Which Pot Stocks Can Double in Value in 2020?

There’s a big difference between investing in stocks like Green Organic Dutchman Holdings Ltd (TSX:TGOD) and stocks like Cronos Group Inc (TSX:CRON)(NASDAQ:CRON).

| More on:
edit Jars of marijuana

Image source: Getty Images

Nearly every pot stock doubled in value in 2018. Some quintupled in value.

Last year was a different story. In 2019, any company related to marijuana was hit hard. Cannabis ETFs finished the year down more than 50%.

The pullback has laid the groundwork for another bull run in 2020. Many investors have been scared off, but these are exactly the conditions you need for a sharp reversal.

Some of the highest-quality pot stocks are now trading at bargain valuations. If you’re willing to take a calculated risk, you could double your money this year with the following stocks.

Go for gold

Green Organic Dutchman Holdings (TSX:TGOD) has more near-term upside than any other stock in the industry. With a market cap of just $210 million, it’s not difficult to see the company surpassing a $500 million valuation this year. In fact, only a handful of things need to happen.

In 2018, Green Organic was a multi-billion-dollar firm. What happened? While the stock was swept up in the cannabis bull market, investors also fell in love with its powerful partnership with Aurora Cannabis, which was worth more than $10 billion.

Aurora was a heavyweight in the industry, and the partnership committed it to buying a large portion of Green Organic’s pot production and obligated it to help construct the company’s new grow infrastructure. Having the guidance, capital, and influence of a major cannabis partner was a huge advantage for Green Organic.

Last year, everything fell apart. Aurora completely pulled out of the deal, selling the vast majority of its TGOD stake. The entire investment thesis for Green Organic vanished within weeks.

But the company continued to invest in itself. This year, it expects to produce at least 20,000 kilograms of organic cannabis, which fetches a 50% premium versus conventional pot. The stock has been left for dead, but this could be its biggest year ever. If the company can prove that its pot can sell quickly at premium prices, shares could reverse course very quickly.

But it’s not necessary to swing for the fences to generate impressive returns. The stock below has sizable upside with more mitigated risk.

Hedge your bets

Some pot companies still have their powerful partnerships, yet trade at discounted valuations anyway.

Cronos Group (TSX:CRON)(NASDAQ:CRON) stock fell from $29 to just $9 last year, resulting in a market cap of $3.4 billion. Yet its blockbuster deal with Altria Group (NYSE:MO), which has a $100 billion market cap, is just getting started.

Last year, Altria invested $1.8 billion in Cronos, making the company its exclusive cannabis partner. This instantly made Cronos one of the most well-capitalized competitors in the industry. With a 50% market share for cigarettes in the U.S., not to mention world-famous brands like Marlboro, Altria has a proven track record of dominating regulated markets.

Despite the contraction in share price, Cronos has only started to leverage this relationship. In a decade, the company stands a good chance at being one of the largest pot companies on the planet. If the pot market rebounds this year, expect Cronos to be a top pick for new investment dollars.

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 Ryan Vanzo has no position in any stocks mentioned.

More on Cannabis Stocks

A cannabis plant grows.
Cannabis Stocks

TLRY Stock: Here’s What’s Coming in 2023

Tilray Inc. (TSX:TLRY) is geared up for big growth this decade and looks like one of the top cannabis stocks…

Read more »

A person holds a small glass jar of marijuana.
Cannabis Stocks

Canopy Growth Stock: Here’s What’s Coming in 2023

Canopy Growth stock has made a lot of new moves in the last few months, but where is the company…

Read more »

A cannabis plant grows.
Cannabis Stocks

Better Cannabis Buy: Canopy Growth Stock or Tilray?

Only two TSX weed stocks can deliver substantial returns in the highly anticipated growth of the global cannabis market.

Read more »

Medicinal research is conducted on cannabis.
Cannabis Stocks

Is Tilray Stock a Buy in January 2023?

Tilray stock has lost 50% of its value in the last 12 months, in line with its peers.

Read more »

Pot stocks are a riskier investment
Cannabis Stocks

Are Cannabis Stocks Still a Thing in 2023?

The whole question of whether cannabis stocks are still relevant in 2023 is an interesting one. Here's my take on…

Read more »

A cannabis plant grows.
Cannabis Stocks

Why Canopy Growth Stock Fell 72% Last Year

Canopy Growth stock is a beaten-up cannabis giant that is trading at a discount compared to historical multiples. But is…

Read more »

Cannabis grows at a commercial farm.
Cannabis Stocks

Is SNDL Stock a Buy in January 2023?

SNDL is among the worst-performing cannabis stocks in the last three years. But is SNDL stock a buy right now?

Read more »

a person watches a downward arrow crash through the floor
Cannabis Stocks

Why Tilray Stock Fell Almost 60% in 2022

Tilray is a Canadian cannabis stock that is down 93% from all-time highs. Let's see if TLRY stock is a…

Read more »