4 Top Stocks to Buy Now for CBD Upside

Cannabis investors seeking upside in the CBD market should look at Neptune Wellness Solutions Inc. (TSX:NEPT)(NASDAQ:NEPT) and two other stocks.

| More on:

Growth stocks don’t get much more exciting than recreational cannabis, a brand-new market that is still establishing itself while also rewarding strategic investors. Though the actual moment of Canadian legalization may not have seen the meteoric growth in pot stocks that the market expected, there is certainly still plenty of upside to be had if investors know where to look.

One key area of growth is CBD. New Frontier Data values the market for hemp derivatives in the U.S., for instance, at $23 billion over the next couple of years, representing an astounding 21% growth per year. Considering the high-growth potential for this sector, it seems a smart play for Canadians seeking juicy capital gains.

The popular choices for upside

Cronos is the stock to go for in the CBD space if international scope fits your investment strategy. Its main focus is domestic, though Cronos also serves Poland and Germany and has buddied up with companies serving Australia, Colombia, and Israel, with a U.S. operation forthcoming. Customers may know Cronos through its popular recreational brands Spinach and COVE, or its medicinal brand Peace Naturals.

Meanwhile, with thousands of stores spread across the U.S. and a drive to boost production, Charlotte’s Web is one of the leading CBD-weighted stocks on the TSX. An exciting growth stock which has seen a 45% year-over-year increase in revenue and an operational area that has almost tripled since 2018, Charlotte’s Web would fit nicely into a cannabis stock portfolio centred on market share and highly competitive productivity.

Two top contenders for CBD exposure

Neptune Wellness Solutions is an interesting company that focuses on a number of areas of which cannabis extractions are just one. As the names would suggest, Neptune is built around wellness brands and nutraceuticals solutions, as well as specialty ingredients and pet products. A popular stock in the last five days of trading, Neptune might be one to watch for a dip at its current valuation.

Village Farms International (TSX:VFF)(NASDAQ:VFF) kickstarted its entrance into the world of hemp production when it announced a strategic partnership with Emerald Health Therapeutics to create a subsidiary venture called Pure Sunfarms. The mission statement was simple: to grow pharma-grade hemp for the blossoming CBD market in a world-class 1.1-million-square-foot greenhouse.

Investors who like to diversify with as few stocks as possible should find Village Farms an interesting play. Growing bell peppers, tomatoes, and cucumbers for the North American market, Village Farms also gives investors access to basic consumer staples, making for a classically defensive stock that could weather a potential market downturn. The stock has decent growth potential and is fairly healthy in terms of its balance sheet.

The bottom line

Cannabis investors seeking access to the massive upside potential from CBD growth should consider stacking shares in Cronos, lifestyle-focused Neptune Wellness Solutions, expanding Charlotte’s Web, and diversified Village Farms. The latter is a defensive, low-exposure option that could satisfy low-risk investors also seeking exposure to consumer staples, while Cronos and Charlotte’s Web in particular are popular stocks among cannabis stockholders seeking high-growth investments.

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 Victoria Hetherington has no position in any of the stocks mentioned. The Motley Fool owns shares of Charlotte's Web Holdings and Village Farms International, Inc. Village Farms is a recommendation of Hidden Gems Canada.

More on Stocks for Beginners

a man relaxes with his feet on a pile of books
Dividend Stocks

CPP Pensioners: Watch for These Important Updates

The CPP is an excellent tool for retirees, but be sure to stay on top of important updates like these.

Read more »

Piggy bank with word TFSA for tax-free savings accounts.
Stocks for Beginners

2 Top TSX Growth Stocks to Stash in a TFSA for Life

These two growth stocks may not be the top in the last month, but in the last few years, they…

Read more »

people relax on mountain ledge
Dividend Stocks

Invest $10,000 in This Dividend Stock for a Potential $4,781.70 in Total Returns

A dividend stock doesn't have to be risky, or without growth. And in the case of this one, the growth…

Read more »

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

How to Turn a $15,000 TFSA Into $171,000

$15,000 may not seem like a lot, but over time that amount can balloon into serious cash.

Read more »

A worker uses a double monitor computer screen in an office.
Stocks for Beginners

Why I’d Buy Fairfax Financial Stock Even at Today’s Prices

Fairfax stock just keeps edging higher. But is it now too expensive, or can investors just look forward to even…

Read more »

Piggy bank in autumn leaves
Dividend Stocks

A 5.6% Dividend Yield? I’ll be Buying This TSX Stock for Decades!

This Big Six Bank offers a large dividend, growth strategy, and stability. In short, it offers it all!

Read more »

Concept of multiple streams of income
Stocks for Beginners

Lock Up This 9.2% Dividend Yield From a Top Royalty Stock

Royalty stocks have a strong advantage when it comes to creating passive income for investors. But this one has the…

Read more »

concept of real estate evaluation
Dividend Stocks

Buy 1,154 Shares of This Top Dividend Stock for $492.54/Month in Passive Income

This dividend stock can pay out top cash every month, sure, but has even more to look forward to.

Read more »