The NEXT Cannabis Market: Two Secret Titans of Tomorrow

When I first started covering cannabis, my focus was on Canadian licensed producers.

Canada was preparing to legalize cannabis at the national level. And that was setting up handsome domestic and international opportunities.

I recommended a number of companies with promising potential.

That worked out pretty well…

My readers locked in a 1,202% gain on Tilray in eight weeks… 1,963% on Aphria in four years… 3,195% on Cronos Group in five years… and 4,733% on MariMed in four years.

I’m making this point for two reasons.

First, I want you to realize the incredible profit potential in cannabis stocks. Second, I think we have the same type of opportunity all over again…

This time, the opportunity is with cannabis companies focused on pending legalization overseas.

The U.S. cannabis market still has plenty of growth ahead…

But the rest of the world, especially South America and Europe, are poised to close the gap very quickly.

Many of the Canada- and U.S.-focused companies I look at are way overvalued.

On the other hand, I’ve found two very promising – and way undervalued – opportunities in small cannabis companies focused on Europe and Latin America, two untapped markets that are loosening restrictions and moving toward legalization.

The Next Big Opportunity

Khiron Life Sciences (OTC: KHRNF) operates as an integrated cannabis company in Latin America and Europe.

It operates through three segments: Medical Cannabis Products, Health Services and Wellbeing Products.

The company focuses on the cultivation, production, distribution and exportation of THC- and CBD-based medical cannabis.

Khiron also operates a small number of health centers in Colombia under the Ilans and Zerenia brands. It develops CBD-based cosmeceutical products under the Kuida brand name and operates the Zerenia clinic in Medellín, Colombia.

Khiron was the first company to sell legal medical cannabis in Colombia and Peru.

Peru has a population of about 35 million people, and Colombia has a population of about 48 million. These aren’t huge markets… but they’re underserviced. And there’s public acceptance for medical cannabis. (In Colombia, medical cannabis as a therapy is covered by insurance.)

The company is also selling medical cannabis in the United Kingdom, which has a population of nearly 67 million. Khiron is just now establishing a foothold in the country.

Getting a foot in the door in the U.K. is significant. It has an active cannabis industry and is the largest cannabis producer and exporter in Europe.

But Khiron has even bigger fish on its agenda for 2021. The company is targeting Mexico, Germany and Brazil.

In early March, in a landmark decision, lawmakers in Mexico approved a bill to legalize recreational marijuana.

The bill still has to be approved by its Senate and signed by the president, but both have signaled support for the legalization. Medical cannabis was approved three years ago. Mexico has a population of 130 million people.

And Khiron has an important advocate on its board of directors who could open some doors in this market. The former popular president of Mexico, Vicente Fox, is an independent director.

With a population of 83 million people, Germany is the largest cannabis market in Europe. And it will likely be the first country in Europe to legalize adult-use, which I expect to happen within the next few months.

Khiron has recently partnered with one of the top health distributors in Germany, Nimbus Health. That means Khiron’s medical cannabis can be prescribed across a network of more than 300 pharmacies.

Now, at the moment, Europe allows for only medical cannabis use. But 2021 could be the year we see a change.

As it now stands, the European cannabis market is projected to be worth $37 billion by 2027. That’s a 957% increase from the $3.5 billion it collected in 2019.

But the total European cannabis market (medical and adult-use) is expected to be worth $120 billion. And the region is home to nearly 750 million people – more than twice the population of the U.S.

Off to a Good Start

The main priority for Khiron is establishing itself in Latin America, one of the fastest-growing regions in the world.

Latin America comprises 20 countries that are home to more than 640 million people. And these countries have started to trade cannabis across borders.

That’s a market opportunity that can’t be ignored… Peru and Brazil are the immediate objectives this year.

Not only is Khiron on the doorstep of South America, but its location in Colombia gives the company some significant operating advantages.

Most significant is the very low cost of production. In Colombia, power, water and labor are all available at very low costs.

That is why the gross profit margin is so high – greater than 80% on medical cannabis products. It’s one of the highest I’ve ever seen for a cannabis company.

I recently had a conversation with Khiron’s co-founder Alvaro Torres. He explained that the Latin American market is currently where the U.S. market was five years ago and that Khiron sales are just starting to pick up speed.

On average, 10,000 monthly medical consultations are conducted through Khiron’s wholly owned medical clinics.

Sales are booming, as evidenced by the 50% compound monthly growth rate in paid prescriptions since April 2020.

Khiron is growing a regional network of clinics and physicians to serve as the primary distribution channel.

And the strategy is working…

In Khiron’s two Latin American satellite clinics, 80% of consultations are yielding paid prescriptions. In the company’s two flagship clinics, nearly 25% of consults are leading to a prescription.

And the company can meet the growing demand with a huge cultivation facility, which has a capacity of 480,000 square feet.

Like with my No. 1 cannabis stock for 2021, Khiron’s medical cannabis products have the GMP – good marketing products – designation. That’s a very important label for exporting products.

For a small company with just an $87 million market cap, the potential here is huge. And you can pick up shares of this company for well under a buck right now.

I suggest you do it.

Action to Take: Buy Khiron Life Sciences (OTC: KHRNF) up to $0.75. Use a 25% trailing stop on the position.

Tapping Into the Biggest Legal Cannabis Market

The second company I’ve targeted could be an even bigger opportunity. It trades for a little more than $1.00 right now.

But I doubt that’ll be the case for long…

This company is positioned to become a preferred supplier for Mexico.

PharmaCielo Ltd. (OTC: PCLOF) cultivates, processes, produces and supplies medical-grade cannabis-related products to large distributors, including pharmacies, medical clinics and cosmetic companies.

Although headquartered in Toronto, the company’s principal (and wholly owned) subsidiary is PharmaCielo Colombia. This is where the company’s huge cultivation and processing operation is located.

PharmaCielo is Colombia’s largest combined medical cannabis grower and processor.

The company serves Canada, Colombia, Italy and Mexico. However, with the recent legalization for recreational use, Mexico has become the focus.

PharmaCielo has been providing medical cannabis products to Mexico for the past three years.

Now, with the legalization of recreational marijuana, Mexico has suddenly become the largest legal cannabis market in the world.

Some estimates put its value at $3.2 billion. I think it could be much bigger than that.

We saw a 61% increase in cannabis sales in the United States in 2020. That’s huge. And I believe that trend will continue south of the border. The Mexican market could take off like a rocket.

And because PharmaCielo has already been selling medical cannabis in Mexico, it has established relationships and operations. These can be rapidly upgraded to handle the increased demand from recreational users.

The Business-to-Business Titan

I recently talked with PharmaCielo’s chief corporate officer, David Gordon, about the global cannabis markets and the exciting developments taking place for PharmaCielo.

PharmaCielo has been below the radar of most investors. But Gordon thinks that is all about to change with the legalization of cannabis in Mexico. Here’s why…

PharmaCielo not only is one of the largest cannabis companies in South America but also owns one of the largest cannabis operations on the planet.

And Mexico is about to kick corporate growth into high gear…

Through its joint venture with Mino Labs, a Mexico-based specialty pharmaceutical company, PharmaCielo is in a perfect position to become a primary supplier of choice.

PharmaCielo is on track to receive Mexican GMP certification within the next three months.

That’s important because PharmaCielo is a business-to-business provider. It works with large manufacturers. The coveted GMP designation tells manufacturers that PharmaCielo uses industry-leading processing and provides the highest possible levels of purity.

PharmaCielo’s in-country operation and upcoming GMP certification provide a big first-mover advantage over other suppliers.

I liked PharmaCielo even before Mexico legalized adult-use.

The company has many things going for it…

• In November 2020, the company entered into the U.K. market for the first time with its initial CBD and THC shipments for the medical cannabis market.

• GMP certification in Colombia is expected any day now.

• It was recently named a “project of national strategic interest” by the Colombian government. That means it receives federal support in recognition of its importance to the nation.

• The company has expanded its product line from one product in 2016 to eight CBD- and THC-concentrated products currently.

• It has a state-of-the-art processing facility in Colombia.

• The “all-in” operating cost to produce dried cannabis is $0.05 – one of the lowest operating costs in the industry.

• In August 2020, the company doubled its cultivation acreage to 2.6 million square feet.

Late last year, PharmaCielo entered a strategic alliance with AssuredTrans Inc., an independent provider of cannabinoid extract testing, verification and insurance. The alliance provides U.S. cannabis buyers with a guaranteed independent product quality and specifications insurance when purchasing from PharmaCielo.

In Europe, the United Nations Commission on Narcotic Drugs removed cannabis from the narcotics drug list. The move is expected to accelerate acceptance and legalization of cannabis in many jurisdictions around the world.

PharmaCielo is operating in the red, but it’s making big strides in increasing revenue and lowering losses. In 2019, total revenue was $786,901 compared with $0 in 2018. Its net loss in 2019 was $7 million compared with $31.6 million in 2018.

Business was beginning to boom in the first half of 2020. First quarter revenue was $514,409. Second quarter revenue shot past the million-dollar mark to $1.23 million!

But the global economic shutdown due to the COVID-19 pandemic finally caught up with PharmaCielo. In the third quarter, revenue was just $25,913 (as of this writing, fourth quarter numbers had not yet been released).

Since receiving its Colombian manufacturing license in 2016, the company has rapidly become a key player in the international medical cannabis sector.

Rather than grow through costly acquisitions, PharmaCielo has established partnerships and agreements in countries on the leading edge of cannabis legalization.

The strategy was just beginning to pay off, as evidenced by PharmaCielo’s revenues in the first and second quarters of 2020. Had it not been for COVID-19, revenues, income and the share price would have been off to the races.

With COVID-19 vaccine distribution increasing around the world and more countries opening up, combined with cannabis legalization expanding, it’s only matter of time before PharmaCielo’s stock price skyrockets.

Action to Take: Buy PharmaCielo Ltd. (OTC: PCLOF) up to $2.40. Use a 25% trailing stop on the position.

These two small cap stocks could be the titans of tomorrow.

Cannabis is a global opportunity – one that I think will reach $200 billion by the end of the decade.

The U.S. market is booming and is the largest opportunity… for the time being.

But Mexico is now a huge opportunity.

Several European countries are on the verge of legalizing cannabis. Many Latin American countries are loosening or removing restrictions.

And in many countries around the world, there’s a growing open-mindedness and acceptance regarding cannabis.

Cannabis is not just an American or Canadian opportunity. More than two dozen countries have already legalized it in some form or another.

This global cannabis market is one I think all cannabis investors need to start building stakes in now.