We continue to seek out opportunities in high-growth industries engaged in early-stage cyclical growth, which puts a high-priority right now on the cannabis space and hemp, marijuana, and CBD stocks, moreover. Why? Because this group – apart from perhaps any other major market space – reached a capitulatory cyclical bottom in March of this year after a prolonged and severe bear market.
In other words, the cannabis theme has been in a bear market over the past couple years for equity investors, while most other areas of the market have been boiling along into overvaluation and excess. The value opportunity – the growth opportunity, unfettered by that excess – perhaps remarkably, is the pot stocks.
With that said, the specific stock we want to focus on today is Cannabis Strategic Ventures (OTCMKTS:NUGS).
Onward and Upward
This company has been growing rapidly over the past few months. NUGS came into 2020 looking for as much as $5 million in top-line sales. But management has been forced to upgrade that estimate based on the company’s performance in recent months, and is now looking for as much as $11 million in sales, more than double the prior expectation.
This up-shift has been driving by two major axes of outperformance: production capacity and pricing levels.
Moreover, Cannabis Strategic Ventures (OTCMKTS:NUGS) has seen both production capacity and per-unity pricing on its goods sold jump substantially over the past 3 months. This is simply due to strong execution by company management, as far as we can see.
The company’s most recent communication drives this point home nicely because it represents more of the same recipe, and we believe that kind of process should be noted and highlighted.
According to the release, the company just announced a new phase of its “continued efforts to augment both the quantity and quality of the cannabis produced at NUGS Farm.”
As noted, the company has been targeting operational improvements in production capacity and product quality simultaneously, and achieving measurable results, with a 2.5x increase in production capacity as of its latest harvest and a dramatic jump in average price-per-unit cannabis sold in recent sales as quality of product increases.
To drive further execution gains, the NUGS has begun a streamlining stage in its grow operations. The latest step to augment these gains and further drive market positioning and ROI is its move to streamline on strains.
According to the release, Cannabis Strategic Ventures currently grows eight (8) top cannabis strains at NUGS Farm: Heavy OG, Sunday Driver, Ice Cream Cake, Super Glue, Purple Punch, Wedding Cake, Wedding Crashers, and Trifi Cookie.
From this group, the NUGS Farm team is working to scale it back to four strains, optimizing the Farm around the four that are best fit to maximizing the shareholder value of future production at NUGS Farm. According to materials, the decision will be based on year-round harvest productivity, pricing standards, and integrated biological fitness given the precise ecology contextualizing the farm.
Management believes this determination will be made before the end of August.
“We continue to drive powerful improvements in terms of execution,” stated Simon Yu, CEO of Cannabis Strategic Ventures. “Different strains work best in different conditions. Our decision will be based on maximizing our productive yield capacity in terms of dollars. This is purely about shareholder value. We have the luxury of consistent production with some of the finest cannabis strains in the world. But our plan has always been to pare down to four optimal strains. We have already collected quite a bit of data. We will be ready to make this decision within the next 60 days or so. After that, both quantity and quality should be significantly further bolstered.”