Vacation is over and insiders got back to work buying stock during Cyber-week. Much like online shoppers, C-Suite executives and directors sought good value buys for their money last week.
A few purchases we consider for this spot include Fastenal Company’s (FAST) Executive Vice President (EVP) Michael Jeffrey Watts’ $300,000 buy (1); a couple of insiders with a positive history of being on the right side of the trade acquired First Foundation Inc. (FFWM) (2); and Spirit Realty Capital, Inc. (SRC) Director Richard Gilchrist’s quarter-million-dollar purchase of the Real Estate Investment Trust (REIT). (3)
Ultimately, it was Cronos Group Inc. (CRON) Director Marc Jason Alder’s recent string of buys that earns this week’s highlighted inside buy.
Cronos Group manufactures, markets, and distributes hemp-derived supplements and cosmetic products through e-commerce, retail, and hospitality partner channels under the Lord Jones and Happy Dance brands in the United States.
The company is also involved in the cultivation, manufacture, and marketing of cannabis and cannabis-derived products for the medical and adult-use markets. It sells cannabis and cannabis products, including dried cannabis, pre-rolls, edibles, concentrates, and cannabis extracts through wholesale and direct-to-client channels under its wellness platform, PEACE NATURALS; and operates under adult-use brands, Spinach.
Director Adler accumulated a little more than a half-million CRON shares since November 17, 2022, spending north of $1.5 million. (4) The director bought 15,000 shares in July 2020 at $5.78. Between the first buy and most recent wave, Adler sold 10 consecutive times, banking nearly $41 million.
He started unloading the weed stock at $7.23 just three months after his July 2020 purchase. A 25% gain in under three months. He sold CRON for as much as $13.60. So far, the director has made the right choices when trading Cronos Group.
Wall Street thinks Adler may have made the correct call again with a one-year price target of $4.17. (5) The Canadian-based company trades at $3.46 as we type, meaning it has about 17% upside potential to the 12-month target. It may not take that long for CRON and all marijuana stocks to get a lift.
According to Axios, “A bipartisan group of senators plans to attach significant marijuana legislation to “must-pass” year-end bills.” The big news out of the possible bill is to allow cannabis companies access to banking institutions. (6) Beyond banking, Colorado Senator John Hickenlooper (D) filed a bill to federally legalize weed. (7) If one or both bills become law, it removes the remaining hurdles hampering marijuana business.
Longer term, analysts don’t see the CRON company making a profit in 2023 but forecast sales climbing more than 25%. The topline is expected to reach $94.96 million in 2022 and $119.29 next year. As of this keystroke, CRON trades at 12.01 times sales, which is close to its five-year low price to sales ratio (P/S) of 11.17. If CRON hit Wall Street’s 2023 sales target and traded at its recent low P/S ratio, the stock would trade at $3.52, just 6 cents higher than where it is today.
Overall: Cronos Group Inc. (CRON) appears to have limited downside based on its projected sales and recent P/S history. We can’t say for sure, but it appears that the industry could benefit from federal legislation and, if so, we would not be surprised to see valuation expansion for the entire industry.
CRON is only appropriate for investors with the highest risk tolerance and willingness to invest in “sin” stocks, with a minimum time horizon of 12-18 months.
1 – https://www.secform4.com/insider-trading/1691805.htm
2 – https://www.secform4.com/insider-trading/1413837.htm
3 – https://www.secform4.com/insider-trading/1246346.htm
4 – https://www.secform4.com/insider-trading/1656472.htm
5 – https://finance.yahoo.com/quote/CRON?p=CRON
6 – https://www.axios.com/2022/12/03/senate-marijuana-legislation-chuck-schumer
7 – https://www.marijuanamoment.net/senator-files-bill-to-get-country-ready-for-federal-marijuana-legalization-amid-heightened-reform-talks/
8 – https://finance.yahoo.com/quote/CRON/analysis?p=CRON