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Cannabis Growth Investors: Why the Best Is Yet to Come

Cannabis stocks are gaining traction again as we inch closer towards legalization day. It’s an exciting time for investors. A new industry is emerging, and the expected year-over-year growth offered by cannabis producers is unlike anything most of us have ever seen.

I believe cannabis stocks are terrific buys right now for those who have a high risk tolerance. Trading volumes are picking up, and while shares are soaring now, it’s important to remember that the same magnitude of downside could also be in the cards over the near term.

Shares of Canopy Growth Corp. (TSX:WEED), Aphria Inc. (TSX:APH), and Aurora Cannabis Inc. (TSX:ACB) are up by ~61%, ~46%, and ~14% over the last three months. As the momentum picks up, it may be a wise idea to start gradually accumulating shares as we wait for the each province to announce details on their distribution plans.

I believe cannabis stocks still have a lot of room to run, and the best headlines could be coming in the months prior to legalization day, which is likely to occur on July 1, 2018.

Cannabis stocks were deflated earlier in the year thanks to various fears that shook the entire industry, but after several positive developments, cannabis investors are starting to regain confidence, and that could mean shares of all producers are set to pick up where they left off last year before cannabis stocks took their breathers.

There’s still a huge amount of uncertainty involved with owning marijuana stocks at these levels, but I think the uncertainty will gradually die down once we learn more about how life will be for producers once cannabis is officially legalized across the nation. This will likely send pot stocks higher into the green!

Is Canopy the best of the bunch?

Canopy has been soaring by the largest amount over the last three months thanks in part to a supply deal with New Brunswick. Canopy has also been really active with making deals to grow its longer-term international growth prospects, which are expected to pay off further down the road, once other countries become more open to the possibility of marijuana legalization.

Bottom line

Canopy isn’t the most efficient producer right now, but it’s certainly the best when it comes to establishing relationships, making deals, and branding. If you’re looking for a solid branding play or the Marlboro of the cannabis industry, then Canopy is likely your best bet. The Mettrum banned-pesticides scandal is in the rear-view mirror, and it’s expected that there will be considerably less political uncertainty as we move closer to Canada Day 2018.

Aphria and Aurora are incredibly efficient companies, both of which could easily leapfrog Canopy as Canada’s largest pot stock if everything goes according to plan (such as the Aurora Sky project being successful or winning exclusive supply deals with particular provinces).

Personally, I think you can’t go wrong with any of these fine pot stocks, but just make sure you only invest what you’re comfortable with losing. An unforeseen event could easily send shares of marijuana companies crashing again, even as political uncertainty gradually fades.

Stay smart. Stay hungry. Stay Foolish.

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Fool contributor Joey Frenette has no position in any stocks mentioned.

 

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