Whether you like it or not, marijuana is becoming a viable market. Now what that market will look like and what its growth potential remains to be seen, but there's no question it's a viable market. On October 17, 2018, Canada will officially repeal their prohibition on cannabis. In the United States, 16 states have ballot issues that may increase the momentum being shown towards legalizing marijuana nationwide to critical mass.
As a retail investor, it would be hard to look at cannabis companies as anything but a speculative play. But for those inclined to speculate, there is the potential for profit to be made. Just look at what’s been happening with a company like Tilray recently. However, in order to avoid having your investments go up in a puff of smoke, you need to know what you’re investing in. With cannabis companies that something goes well beyond the possibility of a large market of recreational marijuana users. The real growth will be in the companies that can have a quality product and the volume that will make it attractive for companies looking to create disruption in areas such as beverages and textiles.
Quick Links
- Canopy Growth
- Aurora Cannabis
- Aphria
- Cara Therapeutics
- County Line Energy Corp.
- Cronos Group
- 22ndCentury Group
- ETFMG Alternative Harvest
- Tilray
#1 - Canopy Growth (NASDAQ:CGC)
Canopy Growth (NYSE: CGC) - Almost any discussion of investing in marijuana stocks involves Canopy Growth and this won’t be an exception. Canopy is the largest company in the sector with an approximately $18.8 billion market capitalization. As the market for legal cannabis opens up, it’s going to be like a game of musical chairs and there’s little doubt that Canopy Growth will not be left without a seat at the table. Constellation Brands seems to agree. Investors frequently trade on the news and the news about Canopy continues to be exciting. Constellation Brands was already an investor in Canopy. They recently increased their share from 10% to 38%, which essentially was a $4 billion shot of credibility to the cannabis industry and Canopy Growth in particular. But Canopy is also looking to expand into another niche segment of the cannabis industry – medical marijuana. It is accomplishing that by inking a multi-year agreement to supply and service Canada’s Centric Health.
About Canopy Growth
Canopy Growth Corporation, together with its subsidiaries, engages in the production, distribution, and sale of cannabis and hemp-based products for recreational and medical purposes primarily in Canada, the United States, and Germany. It operates through two segments, Global Cannabis and Other Consumer Products.
Read More - Current Price
- $9.03
- Consensus Rating
- Reduce
- Ratings Breakdown
- 0 Buy Ratings, 2 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $4.87 (46.1% Downside)
#2 - Aurora Cannabis (TSE:ACB-CA)
Aurora Cannabis (ACB-CA: Toronto Stock Exchange) - This Canadian company is set to benefit from Canada’s repealing of their prohibition on cannabis which will go into effect on October 17, 2018. With the ability to produce an estimated 570,000 kilograms at peak production, they are the presumptive largest producer in Canada. But that’s just the tip of the iceberg. Although ACB trades on the Toronto Stock Exchange, it recently announced plans to become dual-listed on both the Toronto Stock Exchange and on a major U.S. stock exchange. This will make the stock open to U.S. institutional investors. And Aurora will definitely want access to that capital. But not for the reasons some might think. Wherever you stand personally on the idea of legalizing marijuana, the recreational market is not the real story. Neither is the medicinal market, although that has served a large purpose in taking the stigma off of the product. If you’re thinking about dipping your toes into cannabis stocks, you need to understand the word disruption. Disruption is a fancy term that basically means how a product can be used across many sectors. In other words, how disruptive can it be? As it turns out, cannabis is looking pretty darn disruptive and that makes Aurora Cannabis a great play. That’s because The Coca-Cola Company has announced that it has conducted at least exploratory talks with Aurora to partner with them to create cannabis-infused beverages. This would involve cannabis’ non-psychoactive CBD as the ingredient.
About
- Current Price
- 0.00
- Consensus Rating
- N/A
- Ratings Breakdown
- 0 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
#3 - Aphria (NASDAQOTH:APHQF)
Aphria (NASDAQOTH:APHQF) - Aphria is another Canadian-based company that is looking to enter the U.S. market in a big way. The company is projecting to produce 225,000 kilograms at full capacity, which would make them the third largest manufacturer in Canada. Bloomberg reported that Aphria was in fact, the initial company that Coca-Cola was - and perhaps still is - courting. Like Aurora, Aphria is well positioned to take advantage of the move towards CBD-infused beverages and oils. Not only will these products carry better margins, but they are expected to be more widely accepted in a society where people may not want to ingest cannabis by traditional means. Two keys to sort out which companies will be left standing as the cannabis industry approaches the point where consolidation is product differentiation, a means to control production and the ability to partner to gain exposure to new markets. Aphria achieves product differentiation through its focus on alternatives to cannabis such as oils. It recently announced a $55 million (Canadian dollars) investment in an extraction center, and the company recently acquired Nuuvera which opened up the company to a dozen markets worldwide.
About
- Current Price
- 0.00
- Consensus Rating
- N/A
- Ratings Breakdown
- 0 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
#4 - Cara Therapeutics (NASDAQ:CARA)
Cara Therapeutics (NASDAQ: CARA) - One of the primary missions of many medical marijuana companies is to create a viable alternative to opioids as a source of pain management. Cara is one of the leaders in this mission. Although they may look like a pharmaceutical company, the company is standing out on the leading edge of mining the pain-fighting properties of cannabis. Specifically, Cara has a drug in preclinical development, CR701, which uses the unique properties of cannabis to treat neuropathic pain. Buying into Cara is not considered a pure cannabis play, but as this market becomes more mature, there will be consolidation among the major cannabis growers and suppliers, and companies like Cara will present opportunities for investors to profit from the untapped opportunities that cannabis is unlocking. One concern is that CR701 could be several years away from becoming a viable contributor to Cara’s top and bottom line. However, someone has to be first. And if the trials go well, Cara will be a name to watch in the increasingly disruptive world of companies looking to capitalize on cannabis.
About Cara Therapeutics
Cara Therapeutics, Inc, a development-stage biopharmaceutical company, focuses on developing and commercializing therapeutics treatment of chronic pruritus in the United States. The company's lead product is KORSUVA (difelikefalin) injection for the treatment of moderate-to-severe pruritus associated with chronic kidney disease (CKD) in adults undergoing hemodialysis.
Read More - Current Price
- $0.71
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 3 Buy Ratings, 1 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $9.75 (1,278.9% Upside)
#5 - County Line Energy Corp. (OTC:CYLC)
County Line Energy Corp. (OTC: CYLC) - Don’t let County Line’s status as an over-the-counter stock scare you. This company is well positioned to take advantage of the cannabis craze. The companies that are able to have a hand in controlling how cannabis is grown and produced stand to be big winners. As this market goes mainstream, there will have to be a way to automate the growing process in an environmentally safe way that also ensures quality and scalability. Through their wholly owned subsidiary, D5 Partners, Inc., the company recently acquired Grow Box 5000 hydroponics technologies. Hydroponics systems are a mature market in growing plants and vegetables and the company has plans to make their latest product, the Grow Box 5K an immediate market leader in promoting the production of indoor cannabis on all scales. Certainly, the demand for recreational and medicinal marijuana may increase. In fact, a recent National Gardening survey found that 15% of U.S. households would grow marijuana at home if it was legal. But County Line has its eye on a much larger market, the market for hemp. Hemp is essentially the cousin of marijuana, without the addictive properties and it’s used in much more mainstream applications such as health foods, skin care, and textiles. Disruption is one of the real end games for cannabis and County Line looks to be a major player.
About
- Current Price
- 0.00
- Consensus Rating
- N/A
- Ratings Breakdown
- 0 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
#6 - Cronos Group (NASDAQ:CRON)
Cronos Group (NASDAQ: CRON) - Many of the most successful cannabis companies share the common trait of being true believers. You would have to be because the process of taking cannabis mainstream has probably felt like Sisyphus and his rock. For Cronos, their passion is about removing the stigma of cannabis particularly as it relates to the medicinal marijuana market. Cronos is not a producer, they are a company that looks to invest in and provides support for the companies that advance their mission. They are the 100% owner of Peace Naturals which is licensed to produce and sell medicinal marijuana in Canada and Original BC which is licensed to cultivate and sell medicinal marijuana. They are also a part owner in Whistler Medical Marijuana Company which is licensed to produce and sell medical marijuana. Whistler Medical can also cultivate cannabis oil. By planting their stake firmly in the cannabis field, Cronos has opened itself to new opportunities including recent deals to become a supplier to several Canadian recreational cannabis dealers as well as being chosen as a supplier by Cura, a company already poised to become the leading provider of premium cannabis oil and hemp to the international markets where it is legal, including the United States. This agreement will allow Cura to enter the Canadian market.
About Cronos Group
Cronos Group Inc operates as a cannabinoid company that engages in the cultivation, production and marketing of cannabis products in Canada, Israel, and Germany. It offers dried flower, pre-rolls, oils, vaporizers, edibles, and cannabis tinctures under the Spinach, Lord Jones, and PEACE NATURALS brands.
Read More - Current Price
- $2.47
- Consensus Rating
- Hold
- Ratings Breakdown
- 2 Buy Ratings, 0 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $2.83 (14.7% Upside)
#7 - 22ndCentury Group (ASE:XXII)
22ndCentury Group (NYSEAMERICAN: XXII) - One of the cautionary tales about cannabis investing comes in the possibility that as the industry matures, other companies will bring their expertise to bear and overtake the category. 22ndCentury Group may be an example of that. This is a company that’s known for growing low-nicotine tobacco plants and that looks to finally be ready to contribute to the company’s bottom line. So with more revenue on the horizon, where might the company be looking to grow? Cannabis plants. The company currently controls several cannabis plant-related patents and has been working on a no-THC cannabis plant. THC is the component of cannabis that gets you high. The company is also conducting research that could lead to genetically engineered cannabis plants. This would allow the production of a product with optimized levels of cannabidiol (CBD) and other cannabinoids. While the work on both products is still in its infancy, it’s logical to think that this is the space that 22ndCentury Group will seek out.
About
- Current Price
- 0.00
- Consensus Rating
- N/A
- Ratings Breakdown
- 0 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
#8 - ETFMG Alternative Harvest (ETF:MJ)
ETFMG Alternative Harvest ETF (NYSEARCA: MJ) - One thing the cannabis craze has sparked is a flood of Exchange-Traded Funds (ETFs) that seek to make it easy for investors to speculate without having to pick an individual company. ETFMG Alternative Harvest includes many of the top cannabis companies, including some that are probably on this list. However, the ETF also provides exposure to some Canadian cannabis stocks that may be tough to buy if you don’t live in Canada. That can be significant for investors seeking to find growth stocks. In the U.S., even the most well-run cannabis companies face barriers to capital and are essentially all-cash businesses. This can be especially difficult for a start-up. Canadian companies, however, do not face the same barriers to capital as some of their U.S. counterparts. Plus, the Canadian society as a whole has a more progressive mindset that is just beginning to become a part of the U.S. conversation. Investing in this ETF gives you exposure to some of these companies as well.
About
- Current Price
- 0.00
- Consensus Rating
- N/A
- Ratings Breakdown
- 0 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
#9 - Tilray (NASDAQ:TLRY)
Tilray (NASDAQ: TLRY) - Tilray is the second largest cannabis company in terms of market cap at approximately $16 billion dollars. Their stock has been on a meteoric rise and in their last earnings report, the first one Tilray issued as a publicly traded company, they reported that their revenues had double year-over-year. That doesn’t mean the company is profitable. And they are only expected to generate $41 million in sales for 2018 fiscal year. In fact, it reported a loss of $12.8 million in the quarter. But right now, investors are choosing to overlook that. The question is why? Like Canopy Growth, Tilray is eagerly positioning itself as a partner with major beverage companies that are looking for ways to infuse cannabis into their products. To that end, Tilray was chosen to be the supplier for Nova Scotia Liquor Corporation as well as Prince Edward Island Cannabis Management Corp. And Tilray is also making in-roads into the medical marijuana market. The company recently announced that they had received approval from the U.S. Drug Enforcement Administration to import a cannabinoid capsule to the United States for use in clinical trials. The capsule is designed to treat essential tremor, a neurological disorder.
About Tilray
Tilray, Inc engages in the research, cultivation, processing, and distribution of medical cannabis. The company offers its products in Argentina, Australia, Canada, Chile, Croatia, Cyprus, the Czech Republic, Germany, New Zealand, and South Africa. Tilray, Inc is headquartered in Nanaimo, Canada.
- Current Price
- $1.84
- Consensus Rating
- Hold
- Ratings Breakdown
- 1 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $2.71 (47.2% Upside)
In just a few short years, marijuana stocks have gone from being something you would, pardon the pun, have to be high to invest into something that is now being considered the next big bubble. Which is it? The market is still so very young. And while the track record of other emerging industries may provide some clues to the direction cannabis companies and stocks, will take, nobody knows for sure. That's a reason for investors to be excited and a little skeptical.
When you’re considering investing in cannabis companies, you have to pay attention to their size and scope. The market is getting crowded and as every investor knows, industries don't expand forever. Eventually, there will be a contraction and when that happens, you'll want to make sure you're invested in the major producers. These players will be able to attract the highest margins and best prices. As our list shows, right now that means retail investors in the U.S. have to look to Canada.
One final thought, no matter your political inclinations, the November elections in the United States bring ballot proposals that would legalize marijuana for medicinal and recreational to sixteen states. If you’re an investor looking to get in on the pot craze, this election may be an important barometer.
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