The Top 3 Cannabis Stocks to Watch in October

Aurora Cannabis Inc’s (TSX:ACB) red-hot revenue growth and now-positive earnings make it a pot stock to watch ahead of legalization.

| More on:
The Motley Fool

October is a big month for the cannabis industry. After months of waiting, recreational cannabis will finally be legal nationwide on the 17th. It’s a moment that people from many walks of life — investors, cannabis producers, and pot smokers alike — have been waiting for.

Now that legalization is almost here, investors have to decide where they’ll be putting their money. Although sector-wide funds do exist, most investors seem intent on picking the individual pot stocks they consider the best. And that may be a good idea, since there are a few clear winners in the cannabis industry who are eating up the lion’s share of the revenue.

With that in mind, here are my picks for the top three cannabis stocks to watch in October. These are not necessarily recommendations; rather, my picks for cannabis stocks that will be interesting to follow in the weeks ahead.

Aurora Cannabis (TSX:ACB)

Aurora has a lot of things coming up in October.

Most noteworthy is that the company is pursuing a U.S. listing by month’s end. It’s not clear what index the stock will list on, or what symbol it’ll go with, but management has indicated that they’re ready to go ahead with the listing in principle. This may affect the company’s financial picture by bringing more U.S. investors to the stock, especially if management chooses to sell more equity.

Another thing Aurora has going for it is lightning-fast revenue growth. As of the most recent quarter, its revenue was growing at 223% year over year. Earnings have also been growing at a brisk pace; in Q4, the company posted about $70 million in net income compared to a $20 million loss for the same quarter in fiscal 2017.

Hexo (TSX:HEXO)

Hexo is one of Canada’s smaller cannabis companies. The stock has been on a strong run this past month, up about 50% over 31 days. This stock is worth watching because its target price was recently raised to $10 by Echelon Wealth Partners. If the stock hits that target, investors will stand to make significant gains in short order.

Another reason to watch this stock is because the company has launched a joint venture with Molson Coors to develop cannabis-infused beverages. Such beverages are projected to be a $600-million-a-year market by 2022, according to Cannacord Genuity.

Tilray (NASDAQ:TLRY)

Last but not least, we have Tilray.

Tilray is noteworthy for its massive rally last month, which briefly put its market cap higher than that of Canopy Growth Corp. The rally has since cooled off, but the company remains one of Canada’s top pot stocks.

One thing that makes Tilray worth watching is its institutional backing. Tilray has the blessing of Peter Thiel’s Privateer Holdings. This gives the company ample access to expertise in areas like capital markets, corporate law, and financing. This may help the company secure financing for future growth, potentially at favourable rates and from well-connected investors.

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 Andrew Button has no position in any of the stocks mentioned. The Motley Fool owns shares of Molson Coors Brewing.

More on Investing

Canada national flag waving in wind on clear day
Tech Stocks

Trump Trade: Canadian Stocks to Watch

With Trump returning to the presidency, there are some sectors that could boom in Canada, and others to watch. But…

Read more »

A train passes Morant's curve in Banff National Park in the Canadian Rockies.
Investing

Is Canadian National Railway Worth Buying for its 2.2% Dividend Yield?

Let's dive into whether Canadian National Railway (TSX:CNR) is a top buy for long-term investors at this point in the…

Read more »

nuclear power plant
Energy Stocks

Is Cameco Stock Still a Buy?

Cameco stock recently reported earnings that showed the Westinghouse investment is creating some major costs. But that could change.

Read more »

cloud computing
Dividend Stocks

Insurance Showdown: Better Buy, Great-West Life or Manulife Stock?

GWO stock and MFC stock are two of the top names in insurance, but which holds the better outlook?

Read more »

analyze data
Dividend Stocks

Here’s Why the Average TFSA for Canadians Aged 41 Isn’t Enough

The average TFSA simply isn't enough for most Canadians in their early 40s. Here's how to catch up.

Read more »

A plant grows from coins.
Dividend Stocks

The Smartest Dividend-Growth Stocks to Buy With $1,000 Right Now

New dividend-growth investors should consider CN Rail (TSX:CNR) stock and another top play if they're looking to build wealth over…

Read more »

concept of real estate evaluation
Dividend Stocks

How to Earn a TFSA Paycheque Every Month and Pay No Taxes on It

Canadian REITs can turn your TFSA into a monthly paycheque machine for life. Here's how Morguard North American Residential REIT…

Read more »

Start line on the highway
Investing

2 No-Brainer Growth Stocks to Buy Now With $5,000 and Hold Long Term

Market conditions today are ideal for growth investing, and two rising stocks are no-brainer buys in November.

Read more »