The Motley Fool

Canadian Investors Are Buying This “Odd Couple” of Cannabis Stocks

Image source: Getty Images

Two very interesting developments in the cannabis world have come at the same time. Last week, the ripples of an allegedly non-compliant grower were felt through the marijuana investment space, while a brand-new listing on the TSX is getting traders interested. Let’s take a look at two very different cannabis stocks that Canadians are getting invested in.

White knights versus a spreading blight

Could there be yet more headline-generating drama yet to unfold in the CannTrust Holdings (TSX:TRST)(NYSE:CTST) saga? According to BNN Bloomberg, more than one Canadian cannabis company has been circling CannTrust with a view to buying out the troubled marijuana grower. This comes after Health Canada concluded that CannTrust had been growing cannabis in a number of unlicensed rooms.

What would a buyout look like? With all CannTrust cannabis sales and shipments now halted while Health Canada continues its audit, some additional insight would likely be necessary for a buyer to put in a bid. Risk abounds, despite CannTrust’s client base, and a “white knight” may not be willing to take that on.

Meanwhile, there is still a chance that CannTrust could get back within compliance and continue where it had left off. Investors have seen the situation as an opportunity to snap up a battered stock, driving the share price up by over 8% over the week in a show of confidence in CannTrust’s operation. The stock had plummeted by around half its previous value when news broke of Health Canada’s unfortunate findings.

The possible outcomes of the scenario are wildly varied, with the prospect of a large fine on the table, or even the revoking of CannTrust’s outstanding licence. However, if an outsider steps in and can prove to Health Canada that further non-compliance won’t occur, there’s a possibility that CannTrust could stay in business — although its seized marijuana stock may well be destroyed. After all, there’s a prime site just waiting to be run, and CannTrust’s sales network is a valuable proposition.

A new wild ride for cannabis bulls

Having debuted last Thursday, newcomer Avicanna (TSX:AVCN) is an exciting play in the cannabis space for investors who missed out on last year’s upside-rewarding rodeo. Down 6.08 since debuting, the share price has kicked back to end the day 11.56% positive. Avicanna is likely to produce wild share price volatility, with the ability to reward cannabis investors.

The stock debuted at $7.40 and promptly shed 8%, making it instantly attractive to capital gains investors seeking the widest possible profit margin. This caused the stock to bounce 10%. If this pattern continues, the ability for investors to make some fast cash is almost too tempting to ignore. What’s even more exciting is that more IPOs are on the way this year, with Breath of Life International set to hit the TSX.

The bottom line

With a cannabis stock that has run aground and one that has just gotten started, it’s certainly an interesting space to watch. With some persuasive signs pointing to a CannTrust buyout, and Avicanna looking like a high-momentum stock ripe for a breakout, these are two top tickers for cannabis investors to watch for the remainder of the summer, with the newly IPO’d Avicanna a tempting play for some quick upside.

Just Released! 5 Stocks Under $49 (FREE REPORT)

Motley Fool Canada's market-beating team has just released a brand-new FREE report revealing 5 "dirt cheap" stocks that you can buy today for under $49 a share.
Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune.
Don't miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.

Claim your FREE 5-stock report now!

Fool contributor Victoria Hetherington has no position in any of the stocks mentioned.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.

I consent to receiving information from The Motley Fool via email, direct mail, and occasional special offer phone calls. I understand I can unsubscribe from these updates at any time. Please read the Privacy Statement and Terms of Service for more information.