Should Canopy Growth Corp (TSX:WEED) or HEXO Corp. (TSX:HEXO) Stock Be on Your Buy List Right Now?

Canopy Growth Corp (TSX:WEED)(NYSE:CGC) and HEXO Corp. (TSX:HEXO) have bounced off the December lows. Is one more attractive right now?

| More on:
lush marijuana plants

Marijuana stocks have picked up a strong tailwind in recent weeks, and investors are trying to decide which pot companies might be the best buys today.

Let’s take a look at Canopy Growth (TSX:WEED)(NYSE:CGC) and HEXO (TSX:HEXO) to see if one should be in your portfolio right now.

Canopy Growth

A wave of positive news combined with a broad-based recovery in the equity markets has taken Canopy Growth from $36 per share in late December to the current price above $57. This has investors wondering if the rally will take the stock back to the 2018 high around $76 or simply fizzle out.

The company is covering all the angles as it positions itself to lead the global cannabis industry. Canopy Growth is the top player in the Canadian medical marijuana space and is expected to capture a significant part of emerging medical marijuana markets, including Europe. In fact, Canopy Growth already has a pharmaceutical distribution business in Germany and is investing hundreds of million of dollars to construct production facilities in the region. The company also just announced it has entered the U.K. and Poland.

On the recreational side, Canopy Growth is developing cannabis-infused beverages with its partner Constellation Brands. The American beer, wine, and spirits giant owns a 38% position in Canopy Growth and it wouldn’t be a surprise to see the company eventually take a controlling interest.

In the U.S., Canopy Growth just received a licence to process hemp in New York. The announcement is viewed as being another small step in the United States toward a possible legalization of marijuana at the federal level.

The company plans to invest US$100-150 million to set up operations designed to produce tonnes of hemp extract. The recent passage of the Farm Bill will allow the production industrial hemp by American farmers.

Investments in the past year added specialty branded goods producers and a top hemp research company, further strengthening Canopy Growth’s position in the industry.

The stock currently has a market capitalization of $20 billion, giving it significant firepower to make additional acquisitions and investments in production growth.

HEXO

With a market capitalization of $1.4 billion, HEXO is a much smaller player in the industry, but the company has done a good job of dipping its toes in all the key areas of the market.

As Quebec’s leading cannabis supplier, HEXO might be an attractive takeover target for one of its larger peers. The province is the second largest by population and holds long-term growth potential in both the medical and recreational marijuana segments.

HEXO has partnered with Molson Coors Canada to create a joint venture to market cannabis-infused drinks when they become legal in Canada. The deal gives HEXO a chance to compete with Canopy Growth in the cannabis-infused beverages segment.

Overseas, HEXO is building a production facility with a partner in Greece to supply cannabis to the European medical marijuana market.

The stock is up from $4.25 in late December to $7 per share. The 12-month high is just above $9.

Is one a better bet?

Canopy Growth is probably the more attractive pick for a buy-and-hold position in your portfolio.

Investors who have a shorter-term objective might consider a position in HEXO on the anticipation of a takeover. The industry is expected to consolidate to the point where a handful of companies dominate the market. Given its strategic position in Quebec and its relationship with Molson Coors Canada, HEXO could command a nice premium in the event a bidding war emerges for the company.

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.

The Motley Fool owns shares of Molson Coors Brewing. Fool contributor Andrew Walker has no position in any stock 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 »