Meet the Aurora Cannabis of U.S. Dispensary Stocks

The marijuana industry is evolving at an incredible pace. As recently as the midpoint of the past decade, no countries had given recreational weed the green light, and only a select few U.S. states had medical cannabis laws on their books. Today, two-thirds of all U.S. states have passed medical marijuana laws; 66% of the public supports a broad-based legalization, according to Gallup; and two countries have OK’d recreational pot sales, including Canada, which in October became the first industrialized country to do so.

As the marijuana industry ramps up, every company wants to be a leader. And when it comes to production, that company is Aurora Cannabis (NYSE:ACB).

Aurora Cannabis is attempting to run away from its competition

Rather than choosing to grow entirely from the ground up, Aurora Cannabis has been especially active among Canadian pot growers in acquiring capacity. Though some of its largest projects are organic builds, including the Aurora Sun project (1.62 million square feet) and the Aurora Sky campus (800,000 square feet), it paid about $2 billion to buy MedReleaf, $850 million for CanniMed Therapeutics, and $200 million for South America’s ICC Labs. MedReleaf was a particularly important purchase for Aurora as it brought the soon-to-be retrofitted Exeter facility into its portfolio, and boosted Aurora’s peak output by approximately 140,000 kilos a year.

All told, Aurora Cannabis management conservatively expects to top 500,000 kilos a year, with yours truly expecting more like 780,000 kilos annually by 2022. With the exception of Canopy Growth and its more than 500,000 kilos of forecast output, no other producers are even within a stone’s throw of Aurora’s potential yearly output.

Of course, investors are paying through the nose for this future production. Even with the highest current annual run rate (150,000 kilos) among marijuana growers, Aurora is still producing at what I suspect is less than 20% of peak capacity.

Say hello to the U.S. version of Aurora Cannabis

Cannabis companies want to emulate Aurora’s growth strategy, and one U.S.-focused vertically integrated dispensary stock — i.e., a dispensary operator that controls its cannabis supply chain — looks to be doing a pretty good job of it. Ladies and gentlemen, say hello to the U.S. version of Aurora Cannabis: Harvest Health and Recreation (NASDAQOTH:HRVSF).

To say that Harvest Health has been active on the acquisition front would probably be a gross understatement. Over just the past six months, Harvest Health has completed the purchase of, or announced acquisitions of…

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