The year 2019 was a trouble one for cannabis stocks, to put it mildly. However, with some indications that 2020 could be a better environment for growth in this exciting new sector, here are four stocks to buy – though for a range of different reasons.
The frontrunners
Aphria will release its Q2 2020 financial results before open January 14. Momentum investors could expect to see improvement in this stock, which outperformed its peers in 2019, leading up to and immediately after this date.
Alongside Canopy Growth, Aphria is one of the market leaders in cannabis and a top pick for investors seeking out contenders for eventual dominance of the legal weed space.
Casual marijuana investors seeking only the most stable of pot producers may wish to bypass troubled tickers and go long on other potential market leaders like Canopy Growth, a stock that rallied several times last year.
However, while steep, the Canopy Growth rallies were mostly brief, including two weeks from mid-April and a limited September hump. The end of the year saw a more prolonged comeback.
The speculative plays
While Canopy Growth looks like a market leader in the making, however, another pot producer could find itself a takeover target in the new year. HEXO is the pot stock to buy if investors are looking for potential takeover targets.
The stock fell down a series of cliffs last year, then capped it all off with a $25 million equity raising bombshell.
At the time of writing the stock is down by almost 25% for the last five days of trading. Down 60% in 2019, investors who buy on extreme weakness may find HEXO rocketing on a takeover bid later in 2020.
As the funds from HEXO’s extra shares will go toward research and development, long-range shareholders bullish on HEXO’s chances may want to buy and hold onto a speculative stake in the company. Newcomers with similar ideas could also buy on weakness and hope for that buyout.
Other key cannabis stocks to watch this month include Village Farms, which gained more than 7% over the short holiday week and remains a popular stock among investors and pundits.
Meanwhile, the Horizons Marijuana Life Sciences Index ETF remains a key indicator to watch but not to buy: this week saw the index down 4.2%, indicative of the soured market but devoid of its major outperformers.
Village Farms has been seeing a lot of interest thanks to its outperforming joint venture, Pure Sunfarms. Another big reason to get invested includes its first world-class, recent greenhouse conversion – an operation that saw a speedy turnaround with maximum production capacity quickly reached. Reasons to avoid include oversupply risks and some uncertainty connected to its Emerald joint venture.
The bottom line
Contrarians and value investors could have plenty of bargains to scoop up as the cannabis industry continues to grind along.
From oversupply to a retail bottleneck, the rollout of legal marijuana hasn’t exactly encouraged growth. However, all of that could change this year as more outlets open and businesses potentially aggregate and streamline through mergers and acquisitions.
