If you have been following stocks in the CBD space, then you may have noticed the emergence of its apparent new star, Smart Decision, Inc. (OTCMKTS:SDEC).
The path to fame and fortune in the CBD marketplace was supposed to be so easy in 2019 after the passage of the US Farm Bill in December 2018. But fate had other plans, and most of the stocks in the space are in tatters after a bruising bear market marred by FDA warnings and a historic supply glut. But one stock at the center of a new emerging narrative is standing triumphantly astride the carnage and rubble with a fresh model. And it’s working.
Smart Decision, Inc. (OTCMKTS:SDEC) is taking advantage of the same problem that’s bedeviling most other plays in the CBD publicly traded equity sector. In short, there are too many producers, and they can’t find a way to connect with customers.
Smart Decision is at once their salvation and the better option for investors. The company is in late-stage development of an ecommerce portal driven by a unique AI-assisted cloud-based computational data engine designed in partnership with MIT-trained computer scientists to match new CBD consumers with the CBD product that best meets their needs.
No one doubts the big investment thesis here, by the way. Just because the vast majority of CBD stocks have been in meltdown mode over the past year doesn’t mean the CBD product market isn’t transitioning from niche to mainstream. Experts have it growing by a stunning 125% CAGR over the next half-decade. Demand is booming and will stay that way for at least the next 20 quarters. But the average producer of CBD-based products isn’t able to benefit from this because there are too many of them and it’s hard to connect with new adopters who don’t understand how to navigate the impossible range of choices implicit in the CBD shopping experience.
In other words, there’s a fundamental problem with selling CBD products. And SDEC is the only company out there that seems to have the answer. Hence, the blooming share price.
The Gold Rush
Back in the mid-1800s, prospectors from all over the US rushed out to California because “there’s gold in them thar hills!”
The news of gold in the California mountains had reached clear across to New York, Boston, and Washington DC. And tens of thousands of hopeful adventurers made their way out for the chance to get rich. But, as history tells us, the folks who really made the big money were the ones stationed in the foothills selling picks and shovels to the newly arrived, starry-eyed prospectors coming in by horse and carriage from the east.
Note that nothing in this story suggests that there wasn’t literally tons of gold in “them thar hills!”. Over 750K pounds of gold was mined in the region during this period. But the vast majority of the miners didn’t really make out.
The CBD boom is a similar reality right now, from a boots-on-the-ground point of view. For new gold miners, the problem was how to get at the potential gold locked deep under the ground. For CBD producers and infused product suppliers, the problem is how to connect with new customers ready to try CBD for the first time.
At this point, it seems SDEC has the magic recipe, and the market is starting to discount the topline growth set to come online when it launches the platform next month.
In short, CBD is a complex proposition from a shopping standpoint. You have to choose between bioavailability formats, delivery mechanisms, potencies, brands, and other complicated variables. This is a daunting task if you don’t know what you’re doing at the start. That complexity is a turnoff and it keeps some folks away altogether.
For a CBD producer, this complexity presents almost as troubling an obstacle as the rampant competition. SDEC has predicated its model on solving this dilemma from both ends of the equation.
The Right Tool for the Job
The Smart Decision solution is “a consumer-facing resource designed in partnership with MIT-trained software engineers, leveraging computational data science, machine learning, and AI to connect CBD product suppliers with new-adopter customers in search of CBD-based product solutions, overcoming the overly complicated CBD product landscape to allow CBD shoppers to quickly find the right product to suit their needs.”
The platform is on-schedule in the development timeline and the company plans to launch a beta version by the end of March. An advanced preview of the platform will reportedly be granted in person to attendees at the USA CBD Expo 2020 in Las Vegas, NV, which takes place from February 13-15.
The company is also finding a lot of success in gaining traction with producers and suppliers. Remember, this approach only works if the company is able to lure suppliers into participation. As it turns out, this has been very encouraging, and probably represents one of the factors driving the stock higher: everyone wants to be on this platform – probably because they are having so much trouble connecting with consumers.
In a recent release, Adam Green, Smart Decision CEO, stated, “The ideal scenario, from our perspective, is enough interest and enthusiasm on the part of CBD brands to create competition among brands for access to our platform as participating member affiliates. That will allow us to negotiate the most favorable terms once the technology development process is complete and we launch the fully-enabled iteration of the Smart Decision platform. At this point, we are already solidly heading for that ideal scenario, which is well ahead of even our most optimistic assumptions as of 60 days ago.”
The company apparently is worried about the opposite problem already: too many CBD producers champing at the bit to be involved. That likely means it will get great terms on negotiated relationships, which will spell big profits flowing back to shareholders over time.
Hence the action in the stock.
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