Should You Buy the Dip in These 2 Cannabis Stocks in November?

HEXO Corp. (TSX:HEXO) and The Green Organic Dutchman Holdings Ltd. (TSX:TGOD) stocks have been battered in the early fall. Are these stocks discounts in November?

| More on:
lush marijuana plants

Cannabis stocks absorbed a major hit, as legalization coincided with a global stock market sell-off. Canadian stocks had bounced back marginally as of close on October 25, but a chaotic roll-out has some investors spooked.

Many cannabis stores are already wrestling with supply issues. The Ontario Cannabis Store (OSC) has been poorly received after failing to promptly deliver online orders in the days following legalization. A rotating strike from the Canada Post in select cities has also complicated matters.

From the beginning, experts and analysts had forecast a difficult start for the cannabis industry once recreational use became legal. Leaders at top producers like Aphria have also predicted that medium- and small-sized licensed producers could quickly buckle under the pressures of the roll out. Today, we are going to look at two companies that are not among the heavyweight producers. Shares of these companies have been battered in late September and October. Should investors pounce on a potential discount? Let’s dive in.

HEXO (TSX:HEXO)

HEXO is a Quebec-based company that creates and distributes products to serve the cannabis market. Shares had dropped 28.6% month over month as of close on October 25. This came after a gigantic spike in late August and early September that saw HEXO stock surge to its 52-week high of $9.29.

HEXO received mainstream attention after it partnered with Molson Coors Canada to launch Truss, a line of non-alcoholic infused beverages. The cannabis-infused beverage and edibles market has huge potential in North America, but these products will not be legal in Canada until late 2019 at the earliest.

The company recently boasted that it has been able to successfully meet rising demand in Quebec, where sales of legal cannabis are controlled by the Quebec Cannabis Corporation, a subsidiary of the Quebec liquor and alcohol corporation. HEXO has stated that its annual production will ramp up to 108,000 annually next year. It remains one of the lowest-cost producers in the industry.

Green Organic Dutchman (TSX:TGOD)

Green Organic Dutchman stock has plunged 50.7% over the past month as of close on October 25. Aurora Cannabis boasts an ownership position that exceeds 10%, and it dumped 5.7 million shares between October 10 and 16, which brought its holdings to 33.8 million shares. Green Organic Dutchman has been plagued by construction delays and quickly became overpriced following its initial public offering back in May.

In October, Green Organic Dutchman revealed that it had received a medical sales licence from Health Canada and has also made progress with its international expansion into Latin America. A string of bad news has hurt Green Organic Dutchman, but the company still boasts over $355 million in cash and at full production capacity it is positioned to post revenues upwards of $1 billion by the start of the next decade.

The stock was nearing a 52-week low as of close on October 25. Investors on the hunt for bargains in the volatile cannabis sector should consider Green Organic Dutchman as a speculative addition in November.

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 Ambrose O'Callaghan owns shares of Aurora Cannabis. The Motley Fool owns shares of Molson Coors Brewing.

More on Investing

how to save money
Investing

The Best TSX Stock for Canadians to Buy With $1,000 Right Now

iShares S&P/TSX 60 Index ETF (TSX:XIU) could be a great starter investment for new investors in Canada.

Read more »

Canadian dollars are printed
Dividend Stocks

Beat the TSX With This Cash-Gushing Dividend Stock

Toronto-Dominion Bank (TSX:TD) stock could do well in the year ahead.

Read more »

monthly desk calendar
Dividend Stocks

Monthly Income: Top Dividend Stocks to Buy in November

Here are two of the best monthly dividend stocks in Canada you can buy in November 2024 and hold for…

Read more »

hand stacks coins
Investing

A Top TSX Stock to Buy Now for Real Wealth Later

Intact Financial (TSX:IFC) stock is a fantastic dividend-growth play for the next 15 years and beyond.

Read more »

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Thursday, November 14

The U.S. wholesale inflation data and Fed chair Jerome Powell’s remarks about the economy will remain on TSX investors’ radar…

Read more »

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 »