The Motley Fool

How to Make $100K Next Year by Investing Now in Hexo (TSX:HEXO) Stock

Image source: Getty Images

Cannabis stocks went gangbusters last year. It was possible to turn $10,000 into $100,000 in a matter of months.

This year, the story changed completely. Since the summer, most cannabis stocks have fallen by at least 50%. Some have lost 90% of their value.

While the pain has been difficult, it should have been expected. Every emerging market opportunity goes through periodic booms and busts. However, the long-term promise remains strong. Most analysts still expect global sales to reach $100 billion by 2030. Others believe the market value could ultimately approach $300 billion.

If you want to capitalize on this opportunity and potentially take part in the next big run, Hexo (TSX:HEXO)(NYSE:HEXO) should be your top pick.

Building something unique

Cannabis is full of opportunity, the most obvious of which includes traditional flowers and concentrates. These are the segments that have spawned multi-billion-dollar markets throughout North America.

Yet smoking marijuana isn’t the only option. On October 17, 2019, a range of additional form factors were legalized in Canada, including cannabis-infused edibles, beverages, candy, baked goods, lotions, and balms. In many respects, these categories could ultimately be worth several times traditional flowers.

Consider the global cigarette market, a good analogy to traditional methods of smoking weed. This year, Canadians purchased roughly $19 billion of tobacco products. Meanwhile, the alcohol market, analogous to the potential of cannabis-infused beverages, was worth around $35 billion.

These statistics also play out on a global stage. Worldwide tobacco sales total around $1.06 trillion, while the global alcohol industry is worth $1.75 trillion.

The lesson here is simple: if you want to capitalize on cannabis growth, don’t simply focus on companies creating smokable marijuana products. Competitors like Canopy Growth, which partnered with beverage giant Constellation Brands, is targeting cannabis-infused beverages with enthusiasm, but this still only represents one market opportunity.

What you really want is a company capable of targeting traditional cannabis and areas like cosmetics, edibles, beverages, medicines, and more.

Capitalize on everything

Most pot companies are either scaling grow operations to sell cannabis at wholesale prices or creating new cannabis brands, hoping to build customer loyalty. Hexo is building something different.

If you’re familiar with Shopify, one of the most successful stocks in Canadian history, you should know about its platform strategy. Instead of building every aspect of its e-commerce suite itself, Shopify simply created the base infrastructure, which then allows outside developers to build on top of it. This allowed Shopify to scale faster than any other competitor, because it could tap into millions of developers worldwide.

Hexo is doing the same thing with weed. Instead of building all of its own cannabis brands from scratch, it’s partnering with existing brands that are already loved by consumers. Hexo provides all of the base infrastructure, including grow facilities, a research and development centre, and packaging and distribution capabilities. Any outside brand can tap into this infrastructure to co-create cannabis products quickly, safely, and cheaply.

Hexo already has a deal with Molson Coors Canada, which will launch its first cannabis-infused drinks this month. In 2020, it hopes to secure additional deals in new verticals like edibles, sleep aids, cosmetics, and more.

Hexo’s platform model is the only strategy capable of capitalizing on every cannabis opportunity. It has the potential to scale faster than every competitor and can hit the market with well-known, trusted brands.

From mid-2016 to mid-2019, Hexo stock rose 20 times in value. A $5,000 investment would have become $100,000. Shares have fallen 75% since the recent bear market began, setting the stage for another massive run. If Hexo can secure valuable partnerships in 2020, validating its platform model, expect the ability to generate $100,000 in profit by investing just a small fraction of that amount.

This Tiny TSX Stock Could Be the Next Shopify

One little-known Canadian IPO has doubled in value in a matter of months, and renowned Canadian stock picker Iain Butler sees a potential millionaire-maker in waiting...
Because he thinks this fast-growing company looks a lot like Shopify, a stock Iain officially recommended 3 years ago - before it skyrocketed by 1,211%!
Iain and his team just published a detailed report on this tiny TSX stock. Find out how you can access the NEXT Shopify today!

Click here to discover how!

Tom Gardner owns shares of Shopify. The Motley Fool owns shares of and recommends Shopify and Shopify. The Motley Fool owns shares of Molson Coors Brewing. The Motley Fool recommends Constellation Brands, HEXO., and HEXO. Fool contributor Ryan Vanzo has no position in any 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.