2 Cannabis Stocks to Buy and Hold for Decades

Cannabis stocks went gangbusters last year. If you were invested in many of the stocks that doubled or tripled in value, congratulations. This year, however, pot stocks haven’t performed as well, with some of them down 20% to 60%.

Despite the volatility, one thing is certain: the cannabis industry will continue to grow over the next decade and beyond. According to one of the top marijuana analysts, the U.S. industry alone will be worth $80 billion by 2030.

The current sales figures are but a fraction of that number. Last year, Canada became the first western country to legalize recreational pot. The resulting domino effect could add billions of market value to the industry every year.

Although pot stocks have been volatile, that shouldn’t stop you from investing for the long term. It’s not necessary to buy at the absolute bottom to make a bunch of money.

In fact, those who wait for the perfect moment often miss the train entirely. If you want to ride the cannabis boom for years to come, here are your best bets.

Tobacco 2.0

There’s one major risk every cannabis investor will face long-term: commoditzation. Today, most growers are still scrambling to ramp production. Over the next 12 to 18 months, millions of pounds of weed could flood the market.

Regulation is keeping competition at bay, but over time, prices will fall, reducing the value of grower’s crop. There are two ways to battle complete commoditzation: pricing power and cost advantages.

When it comes to cost, larger players will likely win. That’s the story for nearly any commodity in history—if you have the scale, you’re likely a low-cost producer.

Armed with a $12 billion market cap, Canopy Growth Corp (TSX:WEED)(NYSE:CGC) is already significantly ahead of the competition in amassing scale.

In terms of pricing power, differentiation and branding will be key. If you have the largest marketing budget, odds are you’ll be able to build a moat around your product line-up. Even if smaller players succeed, you’ll have the capital to acquire what they’ve built. If the tobacco industry is any indication, big will be better when it comes to pot. Canopy Growth looks set to capitalize on its early lead.

Hedge your bets

While the cannabis industry may consolidate over time, accruing big advantages to the largest competitors, that doesn’t mean small players don’t have room to run. Green Organic Dutchman Holdings Ltd (TSX:TGOD) is a perfect example.

Over time, don’t be surprised if this stock is eventually acquired by a larger peer, most likely at a large premium to today’s trading price.

What makes Green Organic so special is that 100% of its production is grown in accordance to organic agriculture principles. It’s one of the only growers focused on this niche. As cannabis production becomes commoditized, and prices fall, Green Organic has an opportunity to sell a differentiated product at higher prices.

After last year’s cannabis hype collapsed, investors abandoned Green Organic stock in favor of its larger peers. The company’s market valuation is down to $800 million despite analysts believing the company will hit $225 million in sales next year.

By 2021, this hyper-growth company could be trading at just two times sales. It’ll take a couple years to play out, but this stock has clear multi-bagger potential.

One tiny small-cap stock to bet on ahead of Cannabis 2.0 on October 17th…

The first wave of cannabis legalization minted millionaires out of everyday investors, and it might be about to happen again.

Because when edibles are legalized in Canada on October 17th, experts project a new $2.7 BILLION market will be born.

Our last legalization stock pick is already up 1,211%, and now we’re recommending one tiny small-cap stock before Cannabis 2.0.

This could be our next +1,000% winner in the cannabis space.

Hurry, the second wave of cannabis legalization is about to hit and this stock could skyrocket.

Click here to learn more!

More reading

Ryan Vanzo has no position in any stocks mentioned.

Source: The Fool
2 Cannabis Stocks to Buy and Hold for Decades
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