Buy These Top Canadian Cannabis Stocks for Market Dominance

Here’s why cannabis stocks like Aphria Inc. (TSX:APHA)(NYSE:APHA) are still worth adding to a growth portfolio.

Cannabis stocks are facing a year in which they will finally have to put their money where their mouths are. Investors will need to see profitability from the full range of product types, and they will need to see it even before the retail environment is optimized.

While there is some bullishness that a relaxing of the retail stranglehold on cannabis sales will boost top lines this year, patience is wearing thin.

It’s boom or bust for cannabis in 2020

Aphria (TSX:APHA)(NYSE:APHA) plummeted by 9% on the news that it had revised its fiscal outlook — hardly the kind of news that cannabis investors want to see at the moment. Q2 revenue was below the lowest estimate, and its revised outlook was significantly lower than previously expected. However, its EBITDA was positive for the third quarter running, and Aphria’s share price quickly recouped its losses.

Slowing growth in Germany joined other tailwinds, including the sluggish Ontario retail rollout and hiccups in the vaping industry. The company is bullish on the latter half of 2020 and will be streamlining and clamping down on capital expenditures through sales of non-core assets while also looking forward to beefing up its top line.

Some cannabis have been seeing some insider buying of late, with Sundial Growers, Nextleaf Solutions, and Trulieve Cannabis displaying inner-circle confidence. One of the few large-cap cannabis stocks that managed to get through a terrible year for the sector, Trulieve belongs on a shrinking list of defensively massive cannabis producers, alongside such luminaries as Canopy Growth, Cronos, and Curaleaf.

Which cannabis stocks to stack in 2020?

Canopy is the number one stock by market cap — a fact that assures this breakout stock a place at the table when it comes to the potential for eventual market dominance. In terms of production, it’s up there in the top three and has wide geographical diversification, commanding a spread of 16 countries not including Canada itself.

With $2.1 billion on hand, it’s been said that Canopy could technically start again from scratch. However, the situation is unlikely to come to that, even with painful losses through 2019 and headwinds from both management changes and a hostile and strongly competitive cannabis environment. While some analysts may point to an uncertain future, Canopy is defensively large.

Meanwhile, with sales up 46% quarter on quarter, the issue isn’t recreational users for top pot stock Aphria. However, it’s up to bullish investors to wonder what kind of sales growth a leading cannabis producer of the calibre of Aphria could rustle up given a fully fledged retail environment to operate within. They may not have long to wonder, as the Ontario cannabis retail system is about to get an overhaul.

While some momentum-minded pundits are eyeing runaway growth in the U.S., Ontario could pull out all the stops this year, removing the bottleneck on the growing legal recreational marijuana sector. Aphria is one to watch in this space, with the acquisition of CC Pharma lending some defensive backbone. Aphria was up 8.7% midweek on average thanks to its positive Q2 sales breakthrough.

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.

More on Stocks for Beginners

construction workers talk on the job site
Energy Stocks

Best Stock to Buy Right Now: Baytex vs Suncor?

Suncor and Baytex stocks both look like solid companies offering growth and dividends. But which is the better buy?

Read more »

profit rises over time
Top TSX Stocks

3 Reasons to Buy Enbridge Like There’s No Tomorrow

Have you considered buying Enbridge (TSX:ENB)? Here are 3 reasons to buy Enbridge today for lasting growth and income.

Read more »

An investor uses a tablet
Stocks for Beginners

If I Could Only Buy 2 Stocks in the Last Half of 2024, I’d Pick These

I’m looking to buy two stocks over the next month. Here’s a look at my picks and why you should…

Read more »

dividends grow over time
Stocks for Beginners

The Smartest Growth Stock to Buy With $2,000 Right Now

Do you have $2,000 to invest for the long term? These three TSX stocks have and will continue to deliver…

Read more »

The virtual button with the letters AI in a circle hovering above a keyboard, about to be clicked by a cursor.
Tech Stocks

Is OpenText Stock a Buy, Sell, or Hold for 2025?

OpenText stock has fallen in the last few years, but that could mean this top tech stock remains an undervalued…

Read more »

man touches brain to show a good idea
Dividend Stocks

3 No-Brainer REIT Stocks to Buy Right Now for Less Than $200

REITs have long been touted as some of the best dividend stocks out there if you want recurring, strong income.…

Read more »

grow money, wealth build
Dividend Stocks

3 Top High-Yield Stocks to Buy in November

If you want passive income, high yield dividend stocks are the clear choice. These are the best, and safest, out…

Read more »

Stocks for Beginners

Where will Loblaw Stock be in 5 Years?

Want a great food stock that can provide growth and income? Here's why Loblaw stock can offer that and more.

Read more »