Origin House Stock: The Best Long-Term Play in the Pot Industry?

Looking to Make Long-Term Profits From Pot Stocks? Read This

The cannabis industry is known for delivering massive gains in a relatively short period of time. Looking around, it’s not hard to find pot stocks that have doubled in the last two years.

But while short-term gains are nice, it’s not exactly clear how these soaring pot stocks would fare in the long run. And to be honest, that long-term uncertainty is one of the reasons why we see so much volatility in marijuana stocks.

There are many cannabis companies with solid growth rates right now, but not all of them will be winners when the market matures in the long term. The blunt reality is that, while a pot stock can make a double-digit advancement in a single day, it may also take an equally large tumble in the next trading session.

And speaking of soaring pot stocks, one of investors’ favorite types of business in the pot industry is growing cannabis. Think about it: the demand for weed is very strong right now, so producers don’t seem to have any problem selling their harvest.

At the same time, many marijuana growers are also expanding their production capacity, so there’s hope that in a few years’ time, their sales figures would be multiple times of what they are earning today.

As a matter of fact, the most established and most well-known pot stocks in the current market, such as Canopy Growth Corp (NYSE:CGC), Tilray Inc (NASDAQ:TLRY), and Aurora Cannabis Inc (NYSE:ACB), tend to be in the marijuana growing business.

However, as I mentioned earlier, it’s not going to be just sunshine and rainbows for every pot stock in the long run. At some point down the road—especially when regulations become more pot friendly—marijuana could be just like any other commodity.

And once supply and demand reaches an equilibrium, the largest profits may not be made by the growers. Instead, brands that manage to differentiate themselves from the rest could be the biggest winners.

There are already industries where this has become a reality. For instance, in the tobacco business, companies that own big brands like “Marlboro” are reaping the biggest profits rather than the tobacco farmers.

Of course, it’s yet to be seen which brands will become the “Marlboro” of the marijuana industry. But I think at this point, it makes sense to check out a company that focuses on the branding side of the cannabis industry: CannaRoyalty Corp (OTCMKTS:ORHOF, CNSX:OH), which now goes by its business name Origin House.

Origin House Stock Deserves Investor Attention

Origin House/CannaRoyalty is a cannabis brands and distribution company headquartered in Ottawa, Ontario, Canada.

While Origin House is listed on the Canadian Securities Exchange, it is deeply rooted in the state of California. The company delivers more than 130 branded cannabis products from over 50 brands to licensed dispensaries in the “Golden State.”

The company’s strategy can be reflected in its business name change last October. By registering “Origin House” as its business name, the company aims to become “the preeminent global house of cannabis brands.” (Source: “CannaRoyalty Announces Business Name Change to Origin House: The Home of Origin for Global Cannabis Brands,” Origin House, October 22, 2018.)

Today, Origin House boasts 70% storefront dispensary penetration in California. And thanks to its acquisition of Canadian vape product retailer 180 Smoke, the company has expanded its presence internationally.

Origin House (OTCMKTS:ORHOF) Stock Chart

Chart courtesy of StockCharts.com

ORHOF is not the hottest name in the pot industry, but the company does grow its business at a rate that’s comparable to some of the highest-flying weed stocks.

In the first quarter of 2019, Origin House generated CA$11.2 million in revenue, marking a staggering 1,635% increase from the CA$0.6 million earned in the same period a year ago. On a sequential basis, revenue growth was 41%. (Source: “Origin House Announces Record Quarterly Revenue of $11.2 Million for the First Quarter of 2019; Sequential Growth of 41% from Q4 2018,” Origin House, May 29, 2019.)

At the same time, Origin House achieved a gross margin of CA$1.7 million in the first quarter of 2019. This represented anther huge improvement because in the year-ago period, the company’s gross margin was negative.

Analyst Take

Now, before you take out your wallet, here’s an important thing to note: Origin House has agreed to be acquired by Cresco Labs Inc (OTCMKTS:CRLBF, CNSX:CL), a vertically integrated cannabis operator headquartered in Chicago.

So any investment decision regarding Origin House—a cannabis brands company with solid long-term potential—should also factor into the pending merger between the two companies.