Already a leader in the gardening industry, Scotts Miracle-Gro (NYSE:SMG) got a whole new lease of life in recent years when it diversified its focus to include cannabis. Now, in 2019, SMG stock is soaring. You might say Scotts didn’t exactly need cannabis to make stock soar, but there’s no doubt it has helped.
Year-to-date SMG stock has grown an astronomical 65%. Shares are now currently selling for $103 USD on the NYSE.
It’s worth noting that while the entire cannabis sector has faced a lull recently (one that has cleared many gains), SMG stock has continued to rise throughout. This is likely because the company has found a lucrative balance by focusing on two key markets: consumer lawn and garden products and supplies for the cannabis industry.
By not relying on cannabis entirely, SMG stock avoids some of the pitfalls found in the newly industrialized cannabis industry. For this reason, it may be a favorable play for those who want a piece of the cannabis industry but who remain skeptical of its regulations, practices, and/or deliveries.
Hawthorne: The Cannabis Arm of Scott’s Business
Scotts’s Hawthorne subsidiary focuses on products for the cannabis industry. It aims to create grow-materials that boost the growth of cannabis plants. The company made a clever move when it saw the potential in this market. It is one of the first major gardening players to move in this direction and now, CEO Jim Hagedorn, in the company’s Q2 conference call, said that “[Hawthorne is in a] better positioned than anyone to win.”
A market leader in supplying gardening products to the cannabis industry, Scotts’s Hawthorne is likely to see considerable growth in the coming years as more US states legalize medical or recreational cannabis.
Aside from cannabis, gardening remains Scotts Miracle-Gro’s main revenue driver. Almost 90% of the company’s revenue in Q2 came from its consumer lawn and garden product business. As we enter the warmer months, sales tend to increase as consumers begin looking after their gardens again.
As stated, for investors who are skeptical of a pure-cannabis play, SMG stock is proving itself a significant gainer in recent months. Scotts Miracle-Gro is already a solid leader in its market, and if cannabis is legalized at the federal level in the US, the company will only benefit significantly.
However, even if that doesn’t come to pass, Scotts’s gardening business proves that it still delivers steady growth.
What are your thoughts on this one?
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