Own Hexo Shares for the Value-Added Cannabis Brands

There’s no shortage of cannabis stocks for traders to pick and choose from. Because of that, sometimes Hexo (NYSE:HEXO) gets overlooked. But that’s really a shame — I think HEXO stock is highly affordable and offers strong upside potential.

Hexo (HEXO) logo with marijuana plants in the foreground
Source: Shutterstock

Admittedly, Hexo isn’t the biggest or the most famous company in the cannabis sector. And when you’re investing in a comparatively small company, you have every right to expect it to differentiate itself from the competition.

However, in the world of cannabis products, branding is everything. That’s how Hexo stands out from the crowd — it continues to develop and market unique, value-added cannabis-infused brands.

This doesn’t necessarily mean that HEXO stock will shoot to the moon tomorrow or next week. But a good branding strategy will pay off in the long run. That’s why investing in this name requires patience, along with a strong stomach for volatility.

A Closer Look at HEXO Stock

Speaking of volatility, the Hexo share price is down over 15% as of Dec. 9. That might sound terrible, but it’s just a typical day for the stock. Remember, there will also be days when its price goes up a lot.

But why is Hexo so jumpy? These outsized price movements are due to a couple of factors.

First of all, cannabis stocks are big movers because marijuana laws and regulations are constantly evolving worldwide. Additionally, HEXO stock tends to be extra volatile because it’s classified as a penny stock — defined by the U.S. Securities and Exchange Commission (SEC) as a stock that trades under $5 per share. Generally speaking, low-priced stocks have a tendency to make bigger daily moves percent-wise in comparison to names with higher prices and market capitalizations.

However, there’s one more thing that you’ll want to know about this stock. As reported by InvestorPlace contributor William White, the company will hold a special meeting on Dec. 11 to determine whether Hexo will have an eight-for-one reverse share split.

A Different Kind of Beverage Company

Today’s forward-thinking cannabis companies are getting into the beverages market. I personally see this as a chance at explosive future potential.

In 2018, Hexo made an early foray into this market when it partnered with Molson Coors (NYSE:TAP) to create a cannabis-infused beverage line called Truss.

Soon after that partnership was formed, the Cannabis Act went into effect in Canada. Because of that, adults in Canada can now possess up to 30 grams of cannabis in public, with specified restrictions.

Clearly, Hexo and Molson Coors are aiming to capitalize on cannabis’ transition into the mainstream. Frankly, I don’t blame them. This year, Hexo announced 13 different products under five brands within the Truss product line.

With this product rollout, Chief Marketing Officer Lori Hatcher calls Hexo “an entirely different kind of beverage company.” Only time will tell how successful these adult-use beverages will be, but owners of HEXO stock should appreciate the firm’s initiative and ambition.

More THC, Every Time

In another effort to differentiate its brands, Hexo recently announced that it “has repositioned its UP Cannabis brand with a differentiator of 20% THC or higher in all dried flower products, every time.”

This is a savvy move on Hexo’s part. The fact is, some folks want more potent cannabis products. And now that cannabis is effectively part of the fabric of Canada’s culture, why not legally give the people what they want?

CEO and co-founder Sebastien St-Louis provided further explanation on why his company’s upping the THC content:

“Until now, cannabis consumers have had to hold flower products in their hands to check that the potency matched their expectations. UP is removing that friction by delivering 20% THC or higher every time, right on the label.”

From a business perspective, “removing the friction” makes perfect sense. It’s great to see Hexo delivering the products that consumers want. This development ought to bolster the HEXO stock price eventually.

Bottom Line

Hexo’s stock price will continue to wiggle and wobble, no doubt about that. So, if you take a stake in this pick, be ready for the inevitable volatility.

That being said, though, the long-term trajectory of HEXO stock should be to the upside. Shareholders should remain confident as the company firms up its offering of value-added, consumer-focused cannabis-product brands. That focus should pay off in the end.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.

David Moadel has provided compelling content -and crossed the occasional line -on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.

On Penny Stocks and Low-Volume Stocks: With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.

Read More: Penny Stocks –How to Profit Without Getting Scammed

Article printed from InvestorPlace Media, https://investorplace.com/2020/12/own-hexo-stock-for-the-value-added-cannabis-brands/.

©2022 InvestorPlace Media, LLC