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3 Stocks to Watch Now: Hemp Leading the Way into a New Industrial Revolution

Stocks mentioned in this report: Levi Strauss & Co. (NYSE: LEVI), Canopy Growth Corporation (NYSE: CGC / TSX: WEED), Tilray, Inc. (NASDAQ: TLRY), Aurora Cannabis Inc. (NYSE: ACB / TSX: ACB), Ecofibre Limited (OTC: EFRBF), Elixinol Global Limited (OTC: ELLXF), and Hemp, Inc (OTC: HEMP)

This is Part 2 of a 2-part series on hemp. For Part 1, click here.

In Part 1 of this series, I explained the future of hemp and more specifically, the opportunities that exist in cannabinoids (CBD) and why hemp / CBD could be bigger than marijuana!

In this specific article, I provide you with the industrial applications that hemp can both contribute to or totally replace!

 

After almost a century of crushing criticism, misinformation and legal imprisonment, hemp is finally on its way back to a rightful place in our economy.

With the signing of the 2018 US Farm Bill, hemp is now being rediscovered for its incredible number of uses in both medicine and industry.

Welcome to the second part of my two-part article on industrial hemp. If you missed the first part, you can click here to read about CBDs produced from hemp and the current investing environment surrounding this sector.

Right now, I’m going to talk about other uses for hemp outside of the well-known CBD (cannabidiol) applications that are currently being researched, produced and hyped across North America. There is far more to the hemp plant than you realize!

 

Hemp Ultimate Usage Could Be Much Larger Than Marijuana

Industrial hemp, the plant that is now legal to grow, farm and produce in the US, has on average a miniscule  0.3% THC (tetrahydrocannabinol). It will not get you stoned or high.

In short, the hemp plant is part of the cannabis family and a cousin of marijuana, the plant famous for giving its users the munchies and red eyes.

Hemp was mistakenly lumped together with the psychoactive marijuana plant when the anti-drug crusades were raging and made illegal starting in the 70s thanks to then President Nixon.

 

Hemp’s Applications Are Bigger Than Just Extracting CBD

CBDs get all the fanfare and investor stampedes, but that is only part of the hemp picture. There are many investment opportunities in hemp outside of the worn out CBD discussion. Prepare to learn about the many applications of hemp that could affect our future!

Hemp produces a large number of CBDs (cannabidiol) uses in medicine, skin lotions and even the beverage market. Most savvy investors already know about the investment opportunities in the CBD market.

 

But what about the rest of the hemp plant?

Industrial hemp has thousands of applications, with many more yet to be discovered now that the plant is available to scientists for research.

According to a 1938 article in Popular Mechanics, at that time, there were over 25,000 uses for the hemp plant. With the increase in technology, knowledge, manufacturing, etc., experts now estimate that with whole plant utilization, the hemp plant actually could have around 50,000 uses![1]

Industrial hemp can be used for textiles, car parts, pet supplies, biofuel, food, construction materials, and biodegradable plastic.

 

“Everything from our vodka to our cars is waiting to be reimagined in the future with legal hemp. Many people won’t even realize how much their lives are affected by cannabis-based products.”
— Andre Bourque, Forbes[2]

We are quite literally on the forefront of discovering what this extraordinary plant can do. The possibilities are just beginning to be known, which means there is unrealized potential for forward thinking investors positioned in the industrial hemp market.

Many of the products that can be produced from hemp are still in the R&D phase. In my opinion, in the next few years, we could see an explosion of hemp-related manufacturing processes and products that will be available to multiple industries and ultimately the end consumer.

The below illustration details some of the more popular uses of hemp.

 

 

Hemp Seeds Fuel a Desired Food Source

Hemp seeds contributed to the largest segment of the market with more than a 45% share in 2018, and are expected to witness a CAGR of 13.4% through 2026.[3]

The market dominance of seeds can be attributed to increasing demand in various applications including food and beverages.

Hemp seeds can be used in a variety of recipes. They taste like nuts and add flavor to many dishes. They contain a large amount of protein and calories. A 100-gram portion of hulled hemp seeds, for example, supplies 586 calories and 64% of the Daily Value (DV) of protein!

 

Health Focus Driven by Consumers: Hemp Seed Oil

Organic hemp seed oil is a rich source of Omega-3 and Omega-6 fatty acids in the ideal ratio of 3:1. This combination is perfect for human nutrition and is well-established to support our heart and cardiovascular functions. The fatty acids presented could also promote biological processes and are believed to be capable of preventing several degenerative diseases.[4]

Hemp seed oil contains a 3:1 ratio of vitamins and other nutrients. Because of the omegas and vitamins, hemp oil is arguably excellent for your hair, skin, and general health.[5]

The cosmetic industry is estimated to witness a growth rate of from 2018 to 2026 owing to the high fatty acid content of the hemp product. While no scientific proof has been demonstrated, consumers are all over hemp-based products which includes CBD based ingredients.

For example, cosmetic products comprising hemp seed oil that could lessen skin discomfort by soothing and repairing dry or damaged skin and also assist in slowing down the aging process, which in turn, is projected to stimulate market demand.[6]

 

Important Hemp Fibers to Set a New Upcoming Paradigm

Hemp fibers contributed to the largest market share with around 40% of the hemp market in 2018 attributed to increasing demand from the textile industry.

When hemp is compared to cotton, hemp wins hands down (even when compared to environmental demands)

  • Hemp produces twice as much fiber as cotton
  • Hemp fibers are more durable than cotton
  • Hemp takes less water to grow
  • Hemp is grown virtually pesticide free

The famous Levi Strauss jeans now come in a hemp/cotton blend denim.

Levi Strauss & Co. (NYSE: LEVI) jeans has now come out with two products using hemp fiber blended with cotton: their iconic jeans and a jacket.

This was a significant research project that took years to develop.

Paul Dillinger, Head of Global Product Innovation, explained to Business Insider that rather than a project that only results in a couple of high-end, niche products, they are looking to convert their entire line to a hemp blend fabric. Wow, this is huge news and a solid affirmation for hemp derived industrial fabrics!

“Our intention is to take this to the core of the line, to blend it into the line, to make this a part of the Levi’s portfolio.”
— Paul Dillinger, Head of Global Product Innovation, Levi Strauss & Co[7]

Dillinger said that the need for cotton alternatives became apparent when looking at the growth trajectory of cotton demand compared to access to fresh water required for its cultivation and processing.[8]

As an example of new research into hemp just recently being discovered, Levi’s used the manufacturing process from a European company doing cutting-edge research into hemp, where industrial hemp was already legal in many countries.

 

Hemp Building Materials Could Prove Positive

The inner core of the hemp plant is being used in various building materials. The material appears to still be in an R&D phase, at least according to my research.

Hempcrete is a bio-composite that is made of the inner woody core of the hemp plant (which is the majority mass of the stalk) and mixed with a lime-based binder. The hemp core or “Shiv” has a high silica content which allows it to bind well with lime.

The result is a lightweight cementitious insulating material weighing about a seventh or an eighth of the weight of concrete.

Insulation board and hemp-wood are also being experimented with in construction.

I was not able to find any public companies currently working with hemp building materials, but I will keep my eye on this sector for new developments.

 

Hemp Based Plastics Could be The Future

Hemp plastic is better than petrochemical derived plastic for several reasons.

  • Doesn’t have any of the ‘ene’s’ such as Toluene and benzene, which are the most toxic byproducts of plastics that are produced from hydrocarbons
  • Can be engineered to biodegrade into much less harmful compounds than ones found in hydrocarbon-based plastics
  • Carbon neutral: The hemp plant pulls in CO2 as it grows. The plant is used to produce plastics. When the plastic is no longer usable, it will go to a landfill where it biodegrades and releases the carbon into the soil
  • Lighter than steel that can withstand 10 times the impact without denting[9]

Ford Motor Company had over 40,000 hemp vehicles on the road in 1941.

Hemp is already being made into compressed door panels and dashboards. Carmakers such as Ford, GM, Chrysler, Saturn, BMW, Honda, and Mercedes are currently using hemp composite door panels, trunks, headliners, etc.

The reason why virtually all European car makers are switching to hemp-based car parts is because the organic hemp-based products are lighter, safer in accidents, recyclable, and more durable.[10]

Henry Ford was a big proponent of hemp-based plastics and actively researched using hemp to build cars and use the hemp oil as fuel.

In 1941 he had over 40,000 hemp vehicles on the road!

Check out this 30 second video of the Ford Motor Company hemp car in action.

Yes, that is an axe!

 

 

It’s All About Paper

75–90% of all paper in the world was made with hemp fiber until 1883.

The Gutenberg Bible, Thomas Paine’s pamphlets, and the novels of Mark Twain were all printed on hemp paper. In the UK, the Magna Carta was printed on hemp paper.

Both the US Constitution and the Declaration of Independence were drafted on hemp paper.

Hemp paper does not yellow, crack, or otherwise deteriorate like tree paper does.

Hemp paper also does not require any bleaching, and so it does not poison the water with dioxins or chlorine like tree paper mills do.[11]

One acre of hemp can produce as much paper as 4 to 10 acres of trees over a 20-year cycle, but hemp stalks only take four months to mature, whereas trees take 20 to 80 years.[12]

Living Tree Paper Company (private) out of Oregon is making a hemp-blend paper that is now being sold in 1,000 Staples stores across the country.

While hemp was recently legalized by the 2018 Farm Bill, there’s still not enough raw hemp material available to replace all of our uses for trees. While this will change, the technology for mass-producing the kinds of paper we’re used to buying, like printer paper, are still being perfected.[13]

 

Biofuels Are Another Byproduct of Hemp

Hemp biodiesel comes from the pressing of the hemp seeds to extract the oil.

Hemp can provide two types of fuel.

  1. Hemp biodiesel — made from the oil of the (pressed) hemp seed
  2. Hemp ethanol/methanol — made from the fermented stalk

The research I found was totally mixed on the viability of hemp-based biofuels. While touted by some as a godsend, others did not share the opinion when compared side-by-side with other sources of biofuel production such as corn ethanol, for instance.

It should be noted though that hemp seed diesel was used in the Ford Motor Company car, talked about above.

 

Energy Storage Supercapacitors; Could this be Real?

Outperforming standard supercapacitors up to 200 percent, hemp-based supercapacitors could be the future of green technology.

Today’s supercapacitors commonly use graphene, a carbon nanomaterial to create electrodes. But making graphene costs up to $2,000 per gram.

In 2013, researchers at the University of Alberta National Institute for Nanotechnology found a more economical material in hemp.

These scientists discovered how to process raw hemp hurds (the plant’s woody core) into activated carbons through hydrothermal processing and chemical activation.

The final product is one that’s able to soak up more electricity, providing better energy capacity. The solution produces not only a cheaper material — $5,000 per ton — but one that performs up to four times better than graphene.[14]

 

Over $16 Billion Estimated Market for Industrial Hemp By 2026

The valuation for the industrial hemp market in 2018 was $4.63 billion. Driven by explosive growth in hemp-based consumer products, the global hemp market is expected to jump to $16.76 billion by 2026 with annual growth at a rate of 17.0%.[15]

“I happen to think that the global hemp market could easily be bigger than the cannabis market. When you start to look at the paper market, the textile market for cotton, the plastics market on a global scale, you realize that these are industries that dwarf what could be the cannabis market on a global basis.”

— Leslie Bocskor, investment banker and president of cannabis advisory firm,
Electrum Partners[16]

 

 

 

Strategic Acquisitions: The Big MJ Companies See the Writing on the Wall

The marijuana sector has taken it on the chin in the last number of months with investor confidence at an all time low.

With the enormous rise and overbloated market valuations experienced in the marijuana market, there is a limit being exposed to the hyperbole and those that appear to be fast approaching a saturation point to supply traditional flower products to the market, most especially in Canada where Cannabis is legal.

The answer? Pivot into marijuana’s cousin, and that means hemp!

Canopy Growth Corporation (NYSE: CGC / TSX: WEED) made waves with the announcement in January that it’s building a large-scale hemp production facility in New York (state). The company expects to have hemp cannabidiol (CBD) products on the market by the end of this year.[17]

Tilray, Inc. (NASDAQ: TLRY) jumped headfirst into the hemp market soon after Canopy’s announcement with its acquisition of Manitoba Harvest, the leading hemp foods company in North America.[18]

Canadian cannabis company Aurora Cannabis Inc. (NYSE: ACB / TSX: ACB) announced that its acquisition of Hempco Food and Fiber Inc. closed at a valuation of around $47.4 million.

The two companies have been working together since 2017. Hempco, a Vancouver-based maker of hemp-based foods, hemp fiber, and hemp nutraceuticals, was also supplying Aurora with raw hemp for extracting CBD.[19]

With Hempco expanding its capacity to be able to produce 2.9 million kilograms of cannabis annually, the deal gives Aurora a solid launching pad for the North American hemp CBD and industrial hemp markets. This is getting exciting!

Aurora took several major steps to build up its global hemp business in 2018. The company acquired Agropro, Europe’s largest producer, processor, and supplier of certified organic hemp and hemp products. At the same time, Aurora acquired Agropro’s sister company Borela, which processes and distributes organic hulled hemp seeds, hemp seed protein, hemp flour, and hemp seed oil.

You can see where the focus and money is moving. Hemp and more specific, CBD,  is the next part of the green wave that could hold awesome future gains for investors.

 

3 Hemp Companies to Keep on Your Radar That Represent the Future!

As an investor, you should understand that using hemp outside of CBD products is still bleeding edge technology. After decades of banishment and lack of research, companies are just beginning to discover novel and commercially viable uses for the plant.

There are NOT a lot of pure hemp plays out there, at least from what I could find in my research.

I found two startups that look promising. They are actively pursuing research into new products that can be brought to market in the coming years.

I also included one of the big MJ companies which is actively working with hemp in the US.

The marijuana market, and subsequently the hemp market, has taken a beating these past couple of months. In my opinion, it is best to do your research, find good candidate companies and time your entry well. I believe that hemp company stocks will recover faster as they have much more to offer commercially and the market is so much larger.

All that said, below are the three picks I found that look promising as investment opportunities and should be placed on your watch list immediately.

 

HEMP STOCK #1:

Ecofibre Limited (OTC: EFRBF /ASX: EOF)

Ecofibre is already well-established in the US wellness market and produces a number of popular CBD-based topical creams, salves, and nutraceutical products for humans and animals.

According to the company website, the business is comprised of four divisions:

  • Ananda Hemp: provides the highest quality, legal, over-the-counter hemp flower extract
  • Ananda Food: grown and processed hemp-based foods
  • Hemp Black: is their industrial use business that focuses on highly innovative solutions across a wide spectrum of consumer markets to include fashion, leisure wear, healthcare, composites and building materials
  • Ananda Professional: CBD oil product line created specifically for the needs of independent pharmacies and healthcare professionals

Hemp Black is the part of the business that really caught my eye. They are working exclusively in hemp R&D. It’s the exciting moneymaker, in my opinion.

According to the company website:

“We invest heavily in research and innovation because we believe the hemp industry is only in its infancy, and Ecofibre is focused on a long-term sustainable business model. We are proud to partner with the top thought leaders in the industry to explore and develop new ways to use hemp in nutraceutical, industrial and consumer products.”[20]

Check out Hemp Black’s cool video on technologies in development below.

 

 

HEMP STOCK #2:

Elixinol Global Limited (OTC: ELLXF / ASX: EXL)

Elixinol Global, which operates in the industrial hemp, dietary supplements and emerging medicinal cannabis sector, comprises three separate companies.

Elixinol US is the main business unit. The company manufactures and distributes hemp-based dietary and skincare products to the US market and exports to another 40 countries globally (including the first-ever CBD-based product to Japan in mid-2018).

The company also expanded its US operations further this year, after acquiring a 25 percent stake in Altmeds LLC, the creators of the market-leading Pet Releaf hemp-based CBD pet line. According to sales figures, Pet Releaf accounted for roughly 65 percent of the pet market’s CBD product sales in 2018.[21]

They have launched a bioplastics company, the Hemp Plastic Company, to use the waste from CBD production to form hemp plastic polymers.

“Initially I thought your small early adopters would be our market… but we didn’t realize what the response would be from the big guys. We’re being embraced by large companies with multimillion unit orders.”

— Paul Benhaim, CEO of Elixinol[22]

The other two companies both operate out of Australia. Hemp Foods Australia sells hemp foods and seeds via both a retail network and wholesale channels. This division of the company produced over $2 million in revenue in the first 6 months of 2018.[23]

And finally, there is Elixinol Australia, a late-stage medicinal marijuana applicant, that will be looking to produce premium medicinal marijuana for the emerging Australian medicinal market. This division is just getting off the ground and could reach a valuation of $100 million when fully up and running..[24]

 

HEMP STOCK #3:

Canopy Growth (NYSE: CGC / TSX: WEED)

Any savvy investor is already familiar with Canopy Growth. They have taken a big hit on their stock price over the last few months, but the company is actively diversifying their business interests outside of recreational marijuana and into the US hemp CBD market.

In January 2019 they were awarded a hemp-processing license in New York State where they will invest up to $150 million into a hemp processing facility.. They also scooped up Colorado-based ebbu, Inc. in October 2018 which holds multiple patents in CBD derivative production (e.g., cannabis-infused beverages).

According to Canopy, “Hemp is an excellent source of low-cost CBD, and by leveraging our expertise in hemp farming and cannabinoid extraction, our hemp division is uniquely positioned to take advantage of the proposed regulatory changes that will allow the collection and processing of CBD from hemp.” [25]

 

Hemp: The Next Step or Pivot for Investors in Future Green Wave Stocks

The continued maturation of the cannabis industry, and subsequent recent sell-off of recreational marijuana stocks is leading companies to reevaluate new opportunities to expand into.

Industrial hemp is a logical choice as it promises blue sky potential in product development that recreational marijuana never could. This assumption is based on both the multiple health benefits associated to CBD content, but also the industrial applications that the entire hemp plant could provide.

The industrial hemp market space is an exciting new area of product development and research. The next few years will bring us new and exciting choices when it comes to the blended clothing we wear, the raw materials that encompass the cars we drive, the paper we write on, the recognized and healthful food we eat, the natural medicinal alternatives we are prescribed and the wellness products we use.

Sign-up now and stay tuned to FNN updates as this story continues to develop!

MF Williams, Contributor
for Investors News Service

P.S. To discover more opportunities in the hottest sectors in North America, sign up now to the Financial News Now newsletter to get the latest updates and investment ideas directly in your inbox!

DISCLAIMER: Investing in any securities is highly speculative. Please be sure to always do your own due diligence before making any investment decisions. Read our full disclaimer here.

Published November 2019

Sources:

[1] https://www.lvginc.com/blogs/blog-1/investing-in-hemp

[2] https://www.forbes.com/sites/andrebourque/2018/12/17/how-hemp-and-the-farm-bill-may-change-life-as-you-know-it/#e30f252694ce

[3] https://finance.yahoo.com/news/industrial-hemp-market-reach-usd-154050638.html

[4] https://www.reportsanddata.com/report-detail/industrial-hemp-market

[5] https://www.namaste.com/blog/hemp-oil-vs-cbd-oil-what-is-the-difference/

[6] https://www.reportsanddata.com/report-detail/industrial-hemp-market

[7] https://www.businessinsider.com/levis-investing-in-hemp-as-a-cotton-alternative-2019-5

[8] https://www.businessinsider.com/levis-investing-in-hemp-as-a-cotton-alternative-2019-5

[9] https://www.forbes.com/sites/andrebourque/2018/12/17/how-hemp-and-the-farm-bill-may-change-life-as-you-know-it/#756b660a694c

[10] http://www.cannopycorp.com/hemp-plastics.html

[11] https://cbdoiled.com/hemp-paper/

[12] Ibid.

[13] https://ministryofhemp.com/blog/hemp-paper/

[14] https://ministryofhemp.com/blog/hemp-supercapacitors/

[15] https://www.alltheresearch.com/report/156/industrial-hemp-market

[16] https://www.benzinga.com/markets/emerging-markets/17/05/9405826/why-hemp-could-be-the-future-of-plastics

[17] https://www.newcannabisventures.com/canopy-growth-secures-new-york-facility-for-hemp-industrial-park/

[18] https://www.businesswire.com/news/home/20190220005260/en/Tilray%C2%AE-Acquire-Manitoba-Harvest-World%E2%80%99s-Largest-Hemp

[19] https://finance.yahoo.com/news/why-aurora-cannabis-could-become-180000920.html

[20] https://ecofibre.com/about/

[21] https://thegreenfund.com/our-top-4-hemp-stocks-for-2019

[22] https://finance.yahoo.com/news/one-largest-cbd-company-ceo-204556801.html

[23] https://thegreenfund.com/elixinol-the-sleeping-giant-of-the-hemp-market

[24] https://thegreenfund.com/are-the-tides-turning-in-the-booming-hemp-industry

[25] https://www.canopygrowth.com/products/

MF Williams

MF Williams graduated from the University of California at Davis, and became involved in banking and finance working for BNP Paribas North America in New York City. He soon found his true passion in small and microcap sector stocks, with their dramatic potential for upside growth. With over 18 years of experience analyzing and researching emerging small cap public companies, his insight and skill set are unmatched.