It’s not hard to understand why the marijuana industry is growing at such an extremely quick pace. Following the legalization of recreational cannabis this past October in Canada, as well as steady legalizations at the state level in the United States of America, the pot industry is now a legitimate business model. Investment dollars are pouring in since it’s now a validated industry, and so is demand for pot products. It would seem as if pot stocks could do no wrong, but as investors, you’ll know this isn’t true. There are always winners and losers within an industry regardless of the forecasted growth trajectory, and legal cannabis will be no different. With this in mind, below you’ll find the five stocks that i think you’re smart to own going forward.
Aurora Cannabis (NYSE:ACB): $7.22 current price
Because of its projected output, Aurora is an easy stock for investors to rally behind as it will likely lead all Canadian growers. At full production capacity the company is looking at a minimum of over 500,000 kilograms.
With a newly announced acquisition in Portugal, Aurora Cannabis has also done an excellent job of moving into overseas markets. It has a presence in 24 countries on five continents. This should come in handy by 2021, when the company will be looking to offload its excess domestic production as Canada could be producing far more dried cannabis flower than it can sell domestically by then.
Aurora Cannabis also noted in its most recent quarterly operating results that it’s on track to generate recurring positive EBITDA by its fiscal fourth quarter. Although this doesn’t guarantee profitability, it suggests that Aurora is on the right track to generating a recurring bottom-line profit.
OrganiGram Holdings (NASDAQOTH: OGRMF): $6.82 current price
With 113,000 kilos in peak annual production forecast by management, OrganiGram will solidly be a top-10 producer on an annual basis.
What makes OrganiGram particularly unique is its use of a three-tiered growing system at its Moncton campus in New Brunswick. Using tiers to grow plants allows for efficient space usage, in fact, there’s a good chance the company’s yield per square foot could be among the three highest in the industry. Couple that with exceptionally low costs (due to efficient space usage) and the company’s focus on a single grow site, and it’s easy to see why profit projections are so robust for OrganiGram.
Also with a focus on hemp and cannabis oils, OrganiGram’s product diversity will help protect its operating margins from being adversely impacted if the per-gram price of dried cannabis tanks.
CannTrust Holdings (NYSE:CTST): $9.02 current price
With a focus on hydroponic growing at its Vaughan and Niagara facilities, CannTrust Holdings is another grower that you should own. As opposed to soil, Hydroponics involves growing plants in a nutrient-rich water solvent. Since CannTrust has relatively inexpensive access to electricity and water in both locations, hydroponics offers a high-yield, low-cost means of growing pot.
Recently, Pelham and CannTrust agreed on a 390,000-square-foot expansion, albeit with added automation to improve efficiency and yield. If I were an investor, I’d count on CannTrust making acquisitions in the not-so-far future to further increase its annual output in light of its Niagara permitting holdup and reduced expansion (based on square footage).
Flowr (NASDAQOTH: FLWPF): $4.17 current price
Whereas most growers are focusing on sheer number, Flowr is all about quality. More specifically, this is a company that’s looking to carve itself a sizable chunk of the ultra-premium cannabis market. Since more affluent clientele are far less perturbed by economic fluctuations than the average consumer, Flowr should be better positioned than most pot growers to outperform in any economic environment. Additionally, Flowr might top all growers in terms of efficient production, with projected yields of 300 to 450 grams per square foot.
The Green Organic Dutchman (NASDAQOTH: TGODF): $3.14 current price
The Green Organic Dutchman may wind up being the 4th- or 5th-largest producer in Canada, depending on how much capacity expansion Tilray undertakes. Also known as TGOD, the company has forecast peak annual output of 195,000 kilos, which includes organic builds in Quebec and Ontario and partnerships abroad, including Jamaica.
Another reason to like The Green Organic Dutchman is its focus on cannabis alternatives. 40,000 kilos (of its 195,000 kilos in peak production) are expected to be devoted to cannabis-infused beverages and edibles, both of which will become legal in Canada by no later than mid-October. As one of Canada’s largest producers, this alternative cannabis operation looks to be a dangling carrot for a snack or beverage company looking for a marijuana partner.