Should You Buy MedMen Enterprises in 2019?

The marijuana industry had an absolutely magnificent 2018, with major milestones throughout North America.

To our north, Canada became the first industrialized country, and only the second country overall aside from Uruguay, to have legalized recreational cannabis. Even though it’ll take a couple of years for the industry’s capacity expansion to be completed, this legalization should result in billions of dollars in added annual sales flowing into the pot industry. In other words, it legitimizes marijuana as a viable business model.

More validity was seen in the United States, where the U.S. Food and Drug Administration approved its very first cannabis-derived drug and President Trump signed the Farm Bill into law. The Farm Bill gives the green light to hemp and hemp-based cannabidiol (CBD) production. CBD is the nonpsychoactive cannabinoid best known for its perceived medical benefits.

With so many positives, you might be surprised to learn that marijuana stocks performed quite poorly in 2018. One such company that roared out of the gate but limped across the finish line is upscale dispensary operator MedMen Enterprises (NASDAQOTH:MMNFF). Over the trailing three-month period, shares of MedMen have fallen 23%.

Since this is one of the more visible names in the U.S. cannabis movement, the big question has to be: Should you buy MedMen in 2019? With valid arguments to be made from both sides of the aisle, let’s have a closer look.

The “Apple of cannabis” belongs in your portfolio

Without a doubt, the most intriguing reason to add MedMen to your portfolio in 2019 is because of its acquisition of privately held, vertically integrated dispensary PharmaCann. Since the interstate transport of weed isn’t legal in the U.S., per federal law, dispensaries like MedMen and PharmaCann need to also operate grow facilities in the states in which they have retail stores. This creates a vertical supply chain and helps to internalize costs while also keeping MedMen, PharmaCann, and other operators compliant with all applicable laws.

The $682 million deal, which would be the largest U.S.-based pot acquisition if it were to close, will combine MedMen’s…

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