1 Cannabis Stock You Should Buy Now and 1 You Need to Sell

It’s time to start getting picky about pot stocks.

The dust certainly hasn’t settled yet, though there has been a bit of mellowing out around the marijuana sector. After record highs came some lows, and now investors need to start getting serious about where certain stocks are headed. Hopefully, it’s in an upward direction.

But that means these stocks have a lot to prove. Honestly, I’m not going to waste your time talking about the heavy hitters. I’ll look at one stock opportunity and another stock that I don’t see the brightest of futures for.

Green Organic Dutchman

Green Organic Dutchman (TSX:TGOD) may be a smaller marijuana company, but it’s been making some major moves recently. Now, before I get into them, I want to warn that I don’t think this is a buy-and-hold-for-years type of stock. Green Organic is just in a place where it’s the right time to buy before some major growth and then sell it.

That growth is coming from a few announcements from the company. Most recently, it announced its entrance into the U.S. market by becoming a “co-founding investor and strategic partner in the newly formed Califormulations LLC” to create hemp-derived cannabis beverages.

This came not long after another announcement that the company has reached a settlement with Hamilton City Council on its greenhouse facility in Ancaster, Ontario. The company will now be able to grow 17,500 kilograms of cannabis per year. On top of that, Green Organic opened its second legal cannabis retail store in Jamaica on May 4 in Montego Bay: a popular tourist destination.

Needless to say, this stock is therefore undervalued at its share price of about $4.25 at the time of writing. It’s dropped by about half since its peak last September, and analysts think it’s due to get back to that range, if not surpass it, in the next 12 months alone. That makes now an ideal buying opportunity in the short term.

Cronos

Often touted as the cannabis company with the most cash, Cronos Group (TSX:CRON)(NASDAQ:CRON), in my view, has hit its peak. That peak was in March, when the company’s shares were just shy of hitting $29 per share and have been dropping ever since to where they sit at the time of writing at $21 per share.

The excitement of last fall has just fallen to the wayside for this stock. After a strong year, the company boasted year-on-year returns of 201.8% recently and was strengthened by its $2.4 billion investment from Altria. But the stock is now seen as overvalued, selling at eight times its future cash flow, 18.8 times its book value, and 79% expected annual growth in earnings.

Don’t get me wrong; the company still has a few tricks up its sleeve. For instance, it recently announced the expansion of its global infrastructure network to include a cannabinoid device research and development facility in Israel to develop the next generation of vaporizer products, specifically for cannabis use.

Then, of course, there’s that investment from Altria and what the company is going to do with it. A new vaporizer is nice, but there has to be more, doesn’t there? The company should be proving to investors that it will boost production, diversify its products, and build its brand through acquisitions. But it’s been all quiet from this company.

One could argue that means the news will be coming in the future, but analysts aren’t so sure. As it stands, the company, even with all this cash, might be able to produce 120,000 kilos of production. Other top-tier cannabis producers are double, triple, and even beyond that.

So, while sales should continue to grow, and some news could be coming down the pipe, I’d say if you haven’t sold Cronos already, now is the time to do it. The next 12 months don’t look all that promising, with the top end of analyst prediction perhaps reaching $30 per share.

Our #1 Stock to Buy in 2019 (and Beyond!)

When you buy heavily cyclical stocks at low prices… and then hold the shares until the cycle reaches its peak… you can make a very healthy profit.

Every investor knows that. But many struggle to identify the best opportunities.

Except The Motley Fool may have a plan to solve that problem! Our in-house analyst team has poured thousands of hours into their proprietary research – and this is the result.

Our top advisor Iain Butler has just identified his #1 stock to buy in 2019 (and beyond).

Click here to claim Iain’s new report, absolutely FREE!

More reading

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned.

Source: The Fool
1 Cannabis Stock You Should Buy Now and 1 You Need to Sell
The Fool

The Motley Fool
Contributor for investorsnews.ca
The Motley Fool is dedicated to helping the world invest — better. Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, mutual funds, and premium investing services.

In all we do, we take a different approach.

We believe – and have proven over decades – that the individual investor can beat the market.

We believe that anyone can do it, even if they don’t have a lot of time or money to devote to investing.

We believe in a long-term outlook, helping people build wealth over time.

We believe that the person best positioned to take care of your financial future is you.

And we work tirelessly on behalf of our hundreds of thousands of members who are enjoying the opportunities that come with having enough money to do the things that matter to them.

While we are headquartered in Alexandria, Va., The Motley Fool advocates for the individual investor around the globe with offices in the UK, Australia, Canada, Singapore, and Germany.

Related posts