Pot Stocks: Which Pick Offers the Most Potential?

As many Canadian pot stocks continue to progress toward profitability, here’s one top pick that looks like it offers the most potential of all.

| More on:
edit Jars of marijuana

Image source: Getty Images

It was just about five years ago when pot stocks, led by Canopy Growth (TSX:WEED)(NYSE:CGC), started an incredible years-long rally leading up to legalization in the sector.

This rally created a tonne of excitement around these stocks and saw investors earn huge returns in a short amount of time.

From where Canopy was exactly five years ago, the stock gained as much as 2,000% ahead of legalization before selling off to its current level, which is still impressive. In the last five years, investors have seen a total return of more than 660% from the Canadian pot stock, despite little momentum in the industry these days.

So you may be wondering after all this time if the sector can even produce any high-potential growth stocks anymore.

Pot stocks: Can you still earn a major return?

Despite the optimism from investors ahead of legalization and the volatile rallies we saw, it was always going to take some time for these businesses to go through growing pains and for the industry itself to crowd out the black market.

Now, though, after a few years of operations, companies are starting to get their feet under them, and the best businesses have begun to separate themselves.

There are still massive industry leaders like Canopy Growth to consider. However, there are also smaller companies showing a tonne of promise, especially over the long term.

So if you’re still bullish on the industry, one of the top Canadian pot stocks I’d consider is OrganiGram Holdings (TSX:OGI)(NASDAQ:OGI).

The company with the most potential

OrganiGram was one of the early cannabis stocks in Canada and has long been a solid company. However, it’s never quite been an investor favourite or one of the large and more dominant stocks, such as Canopy.

Nevertheless, OrganiGram has always stayed the course and stuck with its own long-term strategy. The company operates out of Moncton but has recently leased a new facility in Winnipeg for its growing edibles business.

The pot stock has always been an intriguing pick, with its state-of-the-art, three-level cultivation facility. More recently, though, OrganiGram has become an investor and analyst favourite in the industry.

Its strategy and execution are outperforming its peers, resulting in OrganiGram continuing to post solid growth numbers. Its impressive performance even caught the attention of British American Tobacco, which bought a 20% stake.

This may not have been that noteworthy a few years ago when companies were doing deals all the time. However, optimism to do deals in the cannabis space from major corporations has been low for some time, so in my view, it’s a significant investment.

The company also has a strong balance sheet and has been progressing well. Not only are its sales growing, but so are the number of products it offers.

Bottom line

Although OrganiGram looks to be one of the pot stocks with the most potential, it still could be a long way from reaching profitability.

That doesn’t mean the stock is not worth an investment today. It just means if you’re going to buy OrganiGram or any other pot stock, it has to be for the long-term.

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 Daniel Da Costa has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends OrganiGram Holdings. The Motley Fool recommends British American Tobacco.

More on Cannabis Stocks

edit Cannabis leaves of a plant on a dark background
Cannabis Stocks

Why This Little-Known Cannabis Stock Could Double in 2024

This cannabis stock has already doubled this year since 52-week lows and could easily rise that much once more.

Read more »

Bad apple with good apples
Cannabis Stocks

1 TSX Stock I Wouldn’t Touch With a 420-Foot Pole

Down 87% from all-time highs, Cronos Group stock is a still a high-risk investment for long-term shareholders in 2024.

Read more »

A cannabis plant grows.
Cannabis Stocks

Canopy Growth: Buy, Sell, or Hold?

Canopy Growth (TSX:WEED) stock should make a killing on U.S. expansion, but investors will need to be very patient.

Read more »

Marijuana plant and cannabis oil bottles isolated
Energy Stocks

3 Canadian Value Stocks to Buy Right Now

Undervalued Canadian stocks such as Secure Energy should be part of your shopping list in May 2024.

Read more »

edit Cannabis leaves of a plant on a dark background
Cannabis Stocks

Here’s Why it’s Not Too Late to Buy Cronos Group Stock

The optimism about U.S. federal marijuana legalization and its anticipation are potent bullish triggers for the Canadian cannabis industry.

Read more »

Cannabis grows at a commercial farm.
Cannabis Stocks

Canopy Growth Stock Is on a Tear: Is it a Good Buy Now? 

Canopy Growth (TSX:WEED) stock surged by 80% from news out of the U.S., but is enough there without the news…

Read more »

Marijuana plant and cannabis oil bottles isolated
Cannabis Stocks

Prediction: These Could Be the Best-Performing Cannabis Stocks Through 2030

Quality cannabis stocks such as Green Thumb and Cresco Labs are positioned to deliver outsized gains to shareholders in 2024…

Read more »

Pot stocks are a riskier investment
Cannabis Stocks

The Big Mistake I See Cannabis Investors Making Over and Over Again

The news of marijuana slated to be legalized next year has seen a boost for cannabis investors, but they must…

Read more »