Safe Recreational Marijuana Stocks
When it comes to safe recreational marijuana stocks, “safe” is a relative word. The marijuana industry, after all, is not a particularly safe industry.
Nor would we want it that way. “Safe “denotes small gains and small losses, trucking along at yearly seven percent growth or something along those lines.
But that’s not what we’re looking for in the marijuana industry.
What we’re looking for is big breakout stocks that will double or triple our investments in a year. That is, after all, what we saw out of the marijuana industry in the first few years of its existence. And we continue to see out of some marijuana stocks.
Are Marijuana Stocks Safe to Buy?
So when considering safe recreational marijuana stocks, just know that you’re still going to be exposed to a volatile marijuana market no matter where you invest. And that’s not a bad thing.
You want large gains and potential. You’re not investing in blue-chip stocks for a guaranteed dividend quarter after quarter. This is high-stakes, high-reward investing.
Still, that being said, marijuana stocks are not created equal.
While there is a wealth of marijuana stocks to choose from, there are several that are better suited to roll with the punches and outperform their competitors, even in the downturns.
These marijuana stocks are all generally defined by three factors that I value the most among pot industry shares: signed supply agreements, global expansion, and steady business plays.
In my mind, these are the three things that any marijuana investor ought to consider before jumping in on marijuana stocks as they will not only determine whether these companies can weather the volatile marijuana market, but will also determine the future potential of the stock.
Which brings us to the last point about the safe recreational marijuana stocks: they will all likely take big dives at times.
But the reason I’m calling these stocks safe is because the long-term projection for these companies is solid, with all likely to gain 100%-plus as the years go by and more countries legalize marijuana.
So while severe pullbacks are the cost of doing business in the marijuana industry, the safe marijuana stock list will give you two companies that I believe will see growth for years to come, hiccups and all.
Safe Marijuana Stocks List
|Canopy Growth Corp||CGC||NYSE||33%|
|Cronos Group Inc||CRON||NASDAQ||63%|
Safest Marijuana Stocks in 2019
And that brings us to the safest marijuana stocks in 2019.
The two picks I have are Cronos Group Inc (NASDAQ:CRON) and Canopy Growth Corp (NYSE:CGC).
Both these companies have demonstrated the best ability to solidify their place in the marijuana market and weather the oncoming downturns while also remaining open to huge gains down the road.
Below, we’ll go into detail of each company.
CGC Stock Forecast
The CGC stock forecast is a bright one, even if the current market downturn looks bleak.
Canopy Growth stock is going to be taking hits as the broader stock market is in a pullback, due primarily to political happenings and issues in other sectors.
Having said that, CGC stock remains solid.
The company is one of the few that has grown in 2018, with a significant bump of 33% year-to-date.
Canopy has signed supply agreements across Canada, positioning it to be a main supplier to the largest marijuana-legal country in the world. Furthermore, as the market develops in Canada, expect Canopy’s role to grow due to its massive supply capacity.
Chart courtesy of StockCharts.com
As far as global expansion, the company has made inroads towards the South American market with acquisitions this year, as well as increasing its stake in the German market—arguably the most lucrative market outside of the U.S.
The strong acquisitions are not overly aggressive, instead taking a steady approach to the market that I appreciate. As such, I believe big things lie ahead in CGC stock’s future.
It’s also worth mentioning that Canopy Growth was the recipient of a massive $4.0-billion investment courtesy of Constellation Brands, Inc. (NYSE:STZ), marking the largest deal between pot and “Big Alcohol” to date.
CGC Stock Financials
Despite having a strong CGC stock forecast, the company’s second-quarter performance left a little to be desired.
Canopy saw an increase in all major metrics, from patients to revenue to kilograms sold. The company also registered stronger sales in an emerging market in Germany. (Source: “Canopy Growth Corporation Reports Second Quarter Fiscal 2019 Financial Results,” Canopy Growth Corp, November 14, 2018.)
The reason the stock fell despite these good numbers, however, was due to high analyst expectations, where the report fell short.
The company also saw losses before interest, tax, depreciation, and amortization (EBITDA), hit $57.7 million in the second quarter, up from a loss of $4.8 million in the same quarter a year ago. The year-to-date period saw an adjusted EBITDA loss of $80.2 million, a substantial difference compared to $8.7 million loss in the same period just a year prior.
Losses are not damning, however. They represent the company making new investments and spending in order to expand. It’s a common practice among growing companies, and this appears to be the case for Canopy Growth Corp.
The CGC stock forecast for 2019 is interesting because the company is making the right international and domestic acquisitions to guarantee its future success. For an exploratory phase requires expansion and investment, which should translate to spending.
Canopy Growth Corp also sports one of the highest recreational marijuana market caps around, speaking to the company’s size and staying power.
CRON Stock Forecast
CRON stock is very similar to CGC stock is many ways.
Both companies have signed major supply agreements across Canada, with CRON stock having recently netted ones in two of Canada’s richest provinces, Ontario and British Columbia. (Source: “Cronos Group Inc. Announces Provincial Supply Agreements,” Cronos Group Inc, August 21, 2018.)
On top of that, Cronos has, like Canopy, made smart and incremental acquisitions over the course of 2018, not taking unnecessary risks.
And the final thing they share is that both were recipients of massive outside investment.
Chart courtesy of StockCharts.com
In CRON stock’s case, it was by way of Altira Group Inc (NYSE:MO), the marker of “Marlboro” cigarettes. Altria put in a tidy $1.8 billion into Cronos, sending the stock value soaring. (Source: “Altria to Make Growth Investment in Cronos Group,” BusinessWire, December 7, 2018.)
This puts Cronos in an enviable position and gives it the staying power to weather downturns while also having a lot of room to grow moving forward.
CRON Stock Financials
To sweeten the deal for CRON stock, the company’s most recent quarterly report was solid.
The company saw third-quarter revenues soar to $3.8 million versus $1.3 million a year before.
Kilograms sold in the quarter also jumped by 213% compared to the previous year.
The main factors associated with the increase in revenues and the increase in kilograms sold are expanded production capacity and increased volumes sold through the domestic medical and international channels, as well as initial shipments into the recreational market.
The company was also able to substantially increase its cannabis oil sales, which accounted for about 29% of the total revenue in the third quarter of 2018.
The volatile marijuana market is, by it’s nature, not predictable.
But these safe recreational marijuana stocks are the best-suited to see long-lasting gains for years to come due to their impressive foundations.
Both have strong financials, strong supply agreements, forward-looking global expansion plans, and huge supply capacities and are backed by some of the biggest outside investors in the industry.
While there are going to be a fair share of ups and downs, the jumps long-term are more than likely to outpace the falls.