What's the best marijuana stock on the market right now? My choice would be Constellation Brands (NYSE: STZ) . I think Constellation is the best marijuana stock because of its high growth prospects and relatively lower risk compared to most marijuana stocks.
But Constellation Brands is not a pure play marijuana store. Buying Constellation involves an investment in the company's alcoholic beverage industry even more than in the cannabis industry.
So what's the best pure play marijuana stock on the market right now? If I could only buy a clean-play marijuana stock, it would be Constellation's partner, Canopy Growth (NYSE: CGC) .
Why not a cheaper stock?
Yes, Canopy Growth's market coverage of more than $ 15 billion is far more than any other pure play marijuana store around. Why would I not choose a more attractive valuable store – perhaps Aphria (NYSE: APHA) or OrganiGram (NASDAQOTH: OGRMF) ? Let me first say that it would not surprise me if Aphria and / or OrganiGram exceed Canopy Growth this year.
Aphria's stock price has been knocked down primarily by the claims of short-sellers that the company drastically overpaid for its LATAM Holding acquisition. OrganiGram is a major underdog Canadian marijuana producer who does not receive the attention it probably deserves in the US investor group. I think it's likely that both of these situations will change in 2019 with a review of a special selection of Aphria's board that could potentially clear the air over the short seller's claims and organizational charts that could potentially be noted. on a major US stock exchange.
I take a long-term view when it comes to investing. If I could only buy one share in any industry, it would be the store of the company that I believe has the best chance of being a dominant player in the industry. And for the cannabis industry, I think the stock is not Aphria or OrganiGram – it's Canopy Growth.
While Canopy looks much more expensive than most other Canadian marijuana stocks right now, my roof is that it is best to look at what the future of the cannabis industry could hold. I expect the global marijuana market could easily exceed $ 100 billion within the next 10 years and even more in subsequent years. If Canopy captures 10% of this market, the stock should be worth more than the current value.
The Convincing Case for Canopy
The global cannabis market is changing and expanding rapidly. I believe that to be the biggest winner in this market, a company must have the necessary production capacity to hold onto demand, have a strong distribution network in key countries and have what it takes to stay ahead of the curve that the market is growing. I think there is a convincing case that Canopy Growth controls these boxes better than any other company.
At present, Aurora Cannabis claims its largest production capacity in the industry. But Canopy ranks as a strong runner-up and continues to strengthen its production capacity through expansion and supply agreements with other cannabis producers.
When it comes to distribution networks, Canopy Growth is probably at the top of the track. The company has the widest and strongest supply deals among its peers for the marijuana recreational market in Canada. It has a large presence in the European markets, including among other things. Germany. Canopy is well located in Latin America, Australia and South Africa.
But the best reason to like Canopy Growth is its ability to stay ahead of the curve. Part of that ability comes from a strong management team. However, canopy relationships with Constellation Brands are also an important factor. Canopy's deal with Constellation gave it plenty of cash to use to expand internationally. It also gives Canopy a partner with expertise in building successful consumer brands.
A good example, in my opinion, of Canopy's ability to lead instead of following is the company's plan to build a major hemp production facility in New York. The recent US legalization of hemp paves the way for a large new market. While rivals still say they want to jump into the United States, Canopy has already secured a license in New York, forged positive relationships with key political figures, and will set up business in the near future rather than stand on the sidelines and wait.
My biggest concern
Despite my bullish about Canopy Growth's outlook, I know Murphy's law has a way to educate your head. My biggest concern is that it will take longer for cannabis markets around the world to grow than anyone expects.
There are many ways that could arise. Countries can be slow in establishing regulations even after legalization of marijuana. Even if regulations are introduced quickly, they can be burdensome and prevent growth. And while the possibility that the US marijuana market could open up to Canopy appears better than ever, there is no guarantee that federal laws will change anytime soon.
For all these reasons, Canopy Growth remains a high risk stock, for which many investors would like to steer clear. But for more aggressive investors with a long-term perspective, I can't think of a better stronger play-marijuana stock to buy right now than Canopy Growth.
Keith Speights has no position in any of the listed shares. The Motley Fool recommends Constellation Brands and OrganiGram Holdings. Motley Fool has an information policy.