It’s been a wild ride for the stock market in 2020. With the COVID-19 pandemic cooling down, the broad market officially bottomed on March 23rd. Since then, investors in so-called “stay at home” stocks like Zoom (ZM), Amazon (AMZN) and Wayfair (W) have been richly rewarded by the market’s rapid rebound. Another sector is also providing investors with outsized returns: the previously beat-down cannabis sector. Leading U.S. multi-state operators (MSOs) like Cresco Labs (OTCQX:CRLBF), Curaleaf (OTCPK:CURLF), Green Thumb (OTCQX:GTBIF) and Trulieve (OTCQX:TCNNF) have all posted positive earnings recently boosting the companies’ share prices in the process.

Joining this group of American industry leaders is Red White & Bloom Brands (OTCPK:TDRYD). RWB is one of the leading cannabis companies in the Midwest, which has become the latest frontier for cannabis legalization. Two of the larger states in the region, Michigan and Illinois, legalized cannabis for recreational use last year. RWB is rapidly becoming a leader in both states, which continue to post very strong monthly sales numbers.

Red White & Bloom

Michigan

A large portion of Red White & Bloom’s operations are in Michigan, where the company got its early start in the Great Lakes State as MichiCann. RWB is experiencing a significant first-mover advantage in Michigan, with the company quickly establishing a total state market share of 22%, as measured by actual revenues.

In Michigan, the company has 41 cannabis licenses (cultivation, manufacturing and retail), 23 owned facilities, ten operating dispensaries and five operating cultivation facilities. While RWB is targeting the entire state, it’s heavily focused on Detroit, where it owns 10% of the currently operating dispensaries. Since the Michigan market is well under-supplied, management plans to use its existing licenses to open additional facilities throughout the state.

Illinois

To break into the Illinois market, RWB purchased a 3.6 million sq ft hemp cultivation and processing facility said to be the world’s largest. The massive hemp CBD facility is capable of producing and processing 600,000 pounds of hemp biomass per year. RWB plans to use the facility to produce health and wellness products derived from CBD and other cannabinoids. The company has an initial $25 million offtake agreement with a drug company for cannabis-derived pharmaceutical compounds. Management intends to convert and license a portion of the facility for the production of high THC cannabis, for sale to the Illinois market estimated to be worth over $2.5 billion.

Massachusetts

Finally, RWB is breaking into the highly lucrative Massachusetts market. Thus far, RWB has secured one processing and two cultivation licenses, as well as the property needed to build a 50,000 sq ft state of the art processing facility. The company plans to focus on wholesale for the undersupplied market for the time being and may pursue retail strategies in the future once its Massachusetts wholesale business is up and running.

Branding

Unlike some of the other MSOs, RWB is rolling its brands out nationally right from the jump. The nationwide roll-out should save the company a great deal of money on purchasing costs and R&D. RWB intends to have products in the high, mid and low price tiers, with THC and CBD dominant variants for each. Doing so will allow the company to address virtually all the various niches in the cannabis industry.

RWB also has entered into a licensing agreement with High Times. All of RWB’s current and future dispensaries will be re-branded as High Times dispensaries, and RWB will manufacture and distribute High Times branded products, including flower, vapes and edibles. The new exclusive partnership gives RWB access to one of the most well-known and valuable brands in the cannabis industry.

Competition

RWB does have some competition in the Midwest cannabis market and the U.S. market as a whole. Cresco Labs, Curaleaf and Green Thumb are the most widespread MSOs, with operations in the most states. At the same time, Trulieve has drilled down into Florida and become the most profitable public U.S. cannabis firm to date, but RWB looks poised to change that in the near future. Red White & Bloom’s valuation is very attractive compared to its peers, many of whom are spread quite thin in their respective states. Note that RWB started trading substantially below the company's estimated target in the below table, so the value proposition is even more attractive.

Share Structure

After completing a reverse takeover of publicly-traded Tidal Royalty and rebranding over the last year, RWB started trading publicly on June 4th. Company insiders and other early investors have agreed to substantial share lockups, leaving roughly ¼ of its outstanding shares (~75 million) available for trading. RWB’s low float should lead to increased volatility, but considering the U.S cannabis industry’s upward trajectory, RWB has the potential to produce substantial gains right out of the gate.

Conclusion

Michigan and Illinois are two of the most populated states in the country, not just the Midwest. Red White & Bloom’s combined operating markets are already estimated to be worth over $4 billion. Not keen on settling for only dominating the Midwest, RWB has entered the Massachusetts market with a plan to introduce its brands to New England. Red White & Bloom’s profitable operations, scale and attractive valuation make it a must-own cannabis stock for any serious investor that’s bullish on the U.S. cannabis industry.