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 | | | The Vital Subsector Fueling CBD's Growth... and Outperforming the Broader Industry | | Matthew Carr | Chief Trends Strategist | The Oxford Club | | | | | Consumers and investors simply can't get enough CBD.
When Congress passed the 2018 Farm Bill, we knew it'd be huge. The bill de-scheduled hemp and removed it from the Controlled Substances Act. It did the same for hemp's derivatives - including CBD.
CBD - like the broader cannabis segment - is multifaceted. And now that it's legal in all 50 states, its subsectors are enjoying their own Age of Aquarius.
Extraction, in particular, is the segment I think investors need to pay attention to.
So let's take a look at who's been on a tear in 2019.
A Bold Forecast
Hemp is now recognized as an agricultural commodity. Hooray!
And federal law protects the sale of hemp-derived CBD. Even bigger hooray!
The farm bill triggered the sonic boom we've heard across the cannabis space.
Of course, it hasn't been all "Puff the Magic Dragon" singalongs. Earlier this year, I warned that CBD was entering Wild West territory. And I figured it was only a matter of time before the federal government stepped in.
We didn't have to wait long... | | | In May, the Food and Drug Administration held its first hearing on CBD in food and beverages. It was a mixed bag hearing. But then, just weeks ago, the agency announced it would expedite the process for setting up a regulatory framework for CBD products, hoping to release an outline of rules by this fall.
The news brightened the prospects for CBD and publicly traded companies looking to profit on its sale.
And it added to the list of reasons this is a booming time for CBD.
In fact, the Brightfield Group expects hemp-derived CBD sales to top $21 billion by 2022. That's a meteoric 3,500% increase from 2018!
And if that house-shaking boom wasn't close enough, hemp-derived CBD sales are projected to top $11 billion next year.
Bottoms Up
Let's take a quick peek at one of the faster-growing segments in CBD: beverages.
The industry is projected to grow from a measly $12 million market in 2018 to a $200 million-plus market this year.
But the skyward rise doesn't end there... CBD beverage sales are expected to increase at a compound annual growth rate of 242% through 2022.
That's astronomical growth!
And it means the CBD beverage market would blast off to a $1.5 billion industry in a very short period of time.
CBD is no longer on the launch pad. It's taking off, growing larger with each passing day.
Already, the CBD supplements market is larger than the vitamin E market. And it'll soon surpass the omega-3 supplements market.
These are supplements many consumers have readily available in their homes.
The fact is, consumers are racing out to purchase CBD products to help treat an increasing number of physical and mental ailments, some of which include anxiety, pain, inflammation, depression and sleeplessness.
But here's the deal... No one is out there just crunching on hemp stalks. (Though you can put hemp seeds on a salad.)
Most people are gobbling down CBD in a purified or processed form... And that means one of the areas I believe pot stock investors should focus on is extraction.
The Subsector Outperforming the Industry
Extraction is necessary for the hemp-derived CBD segment, as well as any cannabis derivative product.
And we all know CBD devotees are in the market for oils, capsules or some form of edible - all of which require a company to process the hemp and extract the CBD.
But there's another side to the equation.
We also know that as adult-use cannabis markets mature, the majority of sales shift from dried flower to derivatives and infused products. These include edibles and beverages, capsules, vape pens, topicals, and more.
So as the cannabis and CBD markets grow and mature, extraction becomes increasingly more vital.
And when we look at how cannabis and CBD extractors have performed in 2019 so far, we see remarkable outperformance... The two biggest players, Neptune Wellness Solutions (Nasdaq: NEPT) and Valens GroWorks (OTC: VGWCF) have both gained more than 120% year to date.
Neptune has multiyear extraction deals with The Green Organic Dutchman (OTC: TGODF) and Tilray (Nasdaq: TLRY).
And Valens just reported that revenue surged nearly 300%.
A smaller player, Radient Technologies (OTC: RDDTF), just completed its first commercial run with Aurora Cannabis (NYSE: ACB).
The small extractor also has a German facility that will have a capacity of 2.8 million kilograms of hemp and 280,000 kilograms of cannabis once it's completed next year.
And we've also seen solid returns from Waters Corp. (NYSE: WAT). The company manufactures extractors, as well as pesticides and lab equipment that extraction and cannabis companies need for purification and testing.
In fact, it has a whole segment dedicated to the industry.
Where to Look
Extraction is the segment I think investors need to pay attention to.
Especially since we're at a tipping point for cannabis.
On the horizon, the derivatives market in Canada will be legalized in October. And the most popular consumer purchases are derivatives and infused products.
This all points in one direction...
Extraction companies aren't just a necessity for CBD, infused beverages and edibles. They're a necessity for investors to consider.
Here's to high returns,
Matthew | | | | |  | | | | | |  |  | | | | David Fessler | July 31, 2019 The switch to EVs is pushing oil companies to reinvent themselves in a big way. Read More | | | | |  | | | | Matthew Carr | July 30, 2019 For now, Curaleaf is the cannabis company to beat in the U.S. But can it continue to outpace its competitors? Read More | | | | |  | | | | Matthew Carr | July 29, 2019 From congressional hearings to C-suite exits, major moves rocked the cannabis markets last week. Read More | | | | | | | | | | |
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The Oxford Club is a financial publisher that does not offer any personal financial advice or advocate the purchase or sale of any security or investment for any specific individual. Members should be aware that although our track record is highly rated by an independent analysis and has been legally reviewed, investment markets have inherent risks and there can be no guarantee of future profits. The stated returns may also include option trades. 
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