Marijuana Stocks: Which Producer Is a Top Pick for 2018?

Canada’s three top marijuana stocks, including Canopy Growth Corp. (TSX:WEED), have produced stunning returns in 2017. Which stock is well positioned to continue with this explosive growth?

| More on:

Canada’s three top marijuana stocks have produced stunning returns in 2017. Investors in Canopy Growth Corp. (TSX:WEED) and Aurora Cannabis Inc. (TSX:ACB) stocks saw their capital doubled, while Aphria Inc. (TSX:APH) surged 180%.

The biggest question for investors for the next year is, which marijuana stock is well positioned to continue with this explosive growth?

They are also concerned about which one is most likely to survive if the market takes an ugly turn or if expectations built in to the prices of these stocks are not met.

Before making an investment decision, you should understand the risks of investing in pot stocks. Though there are a plenty of arguments that justify the extremely rich valuations of marijuana stocks, investors should not forget possibility of downside.

If you plan to enter the market in 2018, you should keep in mind that you will be buying marijuana stocks at a time when there may not be much upside left after such an incredible rally in 2017.

After evaluating the risks of investing in Canada’s top cannabis companies, I think Canopy is the safest bet for investors in 2018. Here is why.

The market leader

Canopy ​is ​a ​leading ​diversified ​cannabis ​company ​offering ​distinct ​brands ​and ​curated ​cannabis ​varieties in ​dried, ​oil, ​and ​capsule ​forms.

For 2018, ​Canopy ​has an extensive growth agenda aiming to expand its facilities, ​representing ​3.2 ​million ​sq. ft. ​of ​indoor ​and ​greenhouse ​production ​capacity.

Canopy ​ ​has also ​established ​partnerships ​with ​leading ​names ​in ​Canada ​and ​abroad, ​with ​interests ​and ​operations ​spanning ​seven ​countries ​and ​four ​continents. ​The company owns a pharmaceutical distributor in Germany and has entered joint-venture, or partnership, agreements in several countries, including Spain, Australia, Denmark, Brazil, Jamaica, and Chile.

Canopy currently provides medical marijuana to more than 50,000 registered patients through its online sales platform.

Recreational market

Canada’s marijuana stocks have been surging ahead of the planned legalization of pot for recreational use on July 1.

The federal government is moving swiftly to remove hurdles and put in place a legal framework to allow the functioning of the market. But the nation’s provinces and territories also have a major role to play in pricing and distribution of the product in the market, which could range between $5 billion and $10 billion a year.

According to recent study by Statistics Canada, Canadians consumed an estimated $5-6.2 billion worth of cannabis in 2015. 

Medical marijuana is already legal in Canada, and the country plans to allow recreational cannabis federally by July 2018, making it the first “Group of Seven” country to do so.

Canopy has positioned itself to take advantage of this huge opportunity. With its output growth plans, it has sold a 10% equity stake to Constellation Brands, the third-largest beer producer in the U.S., which plans to sell cannabis-infused beverages in markets that allow the recreational use of marijuana.

The bottom line

Canopy is the top marijuana growth stock which is likely to continue its upward journey in 2018. Trading at $20.14, it has the largest market capitalization among the three producers, valuing the company at $3.84 billion.

For the next six months, I think, Canopy stock is a good short-term play to take advantage of the positive news flow before the opening of the recreational market this summer.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Haris Anwar has no position in the companies mentioned.

More on Investing

Man data analyze
Tech Stocks

3 Reasons Celestica Stock Is a Screaming Buy Now

These three reasons make Celestica stock a screaming buy for long-term investors.

Read more »

profit rises over time
Dividend Stocks

These 2 Dow Stocks Are Set to Soar in 2025 and Beyond

Two Dow Jones stocks are screaming buys but Canadians must hold them in an RRSP or RRIF to avoid paying…

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

How to Use Your TFSA to Earn Ultimate Passive Income

If you have a TFSA, then you have the key to creating ultimate passive income. All you need is a…

Read more »

Confused person shrugging
Dividend Stocks

Better Buy: Fortis Stock or Hydro One Stock?

Let's do a compare and contrast of these two top utilities stocks right now, shall we?

Read more »

A close up color image of a small green plant sprouting out of a pile of Canadian dollar coins "loonies."
Dividend Stocks

Boost Your Passive Income: 2 Canadian High-Yielders at a Bargain

Nutrien (TSX:NTR) stock and another play that appear like fantastic dividend bargains in mid-November.

Read more »

Super sized rock trucks take a load of platinum rich rock into the crusher.
Metals and Mining Stocks

Invest $7,000 in This Dividend Stock for $672 in Passive Income

High yield can be an essential requirement when you need to start even a modestly sized passive income with a…

Read more »

telehealth stocks
Tech Stocks

Well Health Stock: Buy, Sell, or Hold?

Another record-breaking quarter and strong demand sets the stage for continued momentum for Well Health stock.

Read more »

3 colorful arrows racing straight up on a black background.
Dividend Stocks

TSX Stocks Soaring Higher With No Signs of Slowing

Three TSX stocks continue to beat the market and could soar higher in an improving investment landscape.

Read more »