Top Marijuana Stocks for a Portfolio High

The legal marijuana industry remains very much hot and still talk of the town. It is no doubt on track to be one of the fastest-growing sectors over the next five to ten years, as many analysts are calling. It has many potential opportunities for the young and even experienced investors who are looking for a strong yield in the coming years.

There may not be many chances that we will get in our lifetime for a completely new market that has enormous upside potential. At present. the global marijuana market is worth $150 billion, and many close industry watchers suggest even there are more significant gains to be seen with widespread legalization. The growth as detailed could result in sales of some $200 billion worldwide in 15 years, coming via the proceeds of legal selling.

Wall Street firms are now starting to pay attention to the marijuana market. There has been a pick up in coverage by analysts discussing cannabis stocks. The likes of Jefferies, Cowen and Piper Jaffray are all now proving information on cannabis stock picks. U.S. Newswire CNN reported that 13 different analysts are now covering the stock Canopy alone, up from eight analysts back in August 2018. Naturally, the more analysts that start to include cannabis stocks, the more comfortable investors will become, and the more buy initiations will drive share prices higher.

Why So Much Growth in the Sector?

Marijuana has been around for thousands of years and is used primarily for two reasons: getting high and for medical purposes. The drug for a large part has been completely illegal in many countries worldwide, and that is for either of the noted use cases. Things are drastically changing across the globe and certainly picking up some pace.

More and more countries are implementing a law to facilitate the use of medicinal marijuana; it is now legal in over 30 countries for such purposes. In terms of recreational consumption, this is still very much restricted, as only a tiny handful of countries accommodate such use. The growth is merely coming from it being more accepted and accommodated, given its proven benefits by many researchers.

Over the longer-term, there is an opportunity for more significant upside potential tied to federal decriminalization of marijuana. As noted, the tide is very gradually turning in favor of federal legalization in the U.S. President Donald Trump has detailed that he backs the idea of state-by-state legalization, although he has not indicated he is in favor of federal legalization.

How You Can Invest in Marijuana

There are a variety of ways in which you can expose yourself to the marijuana sector; it can be done directly and indirectly.

  • Growers – Many companies primarily serve the purpose of growing and nurturing cannabis plants. Typically, indoor facilities are leveraged, such as greenhouses for such growth of marijuana.
  • Biotech Cannabis-based – Ingredients from the plant extract can be used to develop prescription-based drugs.
  • Industry related product and service providers – It isn’t just the growth and development of the plants, but also the necessary products and services around it on the maintenance and logistical front. They are covering things such as lighting equipment, hydroponics, packaging and distribution, naming just a few.

Read more – Going Green: An Investor’s Guide to Cannabis Stocks

Due Diligence

Just like with any other investment you are exploring, you must conduct your necessary research. Particularly given how young this industry is compared to other sectors, it is vital to be thorough in your background reading beforehand. Looking into the company’s owners, a track record of their work in the industry or perhaps similar sectors are necessary.

Explore an organization’s current financial situation, in addition to their growth prospects, should also be prioritized. You must note that given how young the industry is, within early stages, there may be several companies that are not yet profitable. In terms of gathering company information such as described, it can mostly be found on their website.
Let’s now take a looking at some marijuana stocks that may be worth adding to your portfolio.

Aurora Cannabis Inc. (ACB)

ACB share price weekly chart.

Aurora Cannabis Inc. is a Canadian licensed cannabis producer. It trades on the Toronto Stock Exchange and the New York Stock Exchange. The company now has eight licensed production facilities, five sales licenses, and operates in 18 countries. They boast a large market cap at $6.3 billion. Aurora became even more of a giant in March after they acquired rival MedReleaf in a $2.5 billion deal. It remains the most important deal to date within the industry.

The company offers an excellent stable potential investment into the sector, given the sheer size of its operations. Furthermore, the company is even expanding facilities to accommodate growing market demand. According to a recent report, Aurora plans on increasing its largest greenhouse from 1.2 million square feet to 1.62 million square feet, representing a 33% increase.

ACB shares are trading up around 65% YTD after the price saw a decent rebound at the start of the year following a sell-off from October to December period.

Canopy Growth Corporation (WEED)

WEED share price weekly chart.

Back in April 2014, Canopy Growth back became the first cannabis company in North America to be publicly traded. It is listed on the Toronto Stock Exchange, in addition to being the only cannabis company to be a member of a major global stock market index, the S&P/TSX Composite index.

The stock has a chunky market cap of $19.53 billion. Despite its already colossal dominance and financial success, further growth prospects are still seen. Canopy Growth Corp’s CEO recently noted that he is expecting a growth quarter ahead. He also foresees the cannabis company will generate $1 billion in revenue during its next financial year.

In terms of share price, it has been on the decline since printing highs for 2019 (this was seen up at $68.00). The sellers kicked into gear here, applying to pressure further moves south. Over the last five weeks, WEED has been on a consecutive decline. The price, however, did bounce off weekly support at the $53.00 level, which is somewhat encouraging. Given the healthy looking outlook, this one may be worth holding for the long run.

Charlotte’s Web Holdings Inc (CWBHF)

CWBHF share price weekly chart.

Charlotte’s Web Holdings was founded in 2018. The company is engaged in the production and distribution of hemp-based cannabidiol (CBD) wellness products. The company distributes its products via an e-commerce website and also work with select wholesalers and a variety of brick and mortar retailers. It is listed on the OTCQX Marketplace and has a market cap of around $400 million.

The most recent earnings report from the company was somewhat encouraging for 2018 versus 2017. Key highlights include organic consolidated revenue growth of 71% to $21.5 million (up 21% Q/Q). Gross profit increased 63% to $16.3 million, or 76% of consolidated revenue; also, organic revenue growth of 74% to $69.5 million was reported. The outlook for the stock remains promising, given how young the company is and that it certainly has much more to give.

The share price has been on somewhat of a decline over the last few days, falling 28% from its all-time-highs. In terms of the cooling, it could merely be profit-taking after a decent run higher. It has however managed to catch support within a big buying area; comfort came into play between the $19.00-$18.00 price range.

Featured image courtesy of Shutterstock.

Author:
Ken has over 8 years exposure to the financial markets. During a large part of his career, he worked as an analyst, covering a variety of asset classes; forex, fixed income, commodities, equities and cryptocurrencies. Ken has gone on to become a regular contributor across several large news and analysis outlets.