3 Cannabis Stocks Under $10 a Share

Looking for breakout cannabis stocks? Check out Green Organic Dutchman Holdings Ltd (TSX:TGOD), OrganiGram Holdings Inc (TSXV:OGI), and Hexo Corp (TSX:HEXO).

| More on:
edit Powder of Cannabis (Drugs), Analysis of Cannabis in laboratory.

Image source: Getty Images

The cannabis industry is breaking out, but if market estimates are accurate, there will be plenty of growth for years to come.

Last year, five million Canadians purchased more than $6 billion in cannabis, equating to an annual spend of more than $1,000 per person. Emerging legalization across the U.S. is providing a long-term growth driver to this impressive start.

The U.S. market is expected to hit $80 billion by 2030. Adding international opportunities magnifies the market size even further.

Nearly every cannabis stock has rocketed higher in recent months, but several are still stuck under $10 per share, including Green Organic Dutchman Holdings (TSX:TGOD), OrganiGram Holdings (TSXV:OGI), and Hexo (TSX:HEXO).

Ride this cannabis niche

In January, when Green Organic stock was at just $2.40, I’d highlighted how the market is completely ignoring the company’s growth potential in 2019.

“Green Organic Dutchman is making all the right moves to grow shareholder value,” I wrote. “With shares at an all-time low, this looks like a great entry point for risk-tolerant investors.”

In the 90 days since that post was published, Green Organic stock has risen by 100%. As the Canadian market matures, the company still has plenty of room to run.

By 2021, Green Organic should reach 170,000 kilograms of production. Importantly, all of this production is organic — an area that few competitors are specializing in.

As cannabis prices fall due to ramping production, don’t be surprised to see Green Organic stock outperform due to its differentiated niche and pricing power.

The value of value-added products

As Fool contributor Sean Williams notes, Organigram is “one of the cheapest and overlooked pot stocks. Period.” The stock has risen by more than 100% this year, but the company is still only 10% of the size of its largest competitors.

What’s to like about Organigram?

First, the company is ramping up raw cannabis production. Soon, more than 110,000 kilograms of annual output will be produced across its facilities, nearly as much as Green Organic. Second, Organigram shines when it comes to higher-margin opportunities.

As noted earlier, wholesale cannabis prices should fall as production ramps across the entirety of both Canada and many parts of the U.S. Finding a way to retain pricing power will be key. For example, the company’s CEO aims to generate half of Organigram’s medical cannabis sales from high-margin oils.

Building a portfolio of value-added products like oils isn’t that exciting, but it should help Organigram fight the next few years of pricing pressure.

Don’t forget other markets

Hexo stock has long appeared undervalued. Now with a share price of $9 and a market value of $1.9 billion, there still is room for rapid expansion.

While most cannabis investors are focused on bringing production online, forward-thinking stock pickers should be identifying pot stocks that can take advantage of new verticals. Hexo is exploring those options faster than any other competitor.

For example, it closed a deal last year with Molson Coors Canada Inc. that will bring cannabis-infused beverages to North American markets. Molson owns 57.5% of the venture with Hexo controlling the rest.

As I wrote in February, “These partnerships will be the key to success in adjacent markets like beverages.”

With a year-long headstart on the cannabis-infused beverage market, Hexo has an opportunity to capture a new multi-billion market that few other players are prioritizing. It could take a few years to play out, but the market seems to be ascribing very little value to this promising venture.

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 Ryan Vanzo has no position in any stocks mentioned.

More on Cannabis Stocks

A cannabis plant grows.
Cannabis Stocks

Canopy Growth: Buy, Sell, or Hold?

Canopy Growth (TSX:WEED) stock should make a killing on U.S. expansion, but investors will need to be very patient.

Read more »

Marijuana plant and cannabis oil bottles isolated
Energy Stocks

3 Canadian Value Stocks to Buy Right Now

Undervalued Canadian stocks such as Secure Energy should be part of your shopping list in May 2024.

Read more »

edit Cannabis leaves of a plant on a dark background
Cannabis Stocks

Here’s Why it’s Not Too Late to Buy Cronos Group Stock

The optimism about U.S. federal marijuana legalization and its anticipation are potent bullish triggers for the Canadian cannabis industry.

Read more »

Cannabis grows at a commercial farm.
Cannabis Stocks

Canopy Growth Stock Is on a Tear: Is it a Good Buy Now? 

Canopy Growth (TSX:WEED) stock surged by 80% from news out of the U.S., but is enough there without the news…

Read more »

Marijuana plant and cannabis oil bottles isolated
Cannabis Stocks

Prediction: These Could Be the Best-Performing Cannabis Stocks Through 2030

Quality cannabis stocks such as Green Thumb and Cresco Labs are positioned to deliver outsized gains to shareholders in 2024…

Read more »

Pot stocks are a riskier investment
Cannabis Stocks

The Big Mistake I See Cannabis Investors Making Over and Over Again

The news of marijuana slated to be legalized next year has seen a boost for cannabis investors, but they must…

Read more »

cup of cappuccino with a sad face
Cannabis Stocks

A TSX Stock I’d Avoid at All Costs

Despite posting a massive surge in share prices, Canopy Growth (TSX:WEED) is a stock you might be better off steering…

Read more »

edit Jars of marijuana
Cannabis Stocks

4 Reasons Canopy Growth Stock Looks Like a Screaming Buy

Canopy Growth (TSX:WEED) stock has a lot going for it lately, but there are still more hurdles ahead. Even so,…

Read more »