Marijuana Companies That Could Grow
Investors have an opportunity to add these growing pot stocks to their portfolios in 2019.

These marijuana companies may seek an acquisition.

Competition in the marijuana market is surging thanks to the legalization of the recreational use of cannabis in October 2018 in Canada, and the growing number of U.S. states that have approved its medical and recreational usage. With these developments, more companies are looking to acquire smaller competitors to stay ahead of the pack. Canadian and U.S. companies will seek deals or partnerships as the industry heats up, says Jason Spatafora, co-founder of and a Miami-based trader and investor. "You're going to see some acquisitions. It's really about survival. You can't go it alone as a late-stage company at this point," he says. Here are five marijuana companies that could seek acquisitions soon.

AbbVie (ticker: ABBV)

AbbVie, a Chicago-based biopharmaceutical company that was founded in 2013 after being spun off from Abbott Laboratories, could acquire companies, such as GW Pharmaceuticals (GWPH), Insys Therapeutics (INSY), Zynerba Pharmaceuticals (ZYNE) and Cara Therapeutics (CARA), to boost its pipeline of drugs, Spatafora says. "AbbVie could buy Insys, which has been hammered for their drug, Syndros, which is complementary to what they are doing," he says. "AbbVie could take out all four companies in one shot and still have tons of money left over."

Green Growth Brands

Green Growth Brands, a Toronto-based dispensary company that trades on the Canadian Securities Exchange, made a hostile all-stock bid in December 2018 against Aphria (APHA). Green Growth Brands wants to acquire the Canadian-licensed producer because the company has "great value and not much risk," says Peter Horvath, CEO of Green Growth Brands. Whether the deal with Aphria closes or falls apart, Green Growth Brands plans to be acquisitive in 2019.

The Green Organic Dutchman

The Green Organic Dutchman, an organic cannabis producer, began trading on the Toronto Stock Exchange in May 2018 after raising 132.26 million Canadian dollars ($99.15 million) from its initial public offering. This company could be acquisitive because it has "a ton of cash, doesn't need to raise any money and hasn't made any crazy acquisitions that have an overhang and will bite an investor," Spatafora says. The Green Organic Dutchman began construction of four facilities with a total capacity of 195,000 kilograms in Canada, Europe and the Caribbean. The grower also plans to build a 40,000-square-foot research and development center that will have space to develop new products, such as cannabinoid-infused beverages.

Aurora Cannabis (ACB)

Aurora Cannabis, one of the largest licensed medical cannabis producers in Canada, will continue to seek more deals, Spatafora says. The company acquired privately held Whistler Medical Marijuana in an all-stock deal for CA$175 million in January 2019. The company itself could be a candidate, he says. "If I had to put my money on the next company, it would be Aurora, not a clear takeout, but a joint venture since their balance sheet is a little messy with all their acquisitions," he says. Aurora Cannabis, which has sales and operations in 22 countries across five continents, also holds a stake in several companies, including a 17.6 percent stake in The Green Organic Dutchman.

Liberty Health Sciences

Liberty Health Sciences, an Alachua, Florida-based medical cannabis dispensary company, could be acquiring companies to bolster its footprint, says Michael Berger, founder of Technical420, a Miami-based company that conducts research on pot stocks. The company has been "executing on a major expansion in Florida and has been focused on opportunities in Ohio and Massachusetts" and could seek more deals along the East Coast, he says. Liberty Health operates seven dispensaries in Florida and is a "really undervalued play on the U.S. market," Berger says. The company operates a state-of-the-art facility in central Florida. "We are favorable on the company's ability to expand into new markets and take significant market share," he says.

Expect these marijuana companies to seek acquisitions.

These cannabis companies are likely to acquire other businesses in the near future:

  • AbbVie (ABBV)
  • Green Growth Brands
  • The Green Organic Dutchman
  • Aurora Cannabis (ACB)
  • Liberty Health Sciences
Essential Investor Tips for 2019
You could be in a much stronger financial position by 2020. Here's how.
Nine super-charged investor tips to start your 2019 on the right track.

1. Take control by saving for retirement. If you insist on waiting until you have "enough" money to invest in your own retirement, you might find your definition of "enough" growing and growing, and you might never start at all. When you wait, you miss out on your money growing over time. Have an employer? Talk to your human resources department, supervisor, or business owner about an employer-sponsored savings plans, such as a 401(k). No plan or self-employed? Open an individual retirement account (IRA) by contacting a financial services firm.

2. Establish a rainy day fund. About 34% of respondents to the FINRA Foundation's National Financial Capability Study said they probably or certainly could not come up with $2,000 in an emergency. That inability to pay can make a tough financial situation worse, especially if you have to take on debt to pay the bills or go without vital services such as car repairs or healthcare. If you want more tips on how to get started with establishing your emergency savings.

3. Know what you own. Each type of investment has pluses and minuses, and it's important to know what they are for each product you own. For instance, stocks tend to return more over the long term than bonds (a plus), but stocks as an asset class are also more volatile than bonds (a potential minus, especially if you need the money relatively soon or when the market moves against you). Big problems can occur if you are more concentrated than you realize, fail to understand costs like surrender charges (variable annuities have them), or hold too much of an illiquid investment like a non-traded REIT.

4. Stay (or get) diversified. Diversification helps protect the value of your portfolio if one or more of your investments perform poorly. Learn how to apply this key concept to your portfolio. When you diversify, you aim to manage your risk by spreading out your investments. You can diversify both among and within different asset classes. Diversifying among assets classes typically involves holding a mix of stocks, bonds, and cash. Diversifying within an asset class means dividing the money you've allocated to a particular asset class among various categories of investments that belong to that asset class. For example, if you own stocks, you can diversify within that asset class by owning stocks of companies from different sectors.

5. Run any new investment by others. Heard a hot tip? Thinking about a play in cryptocurrencies or an initial coin offering? Before you invest, check in with a registered investment professional, seasoned investor, or CPA. It's also a very good idea to run any new investment by your spouse, your significant other, or a trusted friend or family member known for good judgment (we all know someone like that). Bad things happen when people invest in a vacuum. Bonus tip: If you research an investment online, also research the source of that info. Websites and investment information can be deployed by promoters or outright scammers.

6. If you get a cold call -- put any investment decision on hold. Not every investment offer that comes out of the blue is a scam, but don't be hasty about signing on to unsolicited offers. When you are on the spot, your emotions might not be in check, and your judgment can be clouded. In fact, fraudsters often try to trigger such emotions to get individuals to fall for their scam. Hanging up is a viable option. If it turns out to be a promising opportunity, it will be there when you are ready to invest, and if it's not, you saved yourself a headache and a potential financial loss.

7. Always remember that higher return comes with increased risk. The promise of higher return is almost always associated with greater risk and an increased possibility of investment losses. For example, a bond that offers a higher yield is likely to have a lower credit rating or other qualities that compel the issuer to offer a higher return to compensate you for the added risk you are taking. Only you know how much risk you are willing to take with your money, so make sure your investments align with your risk tolerance.

8. Be alert to fraud -- especially if you (or your parents) are closer to (or in) retirement. There are many stories about older investors -- particularly single seniors -- being exploited by scammers.

Keep these essential investor tips handy throughout the Year to help you invest with confidence and care.