On Wednesday, Oct. 17, Canada became the first industrialized nation to officially legalize recreational marijuana. Our neighbor to the north was only behind Uruguay, the first country ever to make the same move.
I had that date circled on my calendar for months, and now that it has finally passed, it is time to build a solid portfolio of cannabis-related stocks to take advantage of the potential over the long term.
The marijuana market in Canada will be big, and I expect it to continue to grow significantly in the next 10 years. Today, I want to tell you about five marijuana stocks that will put us in the best position to benefit.
Canopy Growth (CGC)
Canopy Growth (NYSE:CGC) is the world’s largest publicly traded marijuana company, and as a result, it finds itself at the forefront of this trend. It was in the news earlier this year when it received a $4 billion investment from Constellation Brands (NYSE:STZ), the maker of Corona beer, which increased its previous 9.9% stake to 38%. The company’s initial investment was made in 2017 and marked the first big move by a U.S.-based alcohol company into the marijuana sector.
There is huge potential for growth here, and the fact that CGC is based in a country where marijuana is legal is a huge bonus. Then there is the ability for the company to scale up production to meet rising global demand. It has already tripled its marijuana growing capacity in 2018, and there is plenty more to come as CGC has plans to expand its capacity from the current 2.4 million square feet to 5.7 million square feet.
The Green Organic Dutchman (TGODF)
The Green Organic Dutchman (OTCMKTS:TGODF) is a grower of organic, high quality, pharmaceutical-grade cannabis. The Green Organic Dutchman came across my radar a few years ago at one of the many marijuana conferences I attend annually. By focusing on organic products, the company immediately differentiated itself from its peers.
TGODF went public on the Toronto Stock Exchange on May 2, and on June 14, it moved up to the OTCQX Best Market exchange in the U.S. This is a top tier over-the-counter stock exchange, and to qualify, the company had to meet high financial standards and transparency. I even checked, and opening the hood on TGODF reveals a very healthy company. The fact that it has been able to raise $290 million and have a fully-funded budget puts it in a place that very few companies can say they are in.
Plus, it has plans to keep growing. TGODF is in the midst of a major expansion in the two facilities where it will grow organic cannabis. Both sites are based in Canada and strategically placed to be near major metropolitan areas. The company’s goal is to produce up to 116,000 kilograms (kg) of high quality organic marijuana. This is a marijuana stock you do not want to ignore.
Aphria (OTCMKTS:APHQF) is one of the largest marijuana companies in Canada with a market cap of $3.6 billion. It is based in Ontario and it is the leader when it comes to getting product to marijuana buyers. The company has supply agreements in every province of the country as well as the Yukon Territory. That means it has the opportunity to sell to 98.5% of the Canadian population. No other company can match that.
And not only is APHQF in prime position in Canada, but it already has operations on five continents, so it will benefit from the inevitable legalization of marijuana outside of Canada in the coming years. Then there are the rumors that it could be the next Canadian marijuana company to file paperwork to list on a major U.S. stock exchange. That would bring a lot of money in and push the shares higher.
Canada’s legalization opens the gates to massive growth, and APHQF is the best-positioned company in the country to profit. Supply reach along with production capacity, a global footprint, a potential listing in the U.S. and an attractive valuation all make it the top Canadian marijuana stock set to explode.
KushCo Holdings (KSHB)
KushCo Holdings (OTCMKTS:KSHB) is a leading supplier of picks and shovels to the marijuana industry. It was born out of the idea that medical dispensaries were generating $15,000-$20,000 per day in cash sales without any branding. The CEO said, “We noticed a lot of people going into the stores and buying cannabis at the medical dispensaries, and these stores were sort of hiding in plain sight.”
KSHB markets and sells packaging products and related solutions to business customers in the marijuana industry. It had about 4,000 business accounts in 2017, and now that number has ballooned to more than 5,000. This is important because the diversity of customers eliminates the reliance on any one account or region. And as the customer base expands, the company expands with it.
Fundamentally, KSHB is attractive compared to its marijuana stock peers. Management is projecting revenue of $51 million in 2018, which may not sound like much, but is actually better than what some of the largest marijuana companies in Canada are bringing in. Plus, its market cap is only $450 million.
KSHB has been steadily growing and taking market share through both organic growth and acquisitions. And as legalization continues to expand, it will lead to higher sales and thus higher revenue for the company.
Auxly Cannabis Group (CBWTF)
Formerly known as Cannabis Wheaton, Auxly Cannabis Group (OTCMKTS:CBWTF) is the first streaming company in the marijuana industry. When I initially came across it in my research, it immediately caught my attention as it bridges together two of my favorite investment trends: streaming royalty payments and marijuana.
Through its investments in more than 15 different marijuana-related companies, CBWTF is building a diverse portfolio that touches all levels of the industry. As an investor, you are gaining instant diversification and lowering any company-specific risk associated with investing in emerging companies.
I also like that CBWTF has exposure to the cannabidiol (CBD) market. It has an 80% stake in Inverell, a Uruguay-based company with the potential to become the world’s largest CBD producer. Another subsidiary, Dosecann, also has a license for CBD extraction. With how big the recreational market can become in Canada, CBD has the ability to be a huge driver for this stock.
Matthew McCall is the founder and president of Penn Financial Group, an investment advisory firm, as well as the editor of Investment Opportunities and Early Stage Investor. He has dedicated his career to getting investors into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA), +1,044% in Tesla (TSLA), +611% in Liquefied Natural Gas Limited (LNGLY), +324% in Bitcoin Services (BTSC), just to name a few. If you’re interested in making triple-digit gains from the world’s biggest investment trends BEFORE anyone else, click here to learn more about Matt McCall and his investments strategy today.