that will help support the outdoor growing operations of its marijuana grower subsidiary Solargram Farms. The firm has indicated it is expecting a first harvest sometime in 2020 for both its indoor and outdoor cannabis product.

Shares of Captiva have risen 200 percent over a year-to-date period to reach a price of C$0.24.

2. Benchmark Botanics (CSE:BBT)

This cannabis company has operations in Canada and in Europe. Thank to its subsidiary Potanicals Green Growers, the firm holds a license for marijuana production in Peachland, British Columbia.

During the quarter, the company completed a new partnership with Zhejiang Yatai Pharmaceutical (SZSE:002370), a Chinese drugmaker. This partnership will produce a joint venture to "explore opportunities, subject to compliance with Canadian Cannabis Act and related Regulations, to cultivate, manufacture, process, and market high content cannabidiol cannabis products."

Additionally, shares of the company were added to the Horizons Emerging Marijuana Growers Index ETF (NEO:HMJR) during the quarter, offering increased exposure.

Benchmark Botnics' shares have risen 104.35 percent in value this year for a price of C$0.47.

3. Citation Growth (CSE:CGRO)

Formerly known as Liht Cannabis, this company manages marijuana assets in Nevada, Washington, California and British Columbia. During the third quarter, the firm conducted a critical merger with ACC Group of Companies, a Nevada cannabis cultivation operation.

"The acquisition of ACC provides the fuel required to accelerate Citation's movement to large-scale cannabis cultivation and production," Rahim Mohamed, president of Citation Growth, said in a statement. As part of the transaction, the public firm issued 35 million shares.

Citation faced a roadblock in October due to an error in the filing of its financial statement for the year ended on March 31, 2019. Three key amendments were made to the statement.

So far in 2019, shares of this firm have increased in value by 63.24 percent to rest at C$0.25.

TSXV top cannabis stocks

1. SugarBud Craft Growers (TSXV:SUGR)

During Q3, SugarBud Craft Growers obtained its cultivation, processing and medical sales licenses from Health Canada. This officially kicked off operations for the firm out of its facility in Stavely, Alberta.

"As a premium product provider, focused on quality, product leadership and customer satisfaction, we believe that the heart and soul of everything we do starts with what we grow," John Kondrosky, CEO of the firm, said in a statement.

Due to the pullback in the cannabis market, the entire Canadian marijuana space saw a sharp decline in performance during the third quarter.

SugarBud Craft Growers was no stranger to this effect — although its share price is up only 12.5 percent to C$0.08, the company is the TSXV's top-performing cannabis stock so far this year.

2. 48North (TSXV:NRTH)

This novelty cannabis grower had a busy summer with a collection of developments, including an update on its outdoor growing facility, a US-based acquisition and an executive management shakeup.

48North issued its fiscal 2019 results in September, reporting net revenues of C$4.8 million. During the period, the company raised close to C$50 million for a cash position of C$52.7 million. However, the firm posted a net loss for the year of C$8.1 million.

So far this year, the company has seen an increase in value of 1.64 percent for a price of C$0.62.

TSX top cannabis stocks

1. Alcanna (TSX:CLIQ)

Alcanna manages the retail operations of Nova Cannabis and is associated with Canadian producer Aurora Cannabis (TSX:ACB,NYSE:ACB).

As part of its most recent quarterly update to investors, Alcanna said that a Nova Cannabis shop in Toronto, Ontario, has quickly gained the most volume of all its stores in the country. This store averages C$450,000 per week. Alcanna manages nine stores across Canada: eight in Alberta and one in Ontario.

Shares of Alcanna have grown by 20.9 percent so far this year, resulting in a price of C$5.20.

2. Charlotte’s Web Holdings (TSX:CWEB)

This hemp-derived cannabidiol (CBD) manufacturer has continued its path in the US by offering novelty products in high demand across the country.

This past quarter, the firm reported steady operational growth during Q2. During a call with investors, Deanie Elsner, CEO of Charlotte’s Web Holdings, said the firm is cautiously optimistic about the national conversation around CBD regulation with the US Food and Drug Administration (FDA).

“While the farm bill unlocked the door for category availability, the FDA now has the opportunity to expand availability of hemp CBD products across more distribution points to benefit more consumers,” Elsner said during the call.

Over a year-to-date period, shares of the CBD producer have risen 2.63 percent for a price of C$18.35.

3. HEXO (TSX:HEXO)

This Canadian marijuana producer joined a few of its peers by securing a listing on the New York Stock Exchange (NYSE) in July.

"We are extremely pleased to list on the NYSE and believe it reaffirms HEXO’s strong track-record for exceptional corporate governance and is further proof that we are a valuable cannabis industry partner for Fortune 500 companies," CEO and Co-founder Sebastien St-Louis said in a statement.

Also in Q3, HEXO was able to increase the availability of its products in the Canadian market. In Alberta, the firm started selling its cannabis Elixir oral sprays, while in Ontario HEXO secured 18 new product variety listings with the provincial distributor, the Ontario Cannabis Store.

Shares of HEXO have scaled up 0.38 percent in value, resulting in a price per share of C$5.23.

Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.