Mengel’s “Next King of Cannabis”

What's being teased as "the next Canopy Growth?"

By Travis Johnson, Stock Gumshoe, December 17, 2019

Jimmy Mengel is out with a new marijuana stock ad for us, teasing the “next king” of the sector as he looks for more winners… and, of course, he’d like you to subscribe to his newsletter to learn what this next winner might be (actually, he’s pitching this as “you buy my $99 report, nonrefundable, and I’ll give you a free one-year subscription to The Crow’s Nest, after which that will autorenew at $129/year, but whatever).

Gumshoe readers, naturally, want to know what the story is before they plunk down a hundred bucks with no chance at a refund if they don’t like the newsletter… so let’s get you started, ID the stock for you, then you can think for yourself.

The basic spiel is that this will be the next huge winner pick from Jimmy Mengel, who recommended Canopy Growth (CGC, WEED.TO) very early, when it was down around $1 or so — I can verify that he did tease that stock early on, starting in 2015 I believe, so those who followed that suggestion from him were probably quite happy. Here’s a little taste from the ad:

“Canopy isn’t going to be the cannabis company to take us to the next round of growth.

“It’s jettisoned its founder, diluted shares, and like any large company, won’t be growing at a large enough scale to make a difference for investors.

“In short, Canopy isn’t going to be delivering another big win anytime soon — which is why I’ve taken my profits and continued my search for an up-and-coming company that can.”

And then he sums up the other clues he drops quite nicely on his order form here:

“There are three big reasons why this stock will soar in the next few weeks:

“1. Its expansion is almost complete… and the announcement of its progress will be the biggest event in this company’s history. A million square feet will cement its spot as a major cannabis grower

“2. It’s just been added to the NYSE… no other cannabis company in the world has been in this unique position of such rapid expansion AND a recent U.S. listing. Not even Canopy Growth had this advantage!

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“3. And its partnership with a major $13 billion beverage company dovetails perfectly with its expansion… Once it announces the details, every investor in America will want a piece of this cannabis company”

So there you have it… what might the stock be? This is, sez the Thinkolator, our old friend Hexo (HEXO)… which just reported its latest quarterly earnings yesterday, so the news is good and fresh.

Things have not gone terribly well for Hexo lately, though that’s true of most of the marijuana stocks in the past six months — one writer from TipRanks blames it on Quebec, though it’s also true that most growers and producers up North are having trouble with expenses being higher than they expected, and retail prices being lower, and with the slow rollout of beverages and edibles in Canada… and though they do have a 1.3 million square foot super-greenhouse center in Quebec and some other very large facilities in Ontario, it looks like they’re also not going full-out, presumably because of lack of demand (cultivation is “on hold” in parts of those facilities).

There’s a good sum-up of the situation from the CEO in the conference call transcript here that’s definitely worth a read, and you can read the rosy sales pitch in their investor presentation here (that’s from last quarter, but still fairly up to date). Like many marijuana companies, they recognize the problem with being a commodity producer, and they’re trying to move up the value chain by focusing on specific strands and on comomdity-derived products — particularly cannabis-infused beverages in their case, with their Truss partnership with Molson, but also a bunch of other products from vapes to edibles.

They have distribution throughout Canada with at least some of their brands, and they consider themselves to be the “premium branded partner” for the big consumer packaged goods companies, though it’s so early in this product development cycle (and I have so little personal knowledge of that marketplace) that I’m just parroting their words here — I don’t know if they’re really going to lead, or if some competing products could swamp them.

And, of course, they don’t have any profits to go with their solid revenue growth. And they probably won’t for at least a couple years, particularly if they’re investing in product innovation and distribution. They do say they’re tageting positive cash flow next year, or at least they were saying that in October… don’t know if they’ll make it or not.

So this is far from being the worst cannabis company, and I do like the focus on beverages and edibles… though it’s important to note that we still don’t even really have a clear idea of how big those markets might be in Canada, let alone elsewhere. All the estimates could be wildly rosy, just like the estimates about demand for legal cannabis have been pretty over-the-top in most legalized states and in Canada so far (partly that’s because black-market cannabis is now more socially acceptable and is a lot cheaper, to be fair). The future does seem to lie with the brand builders, and there are some brands here… I just don’t know if they’re going to succeed or not, so you’ll have to make your own judgement on that.

But yes, this is Mengel’s latest tease… and if you’d like some backup, I should also note that a few readers have already posted this answer (thankfully everybody gets to be right!), here are a couple of the comments we received on this earlier…

Reader tinskov submitted:

It is HEXO, I watched Jimmy’s presentation and we can see Sébastien St-Louis, CEO of Hexo, many times during the video pitch. Plus HEXO’s master grower is indeed a female, they’re building a 1 million sq feet greenhouse, the beverage partner – a 13Billion company – suits Molson-Coors, which is Hexo’s beverage partner and has a market cap between 11 and 13 Billion, depending on the days. Plus the images of the facility in Mengel’s video fit the images in promotional videos by Hexo. Plus Hexo is located in Gatineau, Quebec, at about a one hour drive from Ottawa, as stated in Mengel’s video. Some images in the pitch video show staff of the company with a Hydropothecary logo on their clothes, Hydropothecary is the medical brand of Hexo. By the way, I am from the province of Quebec, so I can recognize the location of the images in Mengel’s video as being shot in Quebec.

And last week, a jamesseamus posted this:

Looks like hexo.. lisred on NYSE. Got a beverage coming out in Cnada with Molson. Not able to verify that they have a lock on Purple Kush or are going to triple their greenhouse space…. but seems to fill the bill… and Jimmy separately fromhis new report issued a buy on HEXO recently….

So with that, dear friends, I’ll pass it over to you — what do you think of Hexo? Like their CPG focus and brand building ideas, or are you worried that, like everyone else in Canada, they’ve been producing a lot more marijuana than they can sell at a good price? I can’t see the future and I don’t know the Canadian pot marketplace, but I’d be delighted to hear what you think… just use the friendly little comment box below. Thanks!


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Michael Blythe
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Michael Blythe

In Ontario they gave up on the cannabis store lottery and have announced they will allow a lot more sellers. They should provide the channels to move more cannabis.

Andrea
Guest
Andrea

weeds money has been made and it aint by regular small investors we get to pick up scraps that will sink soon , !!j

jetjock
Guest
jetjock

Not really Andrea.

There is ONE weed stock doing just fine and will move higher from here.

It’s their business model that I like.

IIPR.

rlazenby
Member
👍21
rlazenby

Is IIPR really a weed stock. No, they rent to people who are in the business correct?

jamesseamus
Guest
jamesseamus

GOOD LUCK JETJOCK !WHAT IS YOUR ENTRY PRICE? Under water now? You may never get to come up for air……

jflynch
Guest
jflynch

I know a guy who bought MJ stocks as penny stocks….made a lot of dough…sold out….now it’s slow moving but in the future will be really big….especially for pain relief and overall health…! People are getting sick and tired of the drugs that are addictive.

rlazenby
Member
👍21
rlazenby

that is so true Andrea. I lost 10,000 already because one I did not know what I was doing/self-taught. Did my due diligence by checking out the companies and some I simply went by what others were saying. I certainly hope that the Cannabis Industry comes back up as I do not feel it is going to be anything soon as unfortunately I did learn that even the stock market is somewhat rigged by big investors.

krinkle
Member
👍57

HAHA…you MUST be joking!

Christine
Guest
Christine

Take your comment and insert my name in the beginning. Did same thing, I’m down by $4,000. Here’s my lesson: don’t try to make a quick buck if you’re somewhat of a newbie. There are big players out there who know when to move on something. Here’s another gem, I used to have a few shares of SHOP that I bought at approx $80. Yup, I sold them.

cka1946
Member
👍47

I got rid of a bunch of losers, they made everything sound good but I will not sell any of my CBD stocks because I think that will come back …there are so many nonadictive reasons to feel positive.

roberthebel
Member
👍140
roberthebel

I completly disagree with the regular folk picked anyone’s scraps at all personally know of more than a dozen small groups that did better than we hoped at 1/100 of what the 4 of us back in 2015 2 Canadians and 2 Americans met at a rangers game and by the end of 2016 we had a group of the low 50 and 6 months prior to aone of the votes during Canada s legalization. We all changed our live and kids and hopefully kids kid and although the game has changed with the voting schedule we as other groups… Read More »

jamesseamus
Guest
jamesseamus

Timing is critical…as is a solid understnading of the economic basis and reality of the proposed investment. The Pot Millionaires club is now closed, guys…and gals.

Buck
Guest
Buck

It would be hard to find a sub-sector which has met with as much bloodshed as the Pot Stocks. Utterly destroyed over the year. The large cap players (I call them the Big5) have lost a fortune for investors this year. (They have lost about $35B and are now only worth about $17B). HEXO, while not a Big5 Pot Stock, lost about 75% of its value. Central to the problem are a few things. First, pathetic performance from Executive teams who seem mortally detached from accountability to their investors or capable of understanding operational necessity. Second, a Canadian government regulator… Read More »

jflynch
Guest
jflynch

I have 4 MJ stocks….bought in too soon….down considerable and am still holding on as it’s a matter of time for laws to pass in the US for them to prosper. I have ACB as one….probably now 1/3 of original cost. I think the CBD and for sure the beverage drink business will be super big. Just think of the energy drink market currently. I think the chocolate and gummie bear market will be good for the non smokers….! Still holding 4…sold 1 doggy one and bought a security system company instead who is doing fine. I think Hexo will… Read More »

DURKOP DENNIS ALLEN
Guest
DURKOP DENNIS ALLEN

Big profits can only be maintained by volume business! Easy profits are over!

ronwill
Member
👍266
ronwill

If only you could buy stock in drug cartels….

quincy adams
Guest
quincy adams

Anyone who’s watched their HEXO investment burn this year may want to check in with the Schall Law Firm, who just today announced the filing of a class action lawsuit against HEXO for possibly being a bit untruthful regarding their financial performance, among other crimes and misdemeanors. Great timing, Gumshoe!

jamesseamus
Guest
jamesseamus

Thanks for the comment. I bought HEXO warrants. I was swindled. But Schall does not mention the warrants in their signup form for the class action> I have contacted them directly and asked that they expand the class to include warrant holders. Your comment much appreciated. Down 96+%…..lol

Bonne chance as they say in Quebec

krinkle
Member
👍57

Yes, the MJ promoters are only trying to get us naive, fantasy, and wealth-obsessed folks crazed enough to buy their latest pitch. I already got burned by a more reputable, well-established Promoter. And it was NOT a penny stock. But I never have too much cash to toss, so when the direction firm, I cut away. When I talk to old lovers (sure) heavy into pot way back then, they are trying not to pick up old habits! I, indeed, wish people would smoke the stuff because we likely could have a compassionate world, but let’s face it: people are… Read More »

Carbon Bigfoot
Guest
Carbon Bigfoot

Leave it to the Hosers to craft a STRANGE BREW with alcohol & maryjane!! They already re-voted in the boy wonder —-what’ll be next??

chuck harowitz
Guest
chuck harowitz

HEXO (NYSE:HEXO): Q1 GAAP EPS of -C$0.24 misses by C$0.14.

Revenue of C$14.5M (+154.4% Y/Y) misses by C$1.2M.

chuck harowitz
Guest
chuck harowitz

when cgc was 6 and got bought by constellation was easy money, not now

big tuna
Member
👍133

I keep getting spam emails about how THC and CBD can be formulated in labs, cutting out the grow process and offer consistent quality. If so, I think there will be a total change in the weed industry and the pharmaceutical companies will be the big winners here.

jamesseamus
Guest
jamesseamus

IIPR’s chart looks like a 45 degree downward slope….. I managed to ride it up from $60 to $140 and (blessedly) exited. Consider that the tenants in the greenhouses are fragile underfunded producers of weed which is in goss oversupply and this inventory is being marked down ( to below production cost) all over. The rent will not be paid, and the greenhouses will be empty. It looked like a good idea until you find out that in Colombia you can produce weed at a cost about 10% of that required to produce in greenhouses in the northern hemisphere., and… Read More »

RICK HANNAMAN
Guest
RICK HANNAMAN

Hexo is what #7 of the big producers in Canada? all of which have 1 million sq ft or more of grow space available and planes for more? While as of today there is a glut of product for the market and no demand for the product. Companies are laying off employees scaling back on planned expansions renegotiating merger deals or backing out of them completely. Then you have a government that is dragging its feet when it comes to licensing and permitting… what a phucking mess! Not to mention the price of equipment necessary for some of the market… Read More »

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dortelli
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👍37
dortelli

Organigram, OGI – check it out! Excellent brand recognition and quality, shipping to all Canadian provinces, started shipping chocolate and improved vape pens in February, will ship powder for beverage within next quarter, low cost producer, making money, excellent management, has been falling with all the other boats.