Dear Mr. Berko: I’ve invested off and on in about a dozen pot stocks and lost money each time. I’ve been looking at Aphria for three months and can’t make up my mind. What do you think?
— H.L., Wilmington, N.C.
Dear H.L.: I don’t know enough about the cannabis industry to pick a winning pot stock from the many hundreds trading between pennies and a few dollars. These issues are pushed by bucket shop brokers whose commissions are 50 percent of what the stock sells for. Buyout and merger gossip is so capricious that many pot stocks trade up or down by 50 percent on any buyout rumor. In fact, there’s a rumor Boeing may take over a pot company and pass out product to flyers on its 737 MAX.
But Ian Gendler at Value Line thinks he has a handle on Aphria (APHA-$7.75), which began trading on the Big Board last year, just before Thanksgiving. Homeported in Canada, APHA, via partners and distributors, cultivates, processes and distributes quality cannabis products to users in several countries. Its products are professionally and carefully cultivated in a high-tech, gleaming, 300,000-square-foot pot farm in Ontario. And unlike most penny pot stocks held together by flimsy business models and dog patch yokel CEOs in bib overalls, APHA may be one of the top guns in this industry. Its officers and directors are serious businessmen, it elects a legitimate board of directors, and it uses a respected accounting firm.
This year, APHA expects to put about $150 million of consistently high-class product on the market (many pot firms produce varying and undependable product quality), and should earn a clean dime a share or total net income of $25 million. That’s a 16 percent-plus net profit margin. Gendler reckons APHA can increase revenues in 2020 to $555 million and report a profit of 30 cents per share or a total net profit of $90 million. And a billion in revenues may be just a few years off.
