A market rotation appears to be underway. No, I’m not talking about the shift from growth stocks to value stocks in the broader market. Instead, I’m referring to the relative rise of Canadian cannabis stocks compared to U.S. pot stocks…
In 2020, most Canadian marijuana stocks languished, while many U.S.-based stocks soared. Although quite a few of the U.S. stocks are performing well in 2021, their Canadian counterparts have roared back.
Here are the three best marijuana stocks so far this year — and whether or not they’re smart picks to buy now. (Note: This list excludes any stocks with market caps below $200 million.)
It feels a little like deja vu with Tilray (NASDAQ:TLRY). The Canadian cannabis stock enjoyed widespread attention back in 2018 after its initial public offering (IPO).
At one point, Tilray’s shares skyrocketed nearly 1,400%. The stock hasn’t delivered that kind of return so far in 2021. However, Tilray ranks as the best performing pot stock year to date with an impressive gain of more than 130%.
Arguably the most important reason behind Tilray’s strong performance this year is the company’s pending merger with Aphria (NASDAQ:APHA). The combination of the two rivals will create the largest cannabis company in the world.
Investors have also been excited about the possibility that Tilray (and other Canadian cannabis operators) could be allowed to expand into the lucrative U.S. cannabis market in the not-too-distant future. With Democrats in control of the U.S. Congress and the Biden administration’s campaign pledge to decriminalize marijuana, the chances of major cannabis reform is better than it’s ever been.
Tilray also reported better-than-expected fourth-quarter results in February. The company’s revenue rebounded strongly and its gross margin improved significantly. Tilray also met its goal of achieving positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA).
Perhaps unsurprisingly, the second-best marijuana stock this year belongs to the company that plans to merge with Tilray — Aphria. The Canadian cannabis producer’s shares have soared nearly 130%, trailing only slightly behind Tilray’s gain.
All of the reasons for Tilray’s big gains also apply to Aphria. The impending merger and the hopes of entering the U.S. market have boosted investors’ enthusiasm for the stock. Like Tilray, Aphria also posted better-than-expected quarterly results earlier this year.
Aphria’s and Tilray’s stocks pretty much move in lockstep these days. Under the terms of the companies’ merger agreement, Aphria shareholders will receive…
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