Why Aurora Cannabis Inc. (TSX:ACB) Stock Isn’t for the Faint of Heart

Aurora Cannabis Inc. (TSX:ACB) has taken investors on a wild ride this past year.

| More on:
The Motley Fool

Earlier this year, I did an analysis on the most volatile stocks on the TSX in 2017, and I thought it would be good to do a similar review of marijuana stocks over the past 12 months, which seem to have been very unpredictable lately.

While pot stocks as a whole have been up significantly over the past year, in 2018 we’ve seen the bulls and the bears battle it out, leading to a bit of a roller-coaster ride for marijuana investors.

Canopy Growth Corp. (TSX:WEED)(NYSE:CGC), for instance, is up around 7% since the start of the year, and that’s much better than rivals Aurora Cannabis Inc. (TSX:ACB) and Aphria Inc. (TSX:APH), which are down 33% and 48%, respectively.

Given how volatile some of these stocks have been, it’s a bit concerning for investors, as getting in at the wrong time could have a significant impact on your returns.

For my analysis, I also included Shopify Inc. (TSX:SHOP)(NYSE:SHOP), which I consider to be a fairly volatile stock just by seeing its price movements, and BCE Inc. (TSX:BCE)(NYSE:BCE), which, in my last analysis, was found to be the safest stock to invest in among those that I reviewed.

To assess volatility, I looked at each stock’s coefficient of variation (CV), which is calculated by dividing its standard deviation by the average stock price for the year. The smaller the CV, the less volatile that the stock is.

Below are my findings:

Canopy Growth Aurora Cannabis Aphria Shopify BCE
Standard Deviation 11.03 3.48 4.24 30.23 2.60
Average 24.51 7.20 11.27 155.46 57.39
Coefficient of Variation 45% 48% 38% 19% 5%

The TSX, for comparison purposes, had a CV of just 3%.

What does this data tell us?

By including BCE in this analysis, it helps to put into perspective just how more volatile these other stocks have been in comparison to it. Consider that both Aurora and Aphria had higher standard deviations, yet their combined averages would still not even make up half of BCE’s average price.

Another interesting finding was that Shopify, which seems to be very volatile from what I’ve seen, is still nowhere near as erratic as pot stocks have been. At 19%, it has seen a lot of swings over the past year, but it’s nowhere near as bad as the ride that cannabis investors have been on.

It’s important to note that volatility doesn’t mean that an investment on its own is risky; it is just a measure of the swings the stock price has taken. Aphria, for instance, has been the worst-performing pot stock of the three on this list, but its CV is lower.

The reason for that is Aphria has been on a more persistent down trend and hasn’t seen the spikes in price that Aurora and Canopy Growth have benefited from.

Bottom line

As appealing an investment as marijuana stocks may appear to be to some investors, there’s plenty of reason to be a bit hesitant. It hasn’t been a smooth ride for cannabis investors, and with a lot of change still taking place in the industry, it’s not likely that will change any time soon.

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 David Jagielski has no position in any of the stocks mentioned. Tom Gardner owns shares of Shopify. The Motley Fool owns shares of Shopify and SHOPIFY INC. Shopify is a recommendation of Stock Advisor Canada.

More on Investing

A colourful firework display
Bank Stocks

The Next Canadian Stock I’m Going to Buy

Want to close out the year with a big bang? A Big Bank is highly recommended if you’re looking for…

Read more »

a Couche Tard store
Top TSX Stocks

Why Alimentation Couche-Tard Stock Fell 5% in September

Couche-Tard stock took a hit in September, but the downside pressure could be short-lived considering its commitment to innovation and…

Read more »

Canadian energy stocks are rising with oil prices
Energy Stocks

Why Suncor Energy Stock Fell 10% in September

Energy stocks are top gainers on the TSX in 2022, but still cheap. Suncor Energy stock seems ripe for a…

Read more »

Pipeline
Energy Stocks

Why Canadian Natural Resources Fell 10% in September

With healthy growth prospects and dividend growth, Canadian Natural Resources would be an ideal buy at today's attractive valuation for…

Read more »

A stock price graph showing declines
Tech Stocks

Why Tesla Stock Dived Over 8% Today

Here’s the key reason why TSLA stock is being hammered Monday, despite reporting record Q3 2022 car deliveries and production…

Read more »

Dividend Stocks

3 Expensive TSX Stocks I’d Buy if They Took a Dip

Three relatively expensive large-cap stocks are on my buy list if their prices dip in the next market correction.

Read more »

An airplane on a runway
Investing

5 Things to Know About Air Canada Stock

Air Canada stock looks like one of the cheapest on the market. But before you buy the airliner, here are…

Read more »

funds, money, nest egg
Stocks for Beginners

No Time to Invest? The Easiest Way to Create a Million-Dollar TFSA

Here’s how investors can take advantage of a recent market crash to create a million-dollar TFSA with ease.

Read more »