Wednesday One Year of Water

Wednesday Water

Selling pressure extended through the early part of the trading day. However, the Fed’s announcement sparked a global rally of risk assets as the U.S. dollar eased. The S&P 500 rallied 1.22% to 2,099.

Cannabis stocks seem to be waking up from a press standpoint. We are seeing several meaningless press releases, as many low quality companies try to stay in the spotlight.

Daily Positive: Aphria (TSXV: APH.V), a licensed medical marijuana producer in Canada, announced its board’s approval of a $5 Million two-phase capacity expansion, which should significantly increase production to approximately 7,500 kilograms over the next 12-18 months. In total, the two-phase project is expected to cost approximately $5 million and will be funded by cash on hand. We are very impressed with this LP’s ability to expand without needing more capital.

California has one year of water left. That’s right, the drought has gotten so severe that the reserves are going to be gone in less than 365 days. Let that sink in … .

Does that make your head explode? Because that seems to be a pretty severe and terrifying prospect. It makes us wonder about the future of cannabis cultivation in California and the need to improve energy and water efficiency in the process. If California has been the “fruit basket” of the country, there will likely be a drive to keep water for the farmers of fruits and vegetables.

A great aspect of the cannabis industry is the focus on innovation around the cultivation of the plant, since it is worth so much. This innovation can hopefully also be applied to broader agriculture, such as vertical farming, use of hydro/aeroponics and improved lighting and climate control systems.

One company that comes to mind is Indoor Harvest (OTC Pink: INQD). It has tremendous potential to increase cultivation efficiency, which can be witnessed through the company’s work with Tweed (TSXV: TWD) in Canada. An added bonus is that it can be used for food agriculture and has been tested in the MIT CityFarm project.

Whatever the future holds, the need to be better about our use of water is very clear. As an industry, this is a must; as investors, it is important to evaluate what this means for the bottom line.

 

The discussion above is provided for informational purposes only and does not constitute an offer of, or solicitation for, any investment services or products offered by the author. The author is not making any investment recommendations and the opinions above do not constitute investment advice. Reference to above indices [and companies] is based on information provided by sources the author believes to be credible. Investing in the cannabis industry, as with other industries, presents certain risks including the risk of loss on an investment.

Morgan is a Founding Partner and Managing Director of Poseidon Asset Management. He is the Chief Investor of their Cannabis Focused Fund. Morgan previously worked for a privately owned Registered Investment Adviser and earlier was at UBS Financial Services focusing on wealth management. Morgan believes in the potential of the cannabis industry and likes having an active involvement as it develops. You can follow him on Twitter @PoseidonAsset.

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