One Stock All Set to Ride the Pot Boom
It is no longer a matter of debate whether Canadian companies are the best investments in the marijuana industry. Canada is already well-disposed to the idea of a previously stigmatized drug becoming legal for mass recreational use. It is a no-brainer that the best marijuana stocks are buried right in America’s backyard.
Just to remind you, July 1, 2018 is the day when America’s northern neighbor turns its yellow signal green for recreational marijuana. It is expected that full legalization will usher in a “green revolution” of sorts in the country.
So, if you haven’t already prepared for it, then you must. Because, as much as we believe that this old news is already baked into the price of most Canadian marijuana stocks, we must not overlook the new information coming in.
For instance, one Canadian marijuana company struck a major deal with Canada’s biggest pharmacy company earlier this month.
The Best Marijuana Stock With an “Everywhere” Factor
You know what turns average companies into great investments? Ubiquity.
The legendary billionaire investor Warren Buffett bought into The Coca-Cola Co (NYSE:KO) because everywhere he looked, he found people drinking this black, sugary beverage. He invested in Wal-Mart Stores Inc (NYSE:WMT) for the same reason. Not to forget, Buffett made sure he was buying them at a bargain.
Anytime an average American wants to grab a quick meal, he often ends up at a McDonald’s, mostly because he finds one a stone’s throw away.
This “everywhere” factor has led many simple businesses to achieve gargantuan growth. So, why not take this idea and apply it to marijuana companies?
My dear friend, what I’m suggesting here is that one marijuana company is about to earn this “everywhere” factor.
I’m talking about Aphria Inc (OTCMKTS: APHQF), which has become the first marijuana company to strike a major sales deal with Canada’s largest pharmacy chain, Shoppers Drug Mart, which is owned by Loblaw Companies Ltd (OTCMKTS: LBLCF).
The deal will allow Aphria to sell its marijuana products in all Shoppers Drug Mart outlets across Canada.
It is a deal that will put Aphria “everywhere” on Canada’s map. With Shoppers Drug Mart running over 1,200 pharmacies across the country, expect Aphria products to become ubiquitous much sooner than those of its competitors.
What’s more, the timing of the deal is consequential, since Canada—where marijuana is currently legal only for medical use—is about to fully legalize weed for recreational use.
Aphria may have hit the jackpot with its deal with Shoppers Drug Mart. This marijuana company is set to become the Coca-Cola or McDonald’s of the marijuana world.
But wait, there are quite a few more reasons why the market is already rewarding this stock.
In case you missed it, Aphria stock is up more than 230% this year, beating the biggest marijuana company, Canopy Growth Corp (OTCMKTS: TWMJF), (TSE: WEED), and far outpacing the average market return of 18%.
Chart courtesy of TradingView.com
More Reasons Why Aphria Stock Is the Best Marijuana Stock
Here’s why Aphria stock has been one of the best marijuana stocks of 2017.
Aphria is a unique marijuana company in that it makes a profit, unlike most marijuana producers. That fact, per se, has always been the top reason why I’ve long believed that Aphria is the best marijuana stock.
How does Aphria make it possible? It’s very simple. Aphria is one of the lowest-cost producers of marijuana. The company’s average production costs come out to around $1.11 per gram.
Compare Aphria with its two bigger peers—Canopy Growth and Aurora Cannabis Inc (OTCMKTS: ACBFF)— which spend about $2.73 and $1.91 per gram, respectively.
This gives Aphria an edge over its competitors; that is, the company is able to deliver better margins. This simply means that it subtracts a relatively small amount of costs from its revenue, to arrive at a bigger net income.
In other words, since it produces Cannabis for cheap, Aphria is able to direct these savings to its investors.
Are you partially convinced but still need a little more reassurance that APH stock could be the best marijuana stock in 2018? Then let me give you another great reason why I believe in this company.
I’m a champion of growth investing as much as value investing, although I admit that growth stocks are much less boring than value stocks. Growth stocks promise to deliver speedy returns.
Aphria, in my view, could make for an ideal growth stock in the marijuana world, come 2018. That’s because it is expanding at a supersonic pace right now.
The company, which currently produces about 9,000 kg of cannabis a year, is set to raise the bar three notches in 2018. Aphria is currently upgrading its production capacity with an aim to hit an annual capacity of 30,000 kg by 2018. From there on, Aphria is planning to triple its output to 100,000 kg by 2019. That’s a tremendous capacity upgrade!
On top of that, Aphria has been making equity investments in marijuana businesses left, right, and center. The company has bought stakes in a number of smaller marijuana companies within Canada, which further open the doors for Aphria to make money off the expected marijuana boom in 2018.
And while it’s building its bases within Canada, Aphria is also expanding internationally. It is one of the few marijuana companies selling to the global market, with Australia being the most noteworthy customer base.
Earlier this year, Aphria also made its official foray into the American market with Aphria USA, a subsidiary that sells medical cannabis to patients in Florida. Aphria has likewise invested in a U.S.-based marijuana grower in Arizona to expand its footprint in the country.
Here’s how I’d sum up my take on Aphria stock.
- Aphria is the first and only marijuana company with a deal to sell marijuana at Canada’s largest drugstore chain.
- It is a lower-cost producer of marijuana, compared to its peers.
- It is profitable, unlike most marijuana companies.
- It will be tripling its production capacity in 2018.
- It is expanding into international markets.
- It is the first Canadian marijuana company to run an American subsidiary.
- Its stock has delivered stunning triple-digit returns in 2017, which is better than most of its peers.
- It provides a great opportunity to investors seeking growth potential in their marijuana investments.
Needless to say, I’m bullish on Aphria stock and I have shortlisted it as my top pick among the best marijuana stocks for 2018.