More and more investors are being allured by marijuana stocks. The industry has continuously shown us rapid growth without any signals of slowing down. Many will say that investing in marijuana stocks can be risky, but with high risk will come high rewards. For those who fear the potential risks that are associate with marijuana industry, this may be the best way for you to get your toes wet before diving into the industry head first.
Ladies and gentlemen, I give you Scotts Miracle-Gro (SMG). Yes, that’s right the lawncare and garden company. Although this is not a pure play marijuana stock, it is significantly important to the U.S. marijuana industry. As more states legalize marijuana, Scotts may rank up to become a top U.S marijuana stock. Presently, Scotts’ relationship with marijuana is indirect, but it is becoming more important to the company’s operations and profitability.
Scott’s began acquiring top providers of specialty fertilizers, lighting, as well as other supplies for hydroponics in 2015. As of September, the company had purchased around ten companies which include Netherlands-based Gavita, a producer of indoor lighting for greenhouses and hydroponics, and Botanicare, a Canadian growing media operation. Recently, it purchased Can-Filters, a wholesaler of indoor ventilation products operating in British Columbia.
These businesses are divisions of Scotts’ Hawthorne sector, which contains all its indoor, urban, and hydroponic gardening assets. The sector was created in 2014 to concentrate on “the emerging areas of indoor and urban gardening products.” Apparently, Scott’s knew then that the progression of marijuana throughout the country was something they didn’t want to miss an opportunity to generate profits on.
At the end of Scott’s fiscal 2017, Hawthorne accounted for just over 10% of its total $2.6 billion in revenues which was more than double than the previous year. CEO Jim Hagedorn stated in Forbes that marijuana was “the biggest thing I’ve ever seen in lawn and garden.” And he is right. Scotts is creating a foundational industry around the equipment every single marijuana grower will need, regardless of the size of their operation.
While many are focusing on marijuana cultivators such as Canopy Growth (TWMJF) or Aurora Cannabis (ACBFF) there are risks that are associated with their operations. Far less risk is associated with Scotts, as their primary consumer business of lawncare is what funds their Hawthorne Division. Management anticipates gross margins to come under pressure and that free cash flow will improve permitting the Hawthorne division to continue to expand through acquisitions and organics growth. Although valued high, this may one of the less risky marijuana stocks on the market.
MAPH Enterprises, LLC | (305) 414-0128 | 1501 Venera Ave, Coral Gables, FL 33146 | new@marijuanastocks.com
2 comments
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SMG is way too expensive! I believe there is far less risk with TWMJF and ACBFF being in Canada and a way better deal than SMG just from the growth factor let alone no where NEAR the cost of getting in. Think about it, 94% of Americans are for medical and 64% for recreational use at this time. SMG may be a good deal if you’re a millionaire.