Pot stocks are giving back some of the big 2019 gains, which has investors wondering which marijuana stocks might be the best buys to generate strong returns on the next rally.
Let’s take a look at HEXO (TSX:HEXO) and Canopy Growth (TSX:WEED)(NYSE:CGC) to see if one of Canada’s popular cannabis stocks deserves to be in your portfolio.
HEXO
HEXO’s big production facility in Gatineau, Quebec was in the news this week as residents that live near the new site are complaining that it is stinking up their lives.
Investors might also be plugging their noses when they look at the stock chart, as HEXO is down from $11 per share at the end of April to $8.50. Those who bought at the high might not be too happy, but investors who had the courage to step in at the beginning of the year when HEXO traded for $5.50 are still in pretty good shape.
HEXO arguably punches above its weight. The company only has a market capitalization of $2.1 billion, but has staked out a claim in most of the core markets.
Its acquisition of Newstrike expanded its reach to eight provinces, adding to its dominant position in Quebec, where it’s the leading supplier to the Quebec government’s cannabis retail operations. The company is also setting itself up to be a player in Europe through the construction of a large production facility in Greece that will serve as HEXO’s hub to supply the growing medical marijuana market in the region.
On the edibles front, HEXO launched a new company, Truss, in partnership with Molson Coors Canada. The new company is developing cannabis-infused beverages to sell once Canada opens up the edibles market. That is expected to occur in the fall of 2019.
Canopy Growth
Canopy Growth is a giant in the emerging global cannabis sector. Even after the stock’s recent slide from $70 per share to $54, the company still sports a market capitalization of $19 billion.
Canopy Growth is Canada’s leading supplier of medical marijuana to registered patients, and is taking its expertise to bigger markets, such as Europe, where it owns a pharmaceutical distributor in Germany and is building production facilities in other countries. Canopy Growth also has research and development operations in Chile and production capacity in Colombia to serve Latin America.
In the United States, Canopy Growth is getting itself positioned to take advantage of the potential legalization of marijuana at the federal level. It has an agreement in place to acquire Acreage Holdings for US$3.4 billion, giving it instant access to an existing network of production and retail locations in 20 states.
Is one a better buy?
Both stocks still appear very expensive based on typical valuation methods, so I wouldn’t back up the truck.
However, HEXO could eventually command a takeover premium as consolidation is expected to continue in the cannabis sector. If you like betting on the underdog, go with HEXO. Otherwise, Canopy Growth will likely be one of the few firms that remains standing once all the dust settles and is probably the safer bet.
5 TSX Stocks for Building Wealth After 50
BRAND NEW! For a limited time, The Motley Fool Canada is giving away an urgent new investment report outlining our 5 favourite stocks for investors over 50.
So if you’re looking to get your finances on track and you’re in or near retirement – we’ve got you covered!
You’re invited. Simply click the link below to discover all 5 shares we’re expressly recommending for INVESTORS 50 and OVER. To scoop up your FREE copy, simply click the link below right now. But you will want to hurry – this free report is available for a brief time only.
More reading
- Get Ready for Canopy Growth (TSX:WEED) to Soar Higher
- Cannabis Stocks Like Canopy Growth (TSX:WEED) Continue to Slide
- 3 Stocks to Watch in June
- 3 TSX Marijuana Stocks That Could Be Very Profitable by 2020
- Why Canopy Growth (TSX:WEED) Stock Fell 17% in May
Fool contributor Andrew Walker has no position in any stock mentioned.
Source: The Fool
Should You Buy HEXO (TSX:HEXO) or Canopy Growth (TSX:CGC) on the Dip?
The Fool
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.
