This Pot Stock Is Lighting Up the TSX

This stock may have started slow, but its partnership with Village Farms International Inc (TSX:VFF)(NASDAQ:VFF) sets the company up for success.

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

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

Cannabis investors trying to find underpriced options on the Toronto Stock Exchange should take a look at Emerald Health Therapeutics (TSXV:EMH) and Aphria (TSX:APHA)(NYSE:APHA).

Emerald Health Therapeutics may have gotten a weak start in the market, but its partnership with Village Farms is setting the company up for success.

While the stock may not be ready to compete with Aphria yet, at $1.30 per share on the Toronto Venture Exchange, Emerald Health has excellent chances of one day graduating to be one of the most profitable marijuana stocks in the industry.

No doubt, the stock has had a rough few years battling speculative traders in the marijuana industry. The price on Emerald stock hit a high of almost $9 per share in January 2018 only to fumble throughout the rest of the year and into 2019.

Luckily, things may be turning around for long-term shareholders in the stock.

Emerald Health Therapeutics

Emerald Health Therapeutics owns a 50% stake in Pure Sunfarms along with Village Farms. This joint venture began shipping branded dried cannabis products as of the beginning of October. This means that there will be considerable earnings excitement surrounding these two smaller cannabis stocks over the next six months.

This earnings excitement will likely take the stock price higher versus lower. Compared with Canopy Growth, which currently sells for around $30 per share, these smaller stocks are relatively cheap options.

Canopy Growth has been quickly falling in value since the start of 2019. More expensive pot stocks have failed to impress investors for one reason: they have higher expectations for those corporations than they do for the less expensive stocks.

There is no way that the pricier stocks can prove their worth. The only direction these stocks may go is down, which is why investors should turn their attention instead to lower-cost options like Emerald.

Aphria

Aphria may be a safer low-cost option for more conservative marijuana investors. Investors can pick up around 100-shares in Aphria for only $720 at today’s market price.

This stock has already established itself as a profitable player in marijuana with exciting brands like that at Marigold Projects.

Marigold Projects is a 49% owned subsidiary, which just opened a fascinating new retail shop with an on-site smoking lounge on its existing five-acre marijuana farm in Kingstown, Jamaica. Across the street from a museum dedicated to the late reggae musician, Peter Tosh, customers can stop by to learn about this cultural icon during the trip.

Foolish takeaway

We ultimately don’t know how successful slow movers like Emerald Therapeutics will be in the cannabis industry. Without historical sales data and trends, it is hard to say if this stock will even be around in 30 years.

A small gamble in Emerald Therapeutics wouldn’t hurt investors, because it is priced so cheaply.

Moreover, it is still a better buy than Canopy Growth, which is overpriced and heavily indebted from years of risky business investments leading up to the recent rollout of marijuana legalization.

The slow movers have a significant advantage over the big pot producers who spared no expense in their battle the market. Slow-movers acquired less debt, paid less in interest over the years, and have a higher net present value on their investments.

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 Debra Ray has no position in any of the stocks mentioned. The Motley Fool owns shares of Village Farms International, Inc. Village Farms is a recommendation of Hidden Gems Canada.

More on Stocks for Beginners

financial freedom sign
Stocks for Beginners

5 Investing Hacks to Build a Million-Dollar Portfolio  

Its not difficult to build a million-dollar portfolio. Here are five simple investing hacks that take less than 10 minutes…

Read more »

Volatile market, stock volatility
Stocks for Beginners

3 Top TSX Stocks to Buy in Volatile Markets

Sitting on cash? Consider these three TSX stocks for the long term.

Read more »

potted green plant grows up in arrow shape
Stocks for Beginners

1 Canadian Growth Stock That Could Double Your Money in an Economic Recovery

The market downturn is an opportunity to lock growth during the economic recovery. This stock is a blend of value,…

Read more »

edit Safe pig, protect money
Stocks for Beginners

2 Safe TSX Stocks for Beginners to Buy in a Market Correction

These two TSX stocks are still solid long-term buys today, despite the recent market correction.

Read more »

Human Hand Placing A Coin On Increasing Coin Stacks In Front Of House
Stocks for Beginners

3 Real Estate Stocks to Buy for Terrified Investors

Motley Fool investors shouldn't be afraid of investing in real estate if they have a long-term growth strategy, but these…

Read more »

Value for money
Stocks for Beginners

Market Correction: A New List of Value Stocks Just for You

The 2022 stock market has been bearish, with tech stocks being the biggest losers. But tables are turning. It's time…

Read more »

Knowledge concept with quote written on wooden blocks
Stocks for Beginners

3 Reasons Why Inflation Impacts Canadian Stocks

Here are the three most common ways inflation impacts Canadian stocks, why they're selling off, and when you'll want to…

Read more »

Growth from coins
Stocks for Beginners

2 Growth Stocks New Investors Can Buy on the Dip Today

After the recent market correction, many growth stocks look cheap, making it a perfect time for stock market beginners to…

Read more »