The Marijuana Stock Market Rebound We’ve Been Waiting For
It has finally come. It took a while—longer than most of the marijuana stock market supporters would have liked—but pot stocks have finally swung back up into the black after a disappointing 2017. So, while all the haters were sitting around pointing fingers and laughing at what was shaping up to be a rough year for marijuana investments, the tide has finally turned, and those who had stuck out their positions in pot stocks have reaped rewards for their perseverance.
With gains of over 10% by a number of favored pot stocks in under a week, we’re seeing the resurgence of the marijuana stock market after a long, long layover.
So, what are some picks that are worth considering? With all the good news coming out of Canada, and its steady progress toward full marijuana legalization by summer 2018, I’d say a good number of marijuana companies have great stocks.
Heavy hitters like Canopy Growth Corp (OTCMKTS:TWMJF) are trucking along once more in the black, while other favorites, like Aphria Inc (OTCMKTS:APHQF), have shown strong gains. And there’s one more exciting company I’ll get to later, when we take a closer look at my top marijuana stock picks.
Chart courtesy of StockCharts.com
Before I get into all the fine details of these companies, let’s look at why I’m bullish on marijuana companies in general, and why I think the marijuana stock market couldn’t have picked a better time to wake up.
Canadian Marijuana Stocks Are Loving the News
When Canadian Prime Minister Justin Trudeau was running for the leadership of his country, one of his campaign promises was marijuana legalization.
Fast forward a couple of years. Since Trudeau’s 2015 election win, there has been little real progress on the pot legalization front. But that all changed recently, when the Canadian government ramped up its legalization efforts and began putting dates and details in place.
After all, many politicians break promises made on the campaign trail (it’s not as if politicians are often revered for their profession’s honesty), but it does appear more and more that marijuana legalization is going to stick, which is great news for the marijuana industry and listed marijuana producers.
First, in the past several weeks, we’ve been hearing more about exactly how the marijuana trade will function in Canada. For instance, the Province of Ontario—the most populous province in Canada—recently laid out its plan to use its government-run Liquor Control Board of Ontario (LCBO) to also monopolize the legal marijuana retail sector.
The Ontario government will be opening up 40 stores next year, and a total of 150 separate locations to sell the legalized drug across the province by 2020. Online sales are expected to begin next year to compensate for the expansion process. (Source: “LCBO subsidiary to manage Ontario marijuana sales,” The Globe and Mail, September 8, 2017.)
Things are moving apace in Canada, in terms of full marijuana legalization, so marijuana companies that are already operating in the country are going to be on the receiving end of a massive swell of new customers. This type of market increase is gold for these stocks, and you can see their potential in last week’s surge alone.
Of course, private companies are naturally unhappy with the government’s monopoly on marijuana sales in Canada, and that friction may lead to a confrontation down the road. But that is unlikely to have a large effect on the winning news for the marijuana stock market: that legal weed is coming to Canada, and producers are about to see a lot more demand.
After all, we’ve seen in certain U.S. states that legalizing marijuana can be great for the economy, especially for anyone in the marijuana business, from distribution to production to sales.
Nevada, a recent addition to the U.S. recreational marijuana legalization fold, had to declare a literal state of emergency in order to skirt around the transportation laws that prevented companies from feeding the hungry masses who were waiting for legal weed.
So, with that out of the way, let’s take a look at three stocks that I think could be valuable additions to any marijuana investment portfolio.
1. Canopy Growth
Owner of the greatest stock ticker on the market (TSE:WEED), Canopy stock has increased by nearly 12% over the past week and over 15% year-to-date. Canopy Growth remains every bit the heavy hitter it was when it had its initial public offering (IPO) with over $1.8 billion in market cap. To this day, it remains the most highly valued company that deals mainly in marijuana products.
With the surge of the marijuana stock market, this Ontario-based producer is likely to have a big 2018, as it will likely be one of the main providers of marijuana once legalization hits in Canada.
2. Aphria Inc
This is not the first time I’ve written about Aphria, and it won’t be the last. I love its business model, in that it is attempting to differentiate itself from the competition by using specialized growing methods to help with productivity and cost.
Its use of greenhouse growing, for instance, ensures more stable and predictable yields while also serving to decrease the operating costs.
Aphria is still one of my favorite picks for the marijuana stock market, and should be on the receiving end of a big stock boon in 2018. Aphria stock is up eight percent on the year and 12% over the past five days.
3. MedReleaf Corp
MedReleaf Corp (OTCMKTS:MEDFF, TSE:LEAF) is the owner of my second favorite ticker, and has been on the receiving end of a lot of good press lately.
The company has managed to reduce its cash cost per gram to $1.50 in the second quarter, down from $2.75 in the previous quarter and $3.25 from a year ago. This shows that the company is clear in its mission to bring a competitive product to market that may be able to edge out competitors with its superior price point.
Chart courtesy of StockCharts.com
Another impressive feature of MedReleaf stock is that it holds an 18% market share among medical marijuana license holders. That’s a huge chunk to be held by a relatively small company, when you take market cap into account. Canopy Growth, for instance, is more than $1.0 billion ahead of MedReleaf in market cap.
Add the fact that the company has shown an impressive 27% gain in 2017, while other marijuana companies have reported more modest jumps, and you have what I believe is a great marijuana penny stock going into 2018.
Marijuana companies have the potential to dominate the stock market next year if the Canadian marijuana legalization process goes smoothly. Several companies that are innovating in advance of the expected boom are likely to be the cream of the crop.