In June, I highlighted a small medical marijuana stock set to take off...
That timing couldn't have been better.
As you can see, Trulieve Cannabis Corp. (OTC: TCNNF) has blown away its competition so far this summer. Here you have Canopy Growth Corp. (NYSE: CGC) falling flat since its disappointing earnings and Trulieve up roughly 70% in two and a half months.
This isn’t just a streak of luck. The company’s business strategy is just to pay off in spades.
As mentioned back in June, Trulieve is a medical-only pot company that grows and sells marijuana in its own stores.
But the real inspiration behind this stock is where it does this.
The company now has 55 stores, 53 of which are in Florida. That’s the key.
Messy Legal Battlefield
Every state has its own marijuana laws. Some allow only medical. Others allow recreational use but it gets more complicated than that.
Where and how pot is allowed to grow varies state by state. They also make distinctions on where and how it is sold.
Working through several states’ lawbooks just to figure out how to operate is a huge headache… one Trulieve almost entirely avoids.
In June, I noted that this has helped cut down on its balance sheet risk and has created more synergy between company assets.
That’s still true. But there’s another element of this strategy that is worth bringing up now as Trulieve continues to expand aggressively in Florida.
It is nearing a monopoly.
Its 53 stores, five more than even the last time I wrote about it, controls well over half of the entire Florida market.
Its main competitor is MedMen Enterprises Inc. (OTC: MMNFF). And in this comparison, we can see why Trulieve’s strategy is working so well.
Taking Down a Giant
MedMen is stretched insanely thin. It has operations in California, Arizona, New York, Illinois, Massachusetts and Nevada on top of Florida. And it simply hasn’t been able to turn any kind of profits by juggling all of those state laws and operations:
As you can see, during the same period Trulieve began exploding higher, MedMen dropped nearly 30%. In fact, from launch, MedMen is down more than 90%, while Trulieve stock has nearly tripled.
MedMen’s underlying business hasn’t fared any better. During its most recent quarter, the company missed analyst estimates on both revenue and earnings by a huge margin. In fact, its quarterly loss came out 73% higher than expected.
It is, frankly, failing.
So, Trulieve’s quite profitable business, which surpassed estimates in its most recent quarter are only going to eat up more market from MedMen.
In fact, I wouldn’t be surprised if Trulieve just buys out MedMen’s Florida operations. It has more than enough money.
In fact, despite the company’s rapid growth – going from 17 locations to 55 in just two years – it is still sitting on more than $150 million in cash. It can now start taking out the competition.
MedMen, once a much larger company and the first to the Florida's market is ready to be eaten.
And when that happens, this 70% rally will seem like child’s play. If you didn’t have a chance to enter this opportunity back in June, you still do today.
Expect Trulieve, now that it is moving away from its Canadian listing into a U.S. one, to gain even more followers. And an acquisition announcement is likely going to be the spark that sends the whole thing much, much higher.
To your prosperity,
Joshua M. Belanger Executive Publisher & Founder
Joshua M. Belanger
Joshua Belanger is founder of CounterVest and the editor of Hot Money Trader. He has been providing ordinary investors blockbuster returns since 2008. In 2018, the average return of Hot Money Trader beat the markets by over 15%
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