The Motley Fool

Celebrate 1 Year of Legal Weed With This Top Cannabis Stock

Image source: Getty Images

It’s been a year since the green stuff got the green light, and the results have been mixed, to say the least. From a consumer point of view, the sector has been sluggish to get going with supply issues, store openings, online orders, and even changes in traffic enforcement all being slow off the starting block. However, there is still plenty of momentum in the marijuana space, with one stock looking particularly outstanding.

Catching up with some top pot stocks

At the time of writing, Aphria (TSX:APHA)(NYSE:APHA) is up 25% after a positive Q1, and while it’s not quite the 40% boost it enjoyed after its Q4, it’s certainly a welcome turnaround after last week’s TSX pot stock massacre. HEXO lost it CFO last week, triggering a double downgrade at the Bank of America, before withdrawing its earnings outlook.

HEXO ditched almost 40% last week, and Horizons Marijuana Life Sciences Index ETF was down around 14%. After the reflected glow from Aphria’s Q1, HEXO headed into midweek with a moderated 31% five-day loss. However, while some traders looking for short-term upside may be snapping up cheap shares, the long-range investor may want to stick with Aphria.

Another stock to consider for a long position, Canopy Growth also bounced on the good news, with a +3% gain somewhat mitigating the 11.7% losses it incurred over the last five days of trading. Unfortunately, one of the sector’s brightest hopes for upside, Village Farms, is letting the side down this week, shedding more than +13% over the same period.

The turbulence follows the announcement of the TSX 30, which was dominated by cannabis companies, including all of the outfits mentioned in this article with the exception of HEXO. The list of best-performing Canadian stocks notably included four top cannabis stocks and highlighted the importance of the legal marijuana sector to North American investment.

What’s next for Canadian cannabis?

With a new range of cannabis asset types coming into play at the end of the month, Cannabis 2.0 is likely to see a fresh burst of investment interest. However, as with any major development in the cannabis space, it’s a tough call whether to side with the bulls or the bears on this one. Certainly, there is the opportunity to ride the upside train in the short term.

While it would be unfair and inaccurate to compare the cannabis boom with the dotcom bust, it’s fair to say that more than a few investors expecting a replay of 2018’s meteoric upside got their fingers burned post-legalization. However, the cannabis landscape is starting to become a little clearer, and there are some strong frontrunners in the marijuana race, such as Aphria, Canopy, and Village Farms.

The bottom line

It’s been quite a year for pot stocks, with a mixture of dashed expectations and unexpected rallies. Aphria has rocketed 25% after a positive first-quarter results and is showing consistent upward momentum, having also turned in a solid Q4. While Village Farms is another strong cannabis stock with diversification as a consumer staples play, Aphria is a pure play in the space with solid upside and offers investors the Holy Grail in Canadian marijuana: profitability.

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 Victoria Hetherington 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.

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.