It’s still one of the most controversial topics.
But it’s really tough to discount just how profitable it’s been for investors.
For most of 2018, marijuana stocks ran higher on news of Canadian legalization, further state approval in the U.S., and corporate interest. The U.S. FDA even approved the first cannabis-derived drug. We saw the 2018 Farm Bill, which legalized hemp and hemp-based CBD.
By the way, that legalization of CBD opens up a whole other opportunity.
In fact, as CBD just begins its cultural renaissance, the market could more than double in value to $2.5 billion by 2026 from $950 million, according to Transparency Market Research. However, we could see those numbers improve significantly, as CBD disrupts multi-billion-dollar industries, including the $4.2 trillion wellness market.
Two, according to analysts at Cowen, U.S. cannabis sales alone could reach $80 billion by 2030 – an increase of $5 billion from earlier estimates, and a 4% compound annual growth rate.
It’s tough to ignore what’s happening, as the renaissance begins.
Still, even with that information at hand, related marijuana stocks pulled back – but we believe that pullback is simply temporary.
While pot stocks did pull back in recent months, they’re worth the gamble. Some of our favorite opportunities include the following:
Hot Pot Stock No. 1 – Aurora Cannabis (ACB)
The company now anticipates revenue for the quarter ended in December 2018 of between $50 million and $55 million, compared to $11.7 million year over year.
That implies growth of nearly 330% in a single year.
“Revenue growth for the quarter was driven by the Company’s strong position in the adult consumer use market in Canada, continued shipments of medical cannabis to Aurora’s expanding base of approximately 71,000 patients in Canada, and relatively stable, supply restricted shipments, to its growing international markets,” according to the company.
Hot Pot Stock No. 2 – Canopy Growth (CGC)
Oversold, CGC is one of the most well-known pot stocks on the market.
It doesn’t hurt that Piper Jaffray analysts just initiated coverage on the stock with a $40 price target – a 33% premium over current prices. Better yet, Constellation Brands (which invested $4 billion in CGC) noted that Canopy is on track to surpass revenue expectations over the next two years. In fact, Constellation’s COO believes CGC could see more than a billion Canadian dollars in revenue over that time.
Even better, analysts at Cowen believe U.S. cannabis sales alone could hit $80 billion by 2030 – an $5 billion increase from earlier estimates.
“We expect continued growth in newly established U.S. states, and more robust growth in Canada as more supply comes online and new form factors hit the market,” analysts at Cowen noted. Among the likely beneficiaries, will be Tilray Inc. and Canopy Growth, which it believes will “finally start to see the true benefits of adult use sales and the lapping of upfront investments made in calendar 2018 to scale up ahead of adult use.”
That’s growth no investor should ignore.
Hot Pot Stock No. 3 – The Horizons Marijuana Life Sciences Index ETF (HMLSF)
The Horizons Marijuana Life Sciences Index ETF seeks to replicate, to the extent possible, the performance of the North American Marijuana Index, net of expenses. The Index is designed to provide exposure to the performance of a basket of North American publicly listed life sciences companies with significant business activities in the marijuana industry. It has holdings in Aurora Cannabis, Canopy Growth, Aphria Inc. Cronos Group, and CannTrust Holdings.
As many of us are aware, ETFs offer us more for less.
If we were to buy the top pot stocks individually, we’d pay more than the cost of the ETF. For example, if we were to buy 100 shares of CGC, it would cost $3,755. And we’d only own CGC.
If we were to buy 100 shares of the HMLSF ETF, it would cost us $1,300 and we’d be offered the opportunity to diversify among its many holdings.