Even at a conservative estimate, two out of five Canadian marijuana users still rely on black market dealers for their supply, and the price is just one of the reasons behind it. The complicated legal process and the red tape required for a retail marijuana licence have prevented country-wide penetration of legal weed stores, and the supply chains are still weak.
However, there is also reason to be hopeful about the state of Canada’s marijuana market, and it goes beyond the U.S. legalization that is expected to boost the business of many Canada-based marijuana companies. Even though dried cannabis is still the most moved/sold product in the market, the other segments, including edibles, drinks, and now even CBD vapes, are also growing.
These recreational marijuana products are safer when produced by companies subject to safety regulations, and that might prevent most consumers from straying to the black market dealers in these domains.
Plus, medical marijuana demand is growing across the globe, and many Canadian cannabis companies are well positioned to meet that demand. With that in mind, there are two stocks you may consider keeping an eye on and buying at the beginning of a bull market.
A Smiths Falls-based marijuana company
Canopy Growth (TSX:WEED) used to be among the top players in the Canadian marijuana industry, and even though it still retains many of its strengths, the stock has been brutalized over the years. There are still about 13 brands under the Canopy Growth name from Canada alone. There are about five international brands as well, including one from the U.S.
Its brands cover a wide range of therapeutic and adult-use/recreational products. The collective portfolio of products is enormous, and its global presence gives it more growth opportunities compared to marijuana companies that are exclusively local.
The stock is currently trading at $0.5 per share, after a 99% decline from its 2018 and 2019 peaks. Even though re-reaching those peaks might be an incredibly lofty goal, the stock can double its investors’ capital by just going beyond $1 a share. If there is even a remote possibility that the stock can rise up to a double-digit price tag, it’s worth keeping an eye on Canopy Growth.
A Toronto-based marijuana company
Cronos Group (TSX:CRON) has a decent presence in Canada, Israel, and the United States. It has multiple facilities, including cultivation and processing facilities in both Canada and Israel. Market-wise, the two main domains it covers are adult-use/recreational marijuana products, and one of its main strengths is market recognition.
It’s among the top three Cannabis brands in Canada and the top brand when it comes to edibles. Edibles is a growing market, and if Cronos manages to grab onto its top market share, it might emerge as one of the strongest players in the Canadian marijuana market.
Cronos is also well positioned to take advantage of the U.S. market. Many U.S. states have already legalized marijuana, and if a federal legalization bill is passed for both medical and recreational marijuana, companies like Cronos that already have a presence in the U.S. market might experience a significant boost in sales.
Foolish takeaway
The two cannabis stocks are incredibly beaten down right now. Both have lost over 90% of their valuation over the years. But if a sector-wide recovery is in the cards, the two stocks might be well positioned to take advantage of it.
