2 Good Reasons to Look at Aurora Cannabis (NYSE: ACB)

Written by Jeff J.

May 29, 2019

Valuable partnerships are forming and attention of smart institutions all bode well for Aurora Cannabis. 

Aurora Cannabis, like most Pot Stocks, has received a lot of media attention these days. They reported earnings and announced a major multi-year Global Partnership with the UFC. While there are many pot stocks to choose for investment, here are 2 compelling reasons Aurora is worth a deep look.

1)    UFC Partnership

One of the criticisms of Aurora is that it has yet to see a major investment or partnership from a flagship player. Constellation Brands (NYSE: STZ) bought 38% of Canopy Growth (NYSE: CGC), Phillip Morris (NYSE: MO) bought a minority stake in Aphria (NYSE: APHA) and Cronos (NYSE: CRON). But what about Aurora? Enter the UFC.

The UFC partnership opens a whole new avenue of growth and brand awareness for Aurora. The UFC and Aurora will do clinical studies on the effects of hemp-derived CBD on athlete performance and recovery. The UFC Performance Institute is a $14 million facility based in Las Vegas which focuses on best science-backed practices for fighter health and injury reduction. The UFC has an incentive to keep fighters fighting for the immense fanbase. This partnership will help to establish CBD and Aurora’s products as an industry leader in one of the most physically demanding sports in the world.

Advertisements

No marijuana company matches the global footprint of Aurora and there are few sports that have the worldwide appeal of the UFC. Dana White, President of the UFC, is prone to saying that no matter where you are in the world, everyone wants to know who the toughest man or woman in the world is. The UFC boasts 300 million fans across 170 countries. While Aurora is in only 24 countries, no other competitor comes close to that number. Aurora is best positioned to take advantage of the UFC’s fan base increasing awareness of CBD in athletes.

The UFC athletes are also strictly tested to World Anti-Doping Agency (WADA) standards for performance-enhancing substances and illegal drugs. WADA recently lifted CBD from the banned substance list, allowing professional athletes all of the world to use it. Fighters to Olympians can now enjoy the benefits of CBD with no worries of losing their eligibility to compete.

2)    Wall Street is Bullish and Hedge Funds are Buying

More Wall Street banks are getting over the social stigma of covering Pot stocks and many investors are getting over the stigma of investing in them. Currently, 6 banks including Jefferies, Cowen and most recently Bank of America have initiated coverage. 5 out of 6 have a BUY rating and an average price target of $14.58.

While some may balk at Wall Street recommendations as biased and perpetually bullish, institutional investors vote their opinions with their dollars. Institutional Investors tend to lag Wall Street recommendations. In other words, they move after they have read the reports and spoken with the analyst and company directly. Very few private individual investors will have the access of information that professionals have at their fingertips. Chances are, they have the personal phone number of not only the analyst, but the C suite.

Institutional buying of Aurora Cannabis is seeing an uptick. Key shareholders have already included pension funds (known to be very long term oriented) Westcap Management and Northern Trust. Recent 13F SEC filings also show that noted hedge funds Citadel Asset Management and Renaissance Capital are new shareholders as well. Interest will continue to grow as institutional investors digest where their peers are investing.

So what do you think? Is Aurora Cannabis’s stock set to grow higher? Or will it go up in smoke? Drop us a line in the comment box.

NYSE:ACB Stats as of May 29, 2019

  • Closing price: $8.12
  • Market cap: $8.33B
  • P/E (TTM): 37.59
  • EPS (TTM): $0.22

DISCLOSURE

I/we own shares of stock in ACB, CRON, and MO

Except for Wolves of Investing, I/we are not receiving any compensation from and do not have any business dealings with any companies discussed in this article.

stock of the month results

Every month I pick a stock that I believe has long-term potential to beat the market.

download my free investment ebook

Learn some of the tips that I wish I had known before I started investing.

Videos on stock investing

Check out our 'One Stock at a Time' video series and gain valuable insight to investing.

Leave a Reply

avatar
  Subscribe  
Notify of

Jeff J.

Jeff J. is a guest blogger on Wolves of Investing. He spent nearly a decade on Wall Street trading floors where he was a Vice President. His most recent firm was Goldman Sachs.

Connect with Jeff on LinkedIn!

Pin It on Pinterest

Shares
Share This