Although the past five weeks have been a rough go for marijuana stocks, the legal cannabis industry has been virtually unstoppable for years. We’ve witnessed Canada become the first industrialized country to legalize recreational marijuana, seen the U.S. Food and Drug Administration approve its very first cannabis-derived drug, and sat back as 33 U.S. states have now given the green light to medical marijuana in some capacity.
Although it will require patience on the part of investors as the nascent legal pot industry matures, marijuana stocks offer the potential of being a once-in-a-generation growth story. The question is, which marijuana stocks should you buy?
While diversifying within the cannabis industry isn’t exactly easy, there are five marijuana stocks that I believe would make up the perfect marijuana portfolio — or, as I prefer to call it, a “pot-folio…
To begin with, you can’t have a pot-folio without owning at least one cannabis grower. Though there are more than a dozen mid-tier and major growers to choose from, none offers better long-term value at the moment than CannTrust Holdings (NYSE:CTST).
CannTrust has been beaten to its roots of late following a wider-than-expected fourth-quarter loss and a recent shelf offering that involved selling north of 36 million shares at $5.50 apiece, which was almost 15% lower than where the company was trading prior to the capital raise.
But here’s the deal: CannTrust’s cash raise will fund its acquisition of up to 200 acres of land that will be used for 100,000 to 200,000 kilos of outdoor-grown weed. Though some of this cannabis will undoubtedly wind up in dispensary stores, most of it will be processed for derivative production, such as edibles, cannabis-infused beverages, concentrates, and so on. Derivatives are a considerably higher-margin product than traditional dried cannabis, so this is CannTrust’s way of diversifying its product line and ensuring that its margins are among the best in the industry.
The company also intends to grow a combined 100,000 kilos a year via hydroponic grow methods at its flagship Niagara campus and much smaller Vaughan facility. With cheap access to water and electricity, these grow sources should yield per-gram production costs that are lower than the industry average. All told, that’s 200,000 to 300,000 kilos of eventual annual output for the low, low market cap of $737 million…
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