Small cap stocks are outperforming their bigger peers, a point easily identified by the Russell 2000 on track to book a gain around 20% for November, doubling the gains of the blue-chip heavy S&P 500. Reasons abound as to why small caps are chugging higher and, importantly, there is a strong case to be made that smaller companies are going to continue impressing during 2021.
Namely, small caps, which are viewed as carrying extra risk, are under-represented in many portfolios because of the coronavirus pandemic. Underscored by optimism regarding a COVID-19 vaccine coming soon to a pharmacy near you, another stimulus package and an amazingly resilient economy, market bulls are starting to transition into stocks that have been largely ignored in 2020. Buying will beget buying as money managers look to capitalize on the rotation turning sector laggards into sector leaders.
Further, what increasingly appears to be a presidential victory for Joe Biden has investors considering which industries within sectors should experience a spark with a progressive administration.
In the healthcare space, investors are expecting good things for cannabis and CBD companies. The speculation of additional states legalizing recreational or medicinal marijuana and potentially even de-scheduling, re-scheduling or legalization of cannabis at the federal level has energized stocks like Aphria (NASDAQ:APHA) (TSX:APHA), Charlotte’s Web (TSX:CWEB) (OTCQX:CWBHF) and Village Farms International (NASDAQ:VFF) (TSX:VFF).
When we look at the above companies, there is a quick realization that these stocks are now simply on fire with investors clamoring for the once unloved sector. In the immortal words of Walter Gretzky, as passed on to the world through his son Wayne: "Skate to where the puck is going, not where it has been, we look to a lesser-known CBD company and highlight Nass Valley Gateway (CSE:NVG) (OTCPK:NSVGF).
Nass Valley’s stock has been on the move as well since CSE-listed shares hit C$0.06 in September, including setting a new 52-week high at C$0.28 on November 9. Shares have pulled back some, but held the vast majority of the gains, currently trading in the area of 23 Canadian cents.
U.S. shares are in a similar position, save the currency exchange to trade at roughly $0.18.
Despite the advance, Nass Valley remains one of those companies still largely flying under the radar as a leader in the sweet spot of the cannabidiol (CBD) market. The Vancouver-based company, a product of a merger with New Jersey-based Advanced Bioceuticals two years ago, offers a diverse line of top-shelf health and wellness product made from CBD derived from hemp.
CBD demand is growing globally as more and more consumers experience its broad spectrum of wellness benefits. The company recently passed the rigorous vetting process of Alibaba.com, becoming one of the first CBD companies to get accepted into the ecommerce giant’s ecosystem that reaches billions of consumers worldwide. Moreover, Alibaba.com is the world’s biggest business-to-business (B2B) marketplace, providing Nass Valley with an opportunity to expand it wholesale sales channels as well.
With these growing revenue streams, Nass Valley is targeting sales of $36 million in the next 12 months, arguably making the Company’s current $72 million market cap a bargain among its sector peers.
Sold under the brand Nass Valley Gardens, the lineup includes tinctures, softgels, gummies, topical lotions and pet products all made from an organic, non-GMO process ensuring the highest quality CBD products for discerning consumers. Like others at this time of year, the company is running holiday specials, including extended "Black Friday" and "Cyber Monday" deals with big savings for shoppers that should drive revenue for the parent company.
Based upon the stock price movement in relation to recent news and sector bullishness among its peers, the importance of these developments has yet to be recognized by investors. Against a favorable regulatory backdrop, this is a company to keep a close eye on to maintain its current upward trajectory.
