When it comes to cannabis stocks, Canada is a trendsetter. The first major economy to legalize cannabis, this sector has been red-hot in recent years.
However, cannabis stocks have been under pressure of late. A variety of reasons for this exist. However, the fact that legalization in the U.S. has yet to materialize is one factor which has taken all cannabis stocks down of late.
As the leading vertically integrated cannabis player in the U.S. market, Curaleaf continues to be a top pick of mine right now.
Indeed, I’m very bullish on the U.S. cannabis market long-term. Of course, delays with respect to Federal U.S. cannabis legalization are a big hit to players such as Curaleaf with so much to gain from this legislation. That said, in the current state-by-state model, Curaleaf is doing just fine.
The company’s revenue growth rate has been as impressive as its margins. As Curaleaf gobbles up more market share in more new markets across the U.S., the company will become an even greater force to be reckoned with. For now, investors will be looking to load up on the pick of the litter. And in my view, that company is clearly Curaleaf, at least in the U.S.
A domestic Canadian pick, Hexo’s focus has been on growing its market share in Eastern Canada, Quebec specifically. That said, this Canadian cannabis player has recently been expanding its horizons.
Hexo’s recently made a key acquisition to enter the European market. Indeed, while all cannabis companies wait patiently for U.S. legalization to open up export markets, Hexo is being proactive. This move to expand the company’s horizons could be a solid one for long-term shareholders.
But for now, Hexo has become a leading player in the Canadian cannabis space, for what it’s worth. I think more consolidation is likely in Canada, and Hexo could take the role of consolidator at some point. For those looking for Canadian cannabis exposure, Hexo remains one of my top picks right now.
Both cannabis players appear to have strong long-term growth prospects. Indeed, investors seeking such growth will need to pay up. These stocks aren’t cheap.
That said, the cannabis sector is one of the most exciting (and volatile) places to invest. For younger investors who are more aggressive and can stomach greater potential losses today, such companies could turn out to be great portfolio adds right now.
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 Chris MacDonald has no position in any stocks mentioned in this article. The Motley Fool recommends HEXO Corp.