Marijuana stocks have arguably been the biggest TSX success story over the past three years. Rising dramatically in the markets and growing sales at triple digits year over year, weed producers have outperformed the benchmark by a spectacular margin. Last year, the hype surrounding marijuana legalization sent weed stocks to unprecedented highs, as investors rushed to capitalize on the sales boost that would inevitably result from recreational sales.
As a result, weed stocks have reached truly impressive valuations. Not only are they up dramatically, but they’re even being included in “large-cap” indices like the TSX 60, making them among the biggest companies in Canada.
It’s clear that weed stocks as a whole have come a long way. A handful, however, have risen to become the clear “stars” of the sector, outperforming the others by leaps and bounds. The following are the three that have seen the frothiest gains.
What could be said about Canopy Growth (TSX:WEED)(NYSE:CGC) that hasn’t been said already? With over $97 million in quarterly revenue, it’s the biggest marijuana producer by sales and market cap — although competitors are not too far behind.
Canopy’s success comes down to a few key factors. First, it was a relatively early entry into the legal weed industry, giving it a kind of first-mover advantage. Second, it has received massive amounts of funding from bigger companies. Third, it has the best retail presence of any weed producer, with a line of Tweed-branded stores that are becoming an increasingly common sight nationwide.
Its stock is up 1,710% since it first opened on the TSX just five years ago.
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Aurora Cannabis (TSX:ACB)(NYSE:ACB) is the second-biggest marijuana producer after Canopy, with $75 million in quarterly revenue. At one point, it actually surpassed Canopy’s quarterly sales, but its competitor quickly reclaimed the crown.
Aurora is a company that’s investing big in partnerships, acquisitions, and new grow space — all of which help it to move product in the fast-growing legal marijuana market. Particularly interesting is the company’s partnership with the UFC, which could raise brand awareness among a large and growing target demographic (MMA viewers).
Aurora’s stock is up an astounding 34,100% since it first started trading on the TSX.
Aphria (TSX:APHA)(NYSE:APHA) is one of Canada’s most controversial marijuana producers. When a short-seller released a report last year accusing the company of cheating investors, its stock tanked. However, the company soon recovered, after a management shakeup and a thwarted hostile takeover bid.
Aphria has attracted some heat over the years for allegedly paying too much for low-value acquisitions. But whatever you think of Aphria’s M&A strategy, one thing is certain: it hasn’t hurt on the revenue front. In its most recent quarter, Aphria grew sales by 617% year over year, putting it within striking distance of Aurora. Additionally, the company has a long-term investment portfolio that has contributed to its intermittently strong profits. Aphria was one of the first weed producers to post positive earnings, and its long-term stock portfolio was a big part of that achievement.
Aphria’s stock is up 1,128% since it started trading on the TSX.
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 Andrew Button has no position in any of the stocks mentioned.