With the pot stock craze still sweeping the ASX, and companies like MMJ Phytotech Ltd (ASX: MMJ) and Auscann Group Holdings Ltd (ASX: AC8) most definitely in vogue, investors need to work overtime to not get swept up in the craze.
For the reasons I listed here, I'm steering clear of the sector entirely. Here are 3 promising companies with tangible businesses that I would buy before any of the pot stocks:
Nearmap Ltd (ASX: NEA)
If you're looking at pot stocks because you like smaller companies with a chance of becoming much larger, then consider Nearmap. Although unprofitable due to heavy investment in its US expansion, Nearmap is already generating ~$40 million of annual revenue and likely at much higher margins than is achievable by marijuana manufacturers.
CBL CORP FPO NZX (ASX: CBL)
Specialty insurer CBL appears to have found niches where it is the major player, and the company has a track record of strong profitability and steady growth. Diversification into new markets is a strong growth prospect over the next decade, and with its highly experienced and well-aligned founder-managers, CBL appears to be a high-quality business.
Greencross Limited (ASX: GXL)
Although vet and pet retailer Greencross has come under selling pressure recently by investors nervous about Amazon, the company has a number of attractive growth opportunities and in my view is less at risk than many think.
Thanks to the co-location of its vet, retail, and grooming services, Greencross is creating a one-stop shop that draws more customers and encourages them to spend more when in store. Vets and groomers are an important driver of foot traffic that have demonstrably increased sales, and Greencross could grow in size as it continues to acquire new stores and roll out its co-locations in existing stores.
