Knowing which pot stock to invest in can be a bit difficult these days. There are many to choose from and even determining which exchange you should be focusing on depends a lot on your strategy. Below, I’ll look at the various exchanges in Canada that pot stocks trade on and assess which one is the best option for cannabis investors today.
The TSX and the TSX Venture Exchange are the two of the most popular options in Canada. Home to Aurora Cannabis Inc (TSX:ACB)(NYSE:ACB) and other popular Canadian pot stocks, these two exchanges will certainly have the most options for investors to choose from. A stock like Aurora is certainly a well-established brand with strong market share in Canada and has worked on gaining a footprint in two dozen countries around the world.
Aurora has undertaken an aggressive strategy when it comes to expansion, and it’s a great stock for cannabis investors who are looking at the opportunities in the global market, rather than just the domestic one. It’s one of the largest cannabis stocks in terms of market cap thanks to the company being able to tap into two of the biggest exchanges in North America: the TSX and the NYSE.
Being on the big exchanges helps Aurora get in front of big investors and attract a lot of investment dollars. And while that has helped Aurora, It’s also hurt it. The TSX has made it clear that investing in U.S. cannabis companies or operating in the industry south of the border is off limits, even in states where it marijuana is legal.
Since it’s prohibited federally, a company would not be in compliance with U.S. laws and therefore run the risk of being delisted from the TSX and NYSE as well. While hemp has been permitted, products high in THC or CBD that isn’t derived from hemp are still a no-no for these companies.
That’s a big disadvantage when you consider that U.S. companies are listed on both the NEO and Canadian Securities Exchange (CSE) and are growing every day. A company like Trulieve Cannabis Corp has been dominating south of the border and MedMen Enterprises Inc has also made quite a name for itself.
As more U.S. states begin to legalize pot in the U.S., these companies can look at expanding their presence across the country. Since they are listed on the more lax CSE, they wouldn’t have to worry about running into issues that a stock like Aurora would encounter on the TSX.
There is also the NEO Exchange, which has been getting some new pot listings lately; companies think it’s closer in requirements to the TSX than the CSE. However, it doesn’t have many options for cannabis investors just yet.
If you’re looking for a big, established Canadian company to invest in, then either of the TSX exchanges would be good options for you to find a good pot stock. However, if you’re looking for a company that can benefit from the growth in the U.S., the CSE that will likely be more of what you’re looking for, and to a lesser extent, the NEO exchange.
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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.