Is Aurora Cannabis Inc. (TSX:ACB) or HEXO Inc. (TSX:HEXO) Stock Attractive Right Now?

Aurora Cannabis (TSX:ACB) (NYSE:ACB) and HEXO (TSX:HEXO) are off the 2018 lows. Is one set to deliver big 2019 gains?

| More on:

A recovery in marijuana stocks is bringing investors back into the sector, and many are wondering which pot stocks might offer the best opportunities for additional gains today.

Let’s take a look at Aurora Cannabis (TSX:ACB)(NYSE:ACB) and HEXO (TSX:HEXO) to see if one might be an attractive addition to your portfolio.

Aurora Cannabis

Aurora Cannabis made two major acquisitions in 2018 that launched the company into the top tier of the marijuana sector. The purchases of CanniMed and MedReleaf for $1.1 billion and $2.5 billion, respectively, gave Aurora Cannabis a presence in key regions across the country and added important production capacity, as well as new brands ahead of the October launch of the recreational marijuana market.

Aurora Cannabis is also expanding its international presence. The company bought ICC Labs for $290 million in November. The deal gives Aurora Cannabis a leadership position in Latin America, as ICC is based in Uruguay, where marijuana is already legal for recreational sales to adults.

In addition, Aurora Cannabis announced plans to acquire a major pharmaceutical business in Mexico. Farmacias Magistralis is the only company in Mexico with a federal licence to import products containing THC. The company will be able to manufacture, store, and distribute medical marijuana products in Mexico. The purchase gives Aurora Cannabis a head start in Mexico, which has a population of roughly 130 million people.

Latin America is home to 650 million, so the long-term opportunities in the region are attractive.

Aurora Cannabis has not announced a major beverage or tobacco partnership, but it wouldn’t be a surprise to see a deal sometime in 2019.

The stock currently trades at $8.25 per share, giving the company a market capitalization of about $8.24 billion. The shares bottomed out near $5.30 in august, but still well below the 12-month high around $15.

HEXO

HEXO has done a good job of positioning itself to benefit from medical and recreational marijuana demand in Canada. The company is the top supplier to the Quebec government for its store-based and online sales. HEXO, along with a partner, also has a contract to operate the distribution facility for Quebec’s online cannabis sales.

Additional supply arrangements are in place with Ontario and British Columbia, so HEXO has most of the major markets covered. The company is also targeting the anticipated edibles and drinks market through its partnership with Molson Coors Canada and has a facility in Ontario, where it develops cannabis consumer products, including cosmetics.

Overseas, HEXO is building a large production facility with a Greek partner to supply the growing European market for medical marijuana.

The stock trades at close to $7 per share, compared to $4.30 in late December. Investors who stepped in before the holidays gave themselves a nice gift.

At the time of writing, HEXO has a market capitalization of just under $1.4 billion.

Is one a better bet?

Aurora Cannabis is much larger and more established in Canada and abroad. Any news of a significant partnership with an international beer or tobacco company could send the stock soaring. If you want a buy-and-hold pick, I would probably go with Aurora Cannabis today.

Investors with a shorter time frame might consider buying HEXO on the hopes of a takeover premium, although the big rally in the past month could limit the upside on a deal. Aurora Cannabis might even be a suitor at some point.

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 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 »