Holly Black: Welcome to Morningstar's 3 Stock Picks. I'm Holly Black. With me is Rahul Bhushan. He is Co-Founder of the Rize Medical Cannabis and Life Sciences ETF. Hello.
Rahul Bhushan: Hi, there, Holly. Nice to be with you.
Black: So, you're going to talk us through three stocks in this portfolio. Where should we start?
Bhushan: So, my first stock pick is GW Pharmaceuticals. It's the biggest company in the medical cannabis ecosystem and not many people know this. It's a British company. And they've been experimenting with cannabinoids for the past 20 years. The CEO, Justin Gover, is probably one of the most knowledgeable people around in the pharmaceutical cannabis arena. The reason it's my stock pick for today is they've really been the market leader in the pharmaceutical cannabis spectrum. They've set the precedent for cannabis-derived pharmaceuticals. In June of 2018, they got their first plant-based CBD-derived formulation approved by the FDA in the US. That medicine is now approved across multiple countries and has catapulted their revenues from less than 10 million in 2017 to over 500 million in 2020, so much so that they were actually acquired recently by an Ireland-based company called Jazz Pharmaceuticals.
Black: Lovely. Okay. What's stock number two?
Bhushan: So, stock number two is going to be GrowGeneration, slightly more basic type of company. And number of reasons we like the company – it's an owner operator of hydroponic garden centers primarily based out of out of California. But they have been expanding East in recent times. At the moment, they've got 19 centers in California. They have 52 across the US. They aim to have 55 by the end of the year. They've been growing rapidly through acquisitions. A healthy cash balance of 55 million. It's one of the most profitable companies in the cannabis space by net profit margin. It's 6% on 55 million in revenues. It's a name that's rapidly growing. We like it a lot and we really see good things for the name up ahead.
Black: Did you say garden center? How is this company involved in cannabis?
Bhushan: Yeah. So, they're hydroponics player and they basically have entered the commercial leasing of a lot of their hydroponic centers to cannabis growers. So, you effectively have private label partnerships where a lot of these cannabis growers who are growing cannabis and cultivating cannabis for medicinal purposes or other purposes, but they're able to effectively leverage their warehouses and their space effectively and use that space to cultivate cannabis and carry out the research that they're doing into cannabinoids.
Black: Okay. Onto our final stock.
Bhushan: So, the final stock is a much, let's say, for the more adventurous investor perhaps. It's a clinical stage biotechnology company called Cardiol Therapeutics. And the reason we like it – they recently got an IND to commence a Phase 2/3 – I think it's a placebo-controlled clinical trial for its leading product CardiolRx. And CardiolRx is quite interesting. We met with the CEO actually a couple of months ago in London. But CardiolRx is a pretty interesting product. It's an ultrapure high dose CBD oral formulation which is designed to treat, I should say, acute inflammatory heart disease. So, if this thing passes the last stage of clinical trials, it will be another use case, proven medical use case for cannabis-derived medicine, and that's why we're excited about it.
Black: Fantastic. Rahul, thank you so much for your time. For Morningstar, I'm Holly Black.
