2 Top Pot Stocks to Buy Before the End of 2019

Aphria Inc. (TSX:APHA)(NYSE:APHA) and Avicanna Inc. (TSX:AVCN) are attractively valued plays on the growing demand for cannabis products.

| More on:
edit Cannabis leaves of a plant on a dark background

Image source: Getty Images

The burgeoning legal cannabis industry has been under considerable pressure in recent months, as a slew of disappointing results, regulatory investigations, and claims of fraud have led investors to believe that the pot bubble has burst.

Industry leader Canopy Growth has seen its stock plunge by 54% over the last year, while other industry heavyweight Aphria (TSX:APHA)(NYSE:APHA) has lost a similar amount.

This shouldn’t deter investors from bolstering their exposure to the emerging global legal cannabis industry, which analysts estimate is worth anywhere up to US$66 billion by 2025.

There is every sign that there will eventually be a push for consolidation in the industry, as regulators crack down on non-compliant operators, and major players push to acquire smaller cultivators as they expand their operational footprint.

Let’s take a closer look at two pot stocks you should consider.

Leading cultivator’s surprise profit

Aphria defied analysts and reported a surprise fiscal fourth-quarter 2019 profit of almost $16 million compared to a $5 million loss for the same period in 2018. That came on after a significant increase in recreational cannabis sales with revenue from adult use cannabis more than doubling year over year to $18.5 million.

Aphria also boosted its profitability by reducing costs, reporting all-in sustaining costs of $2.35 per gram of cannabis sold, which was 18% lower than a year earlier.

The company’s focus on expanding its Canadian cultivating footprint to allow the production of 255,000 kilograms of cannabis annually. When combined with Aphria’s ongoing development of its distribution network and push to become a leading medical marijuana company in one of Europe’s most lucrative markets, Germany, it is clear that earnings will keep growing.

Aphria’s attractiveness is underscored by it trading at lower multiples than many of its peers, including trading at 32 times forecast earnings and nine times sales. For these reasons, now is the time to buy Aphria.

Newly listed Colombian pot stock

Since listing on the TSX on July 18, 2019, Colombian cannabis company Avicanna (TSX:AVCN) has seen its stock plunge by 40%, creating a handy entry point for investors.

Avicanna is a biopharmaceutical company developing, manufacturing, and commercializing cannabis plant-derived cannabinoid products for medical and health applications. It owns controlling interests in two Colombian subsidiaries located near Santa Marta Colombia, which, combined, have 290,000 square feet of cultivating footprint.

Importantly, Avicanna has completed the registration of one non-psychoactive and three psychoactive cannabis strains with the Colombian Agricultural Institute and has submitted another 15 applications for registration. This is an important step, because it allows Avicanna to commence commercial cultivation and export of cannabis oil.

Health Canada has issued three authorizations to the company allowing it to import CBD isolates and cannabis resin into Canada from Colombia for scientific purposes.

At the end of August 2019, Avicanna completed its first export of purified cannabidiol from Colombia to Canada, which is an important step in progressing Avicanna’s operations to commercial production.

Avicanna conducts its research and development activities out of its headquarters in Toronto, and it has access to a Health Canada GMP-certified manufacturing facility to produce its cannabis-based health and beauty products.

This gives it the advantage of being able to access the lower costs associated with cannabis cultivation in Colombia while accessing the burgeoning Canadian market with a product manufactured to Canadian standards.

Foolish takeaway

Both cannabis companies are attractively valued and provide an opportunity for investors to access the flourishing global legal cannabis market with an emphasis on medical applications.

The impending legalization of marijuana derivative products, including edibles later this year, will give cannabis stocks a boost and lead to ever-greater demand for the flower as well as oils in a market already experiencing supply constraints.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Matt Smith has no position in any of the stocks mentioned.

More on Cannabis Stocks

A cannabis plant grows.
Cannabis Stocks

Canopy Growth Stock Is Rising But I’m Worried About This One Thing

Canopy Growth stock is soaring as the legalization effort makes real progress in both Germany and the United States.

Read more »

Cannabis grows at a commercial farm.
Cannabis Stocks

Why Canopy Growth Stock Could Double in 2024

Canopy Growth (TSX:WEED) stock saw its share more than double in the last two weeks. So, can it do it…

Read more »

Coworkers standing near a wall
Cannabis Stocks

Why Is Everyone Talking About Canopy Growth Stock?

Canopy Growth stock (TSX:WEED) saw shares surge in the last two weeks for a variety of reasons investors can dig…

Read more »

Pot stocks are a riskier investment
Stocks for Beginners

Why Shares of Cannabis Stocks Are Rising This Week

Cannabis stocks received a boost this week as the White House urged the drug enforcement administration to reschedule the drug.

Read more »

A person holds a small glass jar of marijuana.
Stocks for Beginners

Why Canopy Growth Stock Jumped 16% on Wednesday

Canopy Growth stock (TSX:WEED) is up 16% on Wednesday, adding to a surge of 60% growth in the last week…

Read more »

Pot stocks are a riskier investment
Cannabis Stocks

Is the Worst Over for Canopy Growth Stock?

Down 99% from all-time highs Canopy Growth stock has burnt investor wealth and remains a high-risk investment.

Read more »

Pot stocks are a riskier investment
Cannabis Stocks

Steer Clear: This Stock Spells Trouble

A newly listed cannabis stock is outperforming in 2024 but investors should stay clear to avoid trouble and losses.

Read more »

Cannabis stocks have fallen.
Cannabis Stocks

2 Best Marijuana Stocks to Buy This Month

Marijuana stocks in the U.S. such as Green Thumb and Curaleaf can help you deliver outsized gains to investors in…

Read more »