I’ve avoided talking weed too much in our Investing is Awesome column because, earlier in the year, a lot of Canadian weed companies were seeing stock jumps on less than stellar business plans, and those sort of jumps are often short-lived and dangerous.
But this past week, on my Equity.Guru website, I mentioned a Canadian company called Tinley Beverage Company (TNY.C) that has quietly been working on a hemp-based drink that has been testing in California, duly flying under the radar of most investors. When I first mentioned it last week, you could have the stock for $0.06. Soon as I started talking about it, it started moving hard and fast.
Today, it’ll cost you $0.235.
<plug>That’s a four-bagger in a week, for those who check my site daily.</plug>
A lot of that came from a general lift in the weed sector with important US votes coming up, and a lot of it is based on news of a big new SKU in the Tinley lineup.
But it wasn’t always a buy. I’m not usually a big fan of the beverage business, because getting a product onto store shelves is a ruthless game for the sort of scoundrels that, a hundred years ago, would have been selling swamp real estate to seniors. But if you can make it work, there are undeniable fortunes to be made. Red Bull sold 6 billion cans last year, and is valued at over $5 billion. Not bad for a drink that tastes like kerosene.
Tinley is not Red Bull, but it has already surpassed 50 stores in its first month and may have an idea that can elevate it to a far higher valuation than its current $4.2 million. More on that in a moment.
What is Tinley and why should I care?
Before we get to the kicker, let’s back it up a little and see where Tinley came from. Originally, the company set out last year to produce hemp stalk-based CBD functional nutrition drinks. Which, yes, I know sounds about as appealing as cow pat salad, but technology is a wonderful thing and, frankly, so too is the nutritional makeup of hemp stalk.
For those who want the health benefit of the CBD found in high-quality weed but don’t want to smoke, or don’t have a license to buy bud, or fear they may get drug-tested at work, hemp stalk has ample CBD presence without the problem of being classified in the US as a class 1 drug. Plus the oils and vapes are being sold in all 50 states in regular stores, rather than being limited to dispensaries in the 4-5 legal rec states.
In the old days, hemp and cannabis oil were the basic medicines for just about everything. Then we got all reefer madness-y and let those ingredients become illegal and so here comes Tinley doing what EVERYONE did back in the day, making hemp a nationwide nutritional beverage again, instead of just something Woody Harrelson uses to make chinos.
Though they’re doing it with CBD-rich hemp stalk rather than from hemp seed, which is what virtually all other hemp food and beverage products are made from. Hemp seed may be a very healthy ingredient for its own reasons, but unfortunately for consumers guzzling these products, hemp seed doesn’t contain CBDs like Hemplify does.
Problem: Hemp tastes pretty hempy.
Solution: This product comes in two flavours – tropical punch and berry passion, rather than the old flavours our grandparents enjoyed, commonly known as ‘molasses puree’ and ‘roadkill surprise.’
Using some advanced wizardry and food tech, Hemplify doesn’t taste like garden waste, because it infuses oil-based ingredients into a water-based drink with tech that creates micelles, which preserve the structure of the hemp oil as it moves through your system, tricking your gut into absorbing more of it into the bloodstream. Translated: The good stuff does more good, and doesn’t taste like swamp.
According to the company, in taste tests in California, consumers have been surprised that Hemplify tastes more like a quality tasty beverage and less like a nutritional supplement.
Added bonus: It’s fortified with omega 3, vitamins and electrolyte potassium, it has no sugar, no GMOs, no gluten, and is vegan, which is completely on-trends with health-oriented consumers that are increasingly steering away from the pop aisle.
And when California votes to make marijuana fully legal on November 8, it’ll be a simple switch to turn Hemplify into BongHitify or BlowMyMindify or THCForDaysify. This makes Tinley one of only two Canadian-listed cannabis companies with a presence in the state, alongside Maple Leaf Grow World (MGW.V), and therefore a really strong option for playing the November ballot initiative.
But don’t let me come across as being all advertorial here: It’s worth repeating, retail is a rough business. You’ve got to secure bottling facilities, build sales networks, market your brand, make a brand that people will connect to and relate with and want to take home. You’ve got to lay out millions for all that sh..Wait.. I’m getting a call here from Hemplify that says Tinley outsources all production, which adds a few points to the expenses end of the balance sheet, but removes the multi-million dollar set-up bill that startup competitors face as a barrier to entry.
Tinley doesn’t have all its cash tied up in a factory, or is spending hundreds of thousands on a sales force. Its sales network is a 20+ person third-party group that goes out to a multitude of convenience stores, health food stores, dispensaries and the like, and takes a commission. The product is bottled the same way Coca Cola does it, by licensing out that work to others who’ve already made their multi-million dollar facility investments. Design is outsourced. Branding is outsourced. And staff-wise? Ultra small.
Plus on the branding side, they’ve started to delve into the minor celebrity world with Cody Simpson, Post Malone, and others holding the drink on their social feeds.
A photo posted by Gina Itor (@gina_itor) on
Jun 18, 2016 at 1:09am PDT
What this does is lessen risk. On the flipside, it also clips margin, meaning Tinley makes less per bottle sold – for now. But they’re okay with that in the early stages, as the margins are high to begin with and the product is still being tweaked and improved. That means small production runs keep costs down while allowing them to run tests in various markets, in various chain stores, and get instant feedback that can be used to tweak further.
Wanna try it? Buy some on Amazon, where you can also find customer reviews.
So this is all a good thing. What’s better?
Boozify.
Imagine, if you will, an alcoholic beverage that tastes like a Friday afternoon summer patio drinky, but instead of getting you drunk, it gets you gently stoned.
That’s phase II of Tinley’s big plan, in which they’re putting out three products – a Canadian whiskey, an Amaretto, and a Jamaican rum, that are de-alcoholized and infused with THC. It’ll taste like your favourite drink, and is in fact made from the actual spirits, but it’ll get you high instead of drunk.
This is great news for those who endure hangovers badly, or have problems with over-drinking, or would (like me) be happy to get stoned occasionally without actually smoking, and in polite company.
Tinley just released the news of this move last week and the stock price flew on the back of it. Admittedly, all weed stocks are on the move right now, but Tinley is hitting the ground with a newer, bigger plan at EXACTLY the right moment to take advantage of that rush.
I talked to Tinley boss Jeff Maser last Thursday, while the weed world was on an absolute tear, and I could barely hear him for the phones ringing in the background.
Maser tells me brokers are beating on his door, looking to get involved with the new plans, but that he’s not getting carried away.
“We’re currently doing test runs at a large convenience store chain and we’ve been picked up in 50 stores in 6 states, plus 2 major web stores, all in our first month,” he said. He added, “We believe the de-alcoholized drinks are a game-changer. Nobody enjoys someone busting out a joint at dinner, but now you could enjoy a drink with your friends and get a comfortable high instead of getting your drunk on.”
Maser’s right. Even just on novelty value, you’d have to think everyone is going to try that at least once. When the state votes to go recreational in November, Tinley will have their finger on the ‘launch’ button.
A photo posted by Hemplify (@hemplify) on
May 6, 2016 at 12:14pm PDT
MARKET UPDATE:
The thinking behind our Investing Is Awesome columns is that, instead of spending your money on what companies produce locally, you should consider investing your money in the local companies themselves.
Obviously investing in smaller companies with less of a track record can be risky, something we point out often, and as such we’ve had a few readers ask how the companies we’ve talked about have been doing.
The answer to that is, mostly great.
Some of the companies we’ve mentioned over the last few months, specifically companies in the resource sector (Integra Gold, Lithium-X, Lucara Diamond), have fallen 10-20% since we discussed them due to general sector drag. I maintain they’re even better deals now than they were, because the companies in question have all had good news, so now you get them cheaper, even if mining is facing a plateau in investor interest while other sectors are booming.
Other companies we’ve discussed, such as weed/vertical farming company Arcturus Growthstar Technologies (AGS.V) have gone up by as much as 255% in a few weeks. I’ve taken a little of my investment off the table on that one because, really, when you’re up nearly a triple, you should protect your original stake.
Veggemo producer Global Gardens (VGM.C) is up 26% since we mentioned them. Livestock health supplement researcher Avivagen (VIV.V) is up 11% in a couple of weeks.
Kids clothing retailer Peekaboo Beans (PBB.V) finally launched and is up 8% in a few days. Nanotechnology company Nano One Materials (NNO.V), which is developing better ways to make lithium ion batteries, had dipped for a few weeks but bounced back this past week, up 7% overall.
In general, weed stocks are flying right now. Over at Equity.Guru, we’ve made 80% on InMed Pharma (IN.C), 52% on Aphria (APH.V), and 47% on Golden Leaf (GLH.C) in just the past few weeks. On the downside, my only two-digit loss in the last few weeks is playground supplier iPlayco (PIC.V), which is 19% down, and I sold Supreme Pharma (SL.C) when it ran from $0.75 to $1.00, and it has since gone up around 50%. In hindsight, that was an early bail, but I’ll take a 33% profit as a ‘fail’ any day.
If you’re new to investing, the following guidelines are worth adhering to:
You haven’t lost money until you’ve sold a stock at less than you paid for it. Dips are natural, as are spikes. Daytrading is hard and most people lose money doing it, so look for stories you think will pay off over the long haul, and understand sometimes that long haul goal will take ups and downs.
Don’t invest anything you can’t afford to lose, if hell freezes over. Or Trump wins.
Don’t listen to anyone who tells you to buy or sell a stock, unless they’re a ‘for reals’ investment advisor. I’ll never tell you to buy anything, I only tell you what I like, and what I’ve bought personally.
When a stock goes up by a nice amount, take your original investment out. Millionaires were made by the dotcom boom, and more are being made by the weed rush, but most of those dotcom millionaires let it all ride for far too long and lost most of their profits.
Don’t fall in love with your stock. If it has been nice to you but is starting to hurt, let it go until the ship rights itself. Don’t ride it down, don’t average down, and don’t feel like you’re letting the side down by bailing. This is real money, not play money, do treat it with respect.
— Chris Parry
FULL DISCLOSURE: Tinley paid a fee for consideration fee to be written about today. That doesn’t mean they get automatic good press, it means they’re included in the conversation. I wrote most of this piece on my own site, ‘fee free’, a week ago, because I like the news they’re putting out. They asked for those words to be seen by a wider audience on V.I.A., which I’m more than happy to facilitate.
Apologies to those who don’t read my site, and didn’t get in when it was at 6c, but I think there’s still some good value there.