Canada’s legalization of recreational marijuana is most likely, only weeks away. Marijuana stocks rose in 2017, along with expectations for a cannabis boom, only to ebb early on in 2018. However, stocks are back to climbing in the last several months, with the marijuana stock index up 71% since last November.
Investing in the cannabis industry, or “cannabusiness,” is both a hot trend on the stock market and a challenge for investors to find the best companies to put their dollars behind.
The challenge is real in an industry filling up with players, many of them risky. There are plenty of growers without an outlet for their product on the market, as well as distributors who lack access to enough product to meet demand. Even as analysts have taken to discouraging investors from riskier stocks, there remain ample opportunities for investors who perform due diligence.
These five stocks within the cannabis industry are seeking to capitalize on the biggest market trend of the year: marijuana and technology.
1) Cannabis stock Scotts Miracle-Gro Co. (NYSE: SMG)
Scotts Miracle-Gro has an enviable position as a marijuana stock to invest in, in that the company is not a pure-play cannabis stock. With its established reputation in the lawn and garden sector, Scotts’ emergence in the cannabis industry has given investors a less riskier entrance in to the industry.
Scotts has opted for an aggressive push toward hydroponics in its business ventures. The company has a majority stake (75%) in a hydroponics equipment manufacturer, Gravita International, and claims revenue in excess of $250 million from hydroponics holdings. In addition, Scotts acquired Sunlight Supply in April, to increase its hydroponics edge.
The company’s investment in hydroponics seems to be paying off. Scotts experienced steady growth for much of 2017, along with the majority of the cannabis industry, and the price of the company’s stock has doubled in the last four years. As growers are actively expanding capacity ahead of anticipated demand, Scotts hydroponics products should see a steady increase in demand moving forward.
2) Marijuana stock Aurora Cannabis (NASDAQ:ACBFF)
Aurora Cannabis recently made history with the acquisition of MedReleaf (NASDAQOTH:MEDFF), a $2.5 billion deal that is now the largest to date in the industry. This came on the heels of Aurora’s acquisition of CanniMed earlier this year for $852 million.
Aurora is in a position to become the Amazon of the industry, with ample cash to toss about and potential to dominate the entire supply chain. On the production end of the industry, Aurora has a growing facility spanning 800,000 square feet, that upon completion and automation, should be capable of producing 100,000 annual kilograms of marijuana. An additional 1.2 million square foot facility is in the works for 2019.
The goal, according to CEO Terry Booth, is occupying the top position among the industry’s growers. As far as distribution goes, Aurora aims to distribute its hefty production across Canada once the country legalizes recreational-use marijuana.
3) Cannabis stock GW Pharmaceuticals (NASDAQ:GWPH)
GW Pharma celebrated a huge milestone in the industry this year, and huge boost to its stock when Epidiolex, its cannabis-based drug, became the first of its kind to receive FDA approval on the U.S. market. Expectations are high for Epidiolex, which is used to treat seizures, to make big sales and open the way for more cannabis-based drugs to be federally approved.
Leaders in the industry have argued that cannabis could be one of the answers to the opioid epidemic, offering a safer alternative and reducing abuse of the drugs that have been ravaging the U.S. GW Pharma may be the pioneer to usher cannabis-based drugs into the mainstream medical market.
4) Marijuana stock Canopy Growth (NYSE: CGC)
As the biggest marijuana stock per market cap, Canopy Growth managed to see a 10% rise in its stocks while most other stocks in the industry dropped in the beginning of the year. Since then, the marijuana stock has experienced tremendous growth, with a 20.4% increase over the past three months, and an increase of 292% on the Toronto Exchange over the last 12 months.
In terms of production capacity, the company has set its sights on large expansions; with seven growing facilities, Canopy’s square footage of greenhouse space is 665,00. An additional 3.7 million square feet of greenhouse space is under development in British Columbia.
Canopy’s possession of land and growing space could set the company up to become the top grower in Canada by 2019. The company continues to set its sights high, adding its recent uplisting to the New York Stock Exchange among its achievements.
5) Cannabis stock BLOCKStrain Technology Corp. (TSX-V: DNAX)
BLOCKStrain emerged as the first company in the marijuana industry to provide a solution to some of the riskier aspects of the industry, such as lack of protection and product verification, through the use of blockchain technology. Developing a cannabis “smart hub,” the company deploys the speed and power of blockchain to process transactions with far greater speed, and without a middleman.
The smart hub not only functions to provide a “clean, immutable, legal and transparent distribution network of product between producers and consumers,” it represents the first efforts dedicated to ensuring a higher level of transparency and security in the cannabis industry. Through the blockchain database, each cannabis product added by clients is verified and tracked by BLOCKStrain to ensure product validity.
This service is both crucial and timely for producers and consumers, considering Canada’s proximity to legalization and the widespread growth that it will bring, as well as the greater need for transparency.
BLOCKStrain signed its first client in March, WeedMD Inc., a Canadian LP, who provided BLOCKStrain with $500,000 “to initiate the integration of blockchain technology into its ecosystem.” This strategic investment marked the first among licensed producers to embrace and integrate blockchain technology. The company hopes to see its blockchain technology incorporated into the business management of every Canadian LP for the purpose of verifying, and protecting cannabis products.
However, BLOCKStrain is not necessarily going to stop with the cannabis industry. Company CEO, Robert Galarza has expressed interest in expanding services to the $2.3 trillion grocery industry. With such transformative potential, this company is one to watch for investors interested in blockchain, and marijuana stocks.
(For related news, read 3 Cannabis Stocks Might Have What it Takes to Join the Ranks of the S&P 500 Index)