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Billionaires Bet Big On Canada’s Cannabis Frenzy

Colorado was the first U.S. state to set up a booming legal marijuana industry a few years ago, inspiring other states to follow suit. Bit by bit, the dominoes are starting to fall and marijuana is slowly becoming more available across the country.

However, the federal government is once again hostile to marijuana – with Attorney General Jeff Sessions a particularly fierce opponent of legalization – raising questions about what comes next.

But America's northern neighbor does not have that problem. The Canadian government is moving quickly to legalize marijuana and, unlike the patchwork state-by-state approach unfolding in the U.S., Canada is set to make it legal nationwide by this time next year.

That has kicked off speculation of a green gold rush in Canada, a market that Deloitte estimates could be worth more than $22 billion annually.

It is an investor's dream: a market where there is huge pent up demand not currently being met, and federal legislation slated to open the flood gates. Even better, because marijuana suppliers must register and receive approval from the federal government to sell products, there are serious barriers to entry. This presents a massive case of "first-mover advantage" – the companies that get approved first will cash in on the legal marijuana bonanza.

One company in particular is poised to capture a sizable share of the market. Invictus MD (TSX:IMH.VOTC:IVITF)), a legal medical marijuana provider, is ready to hit the ground running when federal legalization passes.

Here are five reasons why Invictus is a crucial company for investors to keep an eye on.

1) First-mover advantage. There are a little more than 50 licensed producers of marijuana, but Health Canada, the federal regulator, recently decided to accelerate the licensing process, recognizing that there might not be enough supply when legalization comes into effect on July 1, 2018. Invictus MD is one of these companies that has 2 of the 50 licenses in 2 major provinces, perfectly positioned to capitalize on what is largely a captive market. There are more than 400 other companies in line awaiting their licenses, but Invictus is ready to go. And there is growing speculation that suppliers will struggle to meet market demand in 2018.

2) Invictus is the first integrated marijuana-dividend stock. Invictus is the first marijuana supplier to pay a dividend to shareholders, dishing out $1 million last December. Invictus was able to do this through a series of prudent acquisitions, including upstream cultivators as well as fertilizer producers.

Last December, Invictus acquired a 33.33 percent stake in AB Laboratories Inc., a licensed producer of medical marijuana in Ontario. It also has a 33.33 percent stake in AB Ventures, which will expand Invictus' marijuana cultivation capacity based on the 100 acres AB Ventures owns. In April, it acquired a 100 percent stake in Acreage Pharms, another licensed producer in Alberta. "With the Company's acquisition of 100 percent of Licensed Producer Acreage Pharms in Alberta, we now have 250 acres of cultivation space that stretches from Alberta to Ontario," Dan Kriznic, executive chairman of Invictus, said in an April statement.

In fact, Invictus (TSX:IMH.VOTC:IVITF) has stitched together assets that make it an integrated marijuana supplier, and will benefit from selling marijuana, but also from the growth of the sector as a whole. Through the sale of fertilizers, Invictus will profit even from its competitors. As was the case with the gold rush, some of the biggest winners were the sellers of picks and shovels rather than just the explorers who found gold.

3) Market is huge. The Canadian medical marijuana market alone is worth $400 million, and growing rapidly. But that will be a small fraction of the recreational market, which will become legal in a year.

There are around 150,000 medical marijuana users, but some see the recreational market exploding to 4 million users in the first few years of legalization, with sales exceeding $8 billion annually. Deloitte says the economic impact could reach $22.6 billion – a figure larger than the wine, beer and spirits market.

When compared to the $6.7 billion size of the U.S. marijuana market, Canada's legal marijuana market could exceed that of its much larger southern neighbor.

4) Medical marijuana companies are already exploding on the prospect of legalization. Legalization is sweeping the continent, opening up lucrative opportunities for companies that have existed for a long time by servicing the medical marijuana market. As governments relent on legalization, the valuation of medical marijuana stocks have skyrocketed. Here are the gains from 2016 for the top medical marijuana producers:

- AXIM Biotechnologies (NASDAQOTH:AXIM): exploded 1,720 percent

- Corbus Pharmaceuticals (NASDAQ:CRBP) was up 431 percent

- Aphria (NASDAQOTH:APHQF) grew 381 percent

- Aurora Cannabis (NASDAQOTH:ACBFF) was up 299 percent

- Canopy Growth Corp. (NASDAQOTH:TWMJF) up 259 percent

- Medical Marijuana (NASDAQOTH:MJNA) up 254 percent

- GW Pharmaceuticals (NASDAQ:GWPH) was up 64 percent

But the marijuana bonanza is set to continue with the recent launch of the first cannabis-based exchange-traded fund (ETF), called the Horizons Medical Marijuana Life Sciences ETF (TSX: HMMJ). The new ETF will spark a wave of investment into marijuana stocks. Invictus is included in the ETF, along with about two dozen other marijuana suppliers.

5) Top-notch management. Invictus MD is headed up by a great management team, with experience growing small companies. They have multiple strains of marijuana, ranging from pain management to cancer, epilepsy and anxiety. And, of course, the recreational sector is a massive gold mine-in- waiting. But while dozens and even hundreds of companies are rushing to build their marijuana supply chains from scratch, Invictus' (TSX:IMH.VOTC:IVITF) management has been carefully putting together the seeds of a hugely profitable marijuana supplier for years. Dan Kriznic, executive chairman and founder, has a track record of transforming small companies in a variety of sectors to multi-million-dollar enterprises.

The legalization of marijuana in the U.S. sparked a proliferation of suppliers and a wave of money from investors looking to cash in on the billion-dollar market that was created virtually overnight. But the Canadian market is almost unknown to many big investors, which means there is huge untapped potential for those in the know. There is no shortage of catalysts on the near-term horizon, and full legalization in Canada is a year away. Invictus is one of the few candidates set to profit from this green gold rush.

Other companies to watch

Aurinia Pharmaceuticals Inc (TSX:AUP ): It has been a strong year for Aurinia Pharmaceuticals, and after spiking to $14 in March it now appears to be oversold. One of the top stocks in the Canadian pharmaceuticals industry it should definitely be on investors' watch lists.

OrganiGram Holdings. (TSXV:OGI): Organigram Inc. is a licensed medical marijuana producer in Canada, while it managed to maintain its production license this year, the company saw its stock price fall somewhat Year-To-Date, but we see strong upside for this stock as the changing Canadian cannabis legislation could give a massive boost to the market

Molson Coors Canada Inc. (TSX:TPX.A): While Marijuana is set to boom in Canada, overtaking the alcohol industry, the collapse of Molson Coors Canada Inc. in 2017 is well above what was expected. With management working hard to turn this company's performance around, it could be great value buy for investors in the Canadian market.

Emerald Health Therapeutics (TSXV:EMH): Botanicals, a wholly owned subsidiary of Emerald is authorized to cultivate and sell both dried medical cannabis flowers and medical cannabis oils in Canada. Botanicals currently operates an indoor cultivation facility in Victoria, British Columbia, and plans to construct a much bigger growing project in Vancouver. Emerald can be considered a serious growth stock as Canada's marijuana legislation changes.

The Cronos Group. (TSXV:MJN): Cronos is one of Canada's most active investment firms in the medicinal marijuana sector. The company invests mainly in licensed cannabis growers and is one of the holdings in the brand Marijuana Life Sciences ETF. Cronos fell back last month, but looks like a real value stock at this point in time.

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