Growth, value, special situations, momentum
The 2018 Farm Bill gives legal status to Hemp.
CBD derived from hemp now enjoys clarity.
Company still seeking to be a farm to retail shelf CBD operation.
The month of December has been tough on the markets, but not all the news on the wires was bad. Last week President Trump signed the 2018 Farm Billinto law, and with it gave a legal status to hemp and hemp derived CBD. This could be big news for Youngevity (YGYI) investors in a material way. Prior to the passage of this bill, hemp was a regulated substance. That barrier is now gone, and with it some of the red tape that hemp companies have had to deal with.
As many of my readers know, Youngevity is a growing direct selling company with a growing coffee business to boot. In 2018 the company entered the CBD space and announced intentions of creating a field-to-finish hemp based product line inclusive of CBD oil products. For those less familiar with the company, you may want to read a recent article titled, "Youngevity Could Be The Most Undervalued And Safest CBD Play On The Market".
In very simple terms, the 2018 Farm Bill made hemp and hemp based CBD legal. An important point of clarity is that CBD derived from marijuana is still a scheduled substance and is mired in legal ambiguity. Despite the fact that several states have legalized marijuana in some form (medical and/or recreational), the plant is still a scheduled drug in the eyes of the Federal Government and thus could be subject to a lot of scrutiny.
One major shift we will see is in finances related to hemp and CBD. When hemp was a scheduled substance it was difficult for companies to operate in the financial world. Even basic banking services were difficult to establish. Things like transport over state lines also presented problems. With a newly minted legal status, companies that grow hemp, process it, and sell finished products at retail can do business just as simply as a corn farmer.
Youngevity has been exploring the acquisition of existing hemp operations in a desire to replicate its already successful field-to-finish coffee model. With coffee, the company grows the product, sells green coffee, sells roasted coffee, offers its own branded coffee, and even manufactures finished coffee for others. This experience will prove to be very valuable as the company grows and expands its presence in the CBD space.
In the world of CBD products, hemp based CBD products will enjoy a much easier path to market than marijuana based CBD products. Free from hurdles, red tape and banking issues, hemp based products can literally explode onto the scene in 2019 like never before. Any company that has established an early foothold into the hemp based CBD space can have an advantage. Any company that can offer full vertical integration has an advantage that is even greater. Youngevity is poised for getting a fully integrated vertical operation up and running in the near term.
Investors should know that there is opportunity in knowledge. With the holidays and political issues of the day, inclusive of a government shut down, the Farm Bill has not yet received much press. Combine that with the overall sell-off in the markets in late 2018, and hemp based investment plays could be providing the best entry point possible. It is virtually certain that those close to the business (from farmers to retailers) have now started implementing long planned actions. It is also virtually certain that a host of new players will attempt to enter the market now that hemp has legal status. The likely advantage goes to the players in the space that have been planning moves for years rather than over a cup of coffee in the last week.
While I would have loved to see Youngevity already closed on a hemp farm by now, the story is still a positive one. The passage of the Farm Bill may be the catalyst that can jump-start actions within the space, see capital deals happen, and even attract institutional investors. I anticipate swift action by Youngevity in the CBD space, and think that 2019 will be a very interesting year for this company as well as those invested in it. Stay Tuned!
Disclosure: I am/we are long YGYI. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.