The Motley Fool

This Hip New Pot Stock Hits the TSXV This Week

Many marijuana investors have been taking a hit on the chin lately as the negative momentum picks up across the sector. Last year’s darlings, like Canopy Growth Corp. (TSX:WEED), are now this year’s laggards. Is the green rush over for good? Or is the second wave of euphoria on the horizon?

I’m not sure, but investors should be cautious because all pot stocks are falling knives right now, and it’s really hard to say how much downside remains.

Could a “Tragically Hip” new stock reignite bullishness in the marijuana scene?

How about another cannabis company to spark up your interest?

Newstrike Ltd. (TSXV:HIP) is Canada’s newest pot company that will be hitting the TSX Venture Exchange this Thursday. The company partnered with the Tragically Hip with the hopes of “developing the brand that adult consumers who choose to use cannabis will turn to.” According to fellow Fool contributor Chris MacDonald, government regulators may eventually place a ban on celebrity endorsements of marijuana products.

Canopy Growth Corp. and Snoop Dogg may also face a roadblock if the government decides to follow through with its ban. I think pot companies with such “branding” initiatives should concentrate on driving operational efficiencies and delivering a quality product rather than trying to sign the hottest celebrity for marketing purposes.

I’m not sure if “branding” will determine who the leader of the marijuana space will be. I believe the leaders will be the ones that can make large amounts of inexpensive high-quality weed. Newstrike has expert scientists and growers that have been researching methods and techniques to develop a large and efficient operation.

The company has a quality-first growth strategy which aims to “scale without compromise.” The company received its cultivation licence last December and will be working on its new Creemore facility, which will have construction started in Q4 2017. The new facility will have a 10,000-square-foot growth area and an estimated initial volume of 3,000 kilograms per year of dried marijuana.

This definitely sounds promising, but Newstrike’s production facilities will be dwarfed by the massive 800,000-square-foot Aurora Sky production facility that Aurora Cannabis Inc. (TSXV:ACB) is working on. Unlike Canopy or Newstrike, Aurora isn’t going all-in on “branding” initiatives by signing the hippest celebrities. Aurora is actually focusing on driving operational efficiencies and long-term profitability.

I think Aurora Cannabis is head and shoulders above its competition, but personally, I wouldn’t touch any pot stocks right now with all the negative momentum — especially Newstrike because its stock could get hit hard in its first few trading sessions.

Stay smart. Stay hungry. Stay Foolish.

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 Joey Frenette has no position in any stocks mentioned.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.