Until now the cannabis industry and the stocks that have performed the best are the large companies with huge market caps. Investors have focused on these companies since their survival in the growing industry seems to be more likely than some of the smaller companies that are at risk of being crowded out.

Mid-sized companies have gone slightly under the radar, leaving them with reasonable valuations and offering investors a major opportunity if it’s taken soon.

As Canada moves toward the second wave of legalization, these mid-sized companies are poised to break out, especially in the coming months, as a lot of new capacity comes online with construction projects finishing.

Three mid-sized companies that are extremely undervalued and poised to be the next big producers are Green Organic Dutchman Holdings (TSX:TGOD)  Supreme Cannabis (TSX:FIRE), and Flowr  (TSXV:FLWR).

Green Organic Dutchman

TGOD is one of the best value plays in the cannabis industry. It has big plans and well-thought-out steps for the next two years to handle the rollout of what it is calling cannabis 2.0.

With the introduction of edibles in the retail market and new capacity coming online for TGOD, 2020 looks to be a big growth year. It expects to have more than 200,000 kg of capacity by 2021.

The company has a very strong research team working on innovative products to differentiate itself and its brands as well as grow its intellectual property. In addition, it has achieved complete organic certification to grow in its incredible state-of-the-art hybrid facilities.

TGOD now has deals with B.C and Alberta and just made its first delivery to Ontario. As more of its capacity comes online, it expects to sign more deals nationwide.

In addition to its domestic operations, it’s also been looking globally for growth opportunities. The company operates in multiple jurisdictions internationally including the U.S, Jamaica, Mexico, Poland, and Denmark.

With a market cap of just over $800 million, it’s easily a $1 billion stock and could be worth a lot more.

Supreme Cannabis

Supreme is another growing cannabis producer that operates through its many brands in Canada. At the moment, Supreme has roughly 50,000 kg of capacity and has signed deals with eight provinces.

It has also been diversifying its operations by expanding internationally, similar to many other companies in the sector.

Supreme’s operational strategy has been to focus on growing high-margin, high-quality product. It believes that the domestic recreational market is oversupplied with lower-cost cannabis and users looking for higher-quality cannabis that are willing to pay the price have far fewer choices.

It’s also been positioning itself for the legalization of edibles and extracts by partnering with PAX a leading vaporizer company to make branded oil pods for vaping when the regulations come into play.

With a market cap less than $500 million, Supreme has a ton of value and is one of the best opportunities on the TSX.

Flowr

Flowr is another well-positioned, mid-sized cannabis producer. It has a diversified mix of assets that include indoor, outdoor, and R&D facilities, both domestically and internationally. Like the other companies, it sees international markets as a huge opportunity for growth.

It acquired Holigen which it believes is highly complementary to its domestic business. Holigen has two Portuguese assets that Flowr is planning on using to get its foot in the door to the European market.

The project is massive and will provide many benefits, it has even been designated as a project of national interest by the Portuguese government.

Flowr is also planning for expansion into Australia as a distribution centre for the Asia pacific markets.

Domestically, its strategy is similar to Supreme, which is to focus on growing high-quality, high-priced cannabis.

At just under $350 million, Flowr currently has the lowest market cap and the most value of all three.

Bottom line

Each of these companies is uniquely positioned to benefit from the growing cannabis industry, both domestically and globally.

The introduction of edibles and extracts to the Canadian recreational market coupled with new capacity coming online and growing demand worldwide means that massive growth in the sector is not far off.

Cannabis stocks have been in a rut in the summer of 2019. Even during its best stretches, this sector has been volatile. Investors who are on the hunt for growth should be looking for discounts in the cannabis space in early September. Today, I want to look at two cannabis stocks that still have explosive potential.

In early August, I’d discussed why Namaste Technologies (TSXV:N) looked like a bargain. The stock was trading close to 52-week lows, which coincided with a rout in the broader sector. The company had released a positive second-quarter report in July and made a promising purchase agreement with an Alberta-based chocolate maker. Cannabis edibles are set for legalization next month.

Namaste stock has climbed 35% over the past month. It has enjoyed a big jump in early September, as investors are again warming up to it after a corporate restructuring brought on a sharp correction. E-commerce has been a huge disruptor in the retail space. Namaste operates as many as 30 different websites across 20 countries. It possesses a user base of 1.5 million.

Canada has had an especially frustrating brick-and-mortar rollout, making the e-commerce side a much more attractive stream right now. Namaste aims to establish itself as the Amazon of cannabis. This is a lofty goal as the industry is still very young, but Namaste has carved out a global presence very early in the game.

Shares of Namaste are still trading at the low end of its 52-week range. The stock has shot up into technically overbought territory due to its September rebound, but this should not scare off investors looking long term.

Canopy Growth (TSX:WEED)(NYSE:CGC) stock has enjoyed a marginal rebound in September, but shares have still plunged 36% over the last three months. It has made its way out of technically oversold territory, but the stock is still trading at the low end of its 52-week range. This stock is a nice complement to the micro-cap Namaste in your portfolio.

The largest cannabis company on the TSX has a flurry of products that will be launching in December. This could be one of the first big boosts Canopy receives from its partnership with Constellation Brands. Edibles are set to be big business in the cannabis space right away, and Canopy is ready to unveil many offerings including chocolate, vape pens, and cannabis-infused beverages.

There are also positive signs of movement for recreational cannabis south of the border. President Trump was typically mealy-mouthed when confronted with the prospect of federal legalization, but there is growing pressure from key voices in the Republican party to take a firmer stance. Canopy has positioned itself to enter the market quickly after its contingent agreement with U.S.-based Acreage Holdings, which is backed by former Republican Speaker of the House John Boehner.

Investors can expect to see its second-quarter results in November. I like Canopy at its current price ahead of edibles legalization.

After nearly a century, the state of Missouri is once again looking at hemp as part of its agriculture.

The growth is being tested in several facilities across the state.

Prior to the prohibition of hemp in the 30s, Missouri was one of the top several states growing hemp.

In June 2019, Governor Mike Parson signed a bill to allow the plant to be researched once again.

Superintendent of the University of Missouri, David Cope, is taking care of the research.

“We’re tasked with growing some demonstration plots of hemp to see how they would act in certain parts of the state,” said Cope. “We’ve got four different varieties of fiber hemp. This is not to be confused with hemp used for CBD or even medical marijuana.”

Hemp has less than 0.3% of THC, the psychoactive ingredient in cannabis, however, the state of Missouri is looking more into the industrial use of the plant.

They estimate there are over 50,000 uses for hemp in a wide variety of products.

It could be used in things like rope, cloth, or bioplastics, but that won’t be a factor in Missouri until it is tested.

Since Governor Parson didn’t approve of testing until June, researchers got a little bit of a late start.

“They were planted in July. One of the things we did learn is it flowers due to sunlight, Cope said. “It’s not able to get as tall and as bushy, and that stalk isn’t able to get as big before it starts flowering and going into the reproduction cycle due to the sunlight each day.”

Cope says that hemp will face some of the same challenges other crops do, but he expects many to get good use out of it.

“It’s still going to take a lot of work to get the final product. It’s just another method that folks can try to use to be productive and profitable in a farming operation.”

The University of Missouri is testing several different types of hemp in different parts of the state.

Next year they plan to plant in the spring to get data on a longer growth cycle.