If I Could Only Purchase a Pure-Play Marijuana Stock, That's It – The Fool Motley


What is the best marijuana stock on the market right now? My choice would be Constellation Brands (NYSE: STZ). I think Constellation is the best marijuana stock because of its great growth prospects and relatively lower risk compared to most marijuana stocks.

But Constellation Brands is not a just for the game Marijuana stock. Constellation purchasing involves investing in the company's alcoholic beverages sector even more than in the cannabis industry.

So, what is the best pure marijuana stock on the market today? If I could only buy a stock of pure-play marijuana, it would be Constellation's partner, Cover growth (NYSE: CGC).

Bunch of marijuana leaves with a prominent position in the center on the top of the stack

Source of the image: Getty Images.

Why not a cheaper stock?

Yes, Canopy Growth's market capitalization of more than $ 15 billion is well above that of any other pure-play marijuana stock. Why would not I choose a more attractive title – maybe Aphria (NYSE: APHA) or Organigram (NASDAQOTH: OGRMF)? First, let me say from the outset that it would not surprise me if Aphria and / or OrganiGram are outperforming Canopy Growth this year.

The Aphria share price was mainly affected by the short sellers allegations that the company would have been excessively overpaid for its acquisition by LATAM Holdings. OrganiGram is an excellent Canadian marijuana producer that is not getting the attention it deserves from the US investment community. I think it's likely that these two situations will change in 2019, with the review by a special committee of the Aphria board, of the possibility of dispelling vendors' allegations to discovered and the listing of OrganiGram on a major US stock market.

However, I have a long-term vision for investing. If I could only buy one share in an industry, it was the company that I thought had the best chance of being a dominant player in the industry. And for the cannabis industry, in my opinion, the shares are neither Aphria nor OrganiGram, but rather Canopy Growth.

Although Canopy seems much more expensive than most other Canadian marijuana stocks at the present time, I think it's best to look into the future of the company. cannabis industry. I expect the global marijuana market to easily exceed $ 100 billion over the next 10 years or more in subsequent years. If Canopy captures 10% of this market, the stock should be worth several times its current value.

The compelling case for Canopy

The global cannabis market is evolving and growing rapidly. I think that to be the biggest winner in this market, a company must be able to have the production capacity needed to meet demand, a strong distribution network in key countries and the ability to stay in business. ahead of his time. the market is growing. I think there's a compelling argument that Canopy Growth ticks those boxes better than any other company.

Thanks to its many acquisitions, Aurora Cannabis Currently boasts the largest production capacity of the industry. However, Canopy ranks as a very good candidate and continues to strengthen its production capacity through expansion and supply agreements with other cannabis producers.

With regard to the distribution networks, Canopy Growth is undoubtedly on the ground. The company has the largest and strongest supply agreements among its peers for the recreational marijuana market in Canada. It is widely present on the European markets, especially in Germany. Canopy is well positioned in Latin America, Australia and Southern Africa.

But maybe the best reason to love Canopy Growth is its ability to stay ahead of the curve. Part of this capacity comes from a strong management team. However, Canopy's relationship with Constellation Brands is also an important factor. The agreement between Canopy and Constellation gave him a ton of money to use for his international expansion. He also provides Canopy with an expert partner in creating successful consumer brands.

In my opinion, a good example of Canopy's ability to lead rather than follow is the company's plan to build a large-scale hemp production facility in New York. The recent legalization of hemp in the United States paves the way for a huge new market. While his rivals are still saying they would like to get into the US, Canopy has already got a license in New York, has established positive relationships with key political figures and will settle in the near future rather than stay at home. waiting.

My biggest concern

Despite my optimism about the prospects for Canopy Growth, I know that Murphy's law is awake. My biggest concern is that cannabis markets around the world will take longer to develop than everyone else expects.

There are many ways to do it. Countries may be slow to establish regulations even after marijuana is legalized. Even if regulations are put in place quickly, they could be burdensome and hinder growth. And while the possibility that the US marijuana market may open up to Canopy appears better than ever, there is no guarantee that federal laws will be changed in the near future.

For all these reasons, Canopy Growth remains a high risk security that many investors will want to master. But for more aggressive investors with a long-term perspective, I can not think of a stock of pure marijuana play better and stronger to buy now than Canopy Growth.

Keith Speights has no position in the mentioned actions. The Motley Fool recommends Constellation Brands and OrganiGram Holdings. Motley Fool has a disclosure policy.

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