When it comes to market-beating potential, one thing is clear. Investors need to know what market they are trying to beat. What you’ll usually see is the market refers to the S&P 500. But here, we like to focus on the TSX.
In this case, investors will want to try and beat the TSX today when it comes to the “market.” The TSX index is comprised of a wide range of Canadian securities and sectors, with 1,811 listed issuers on the TSX as of January 2024. This totals a market cap of $4.16 trillion as of writing.
So, how on earth are we meant to beat it? You might be surprised by the answer.
Think long term
If you want to beat the market, it’s important to identify sectors that should beat the market long term. That’s why I’m not going to go into an oil and gas stock or something here. Instead, we’re going to get into cannabis.
Cannabis stocks have a strong long-term outlook. The cannabis industry is expected to grow significantly in the coming years. The global legal cannabis market is projected to reach US$91.5 billion by 2028, growing at a compound annual growth rate (CAGR) of 26.7% from 2021 to 2028. And this all come down to the growth in legalization.
Many countries and states are moving toward the legalization of cannabis, both recreationally and medically. This is creating new markets and opportunities for companies in the sector. In the U.S., more states are expected to legalize cannabis, potentially leading to federal legalization. This trend is also observed globally, with countries like Canada, Mexico, and parts of Europe moving toward broader legalization.
Yet when it comes to companies already performing well, there’s really just one to consider.
Tilray stock
Tilray (TSX:TLRY) is one growth stock that Canadian investors will want to have on hand over the next few years. In fact, they certainly wanted it this week when shares surged over 11% after the company reported earnings.
Tilray stock reported strength across several areas. The company increased net revenue by 26% to US$789 million, coming from both cannabis and its beverage-alcohol segments. The latter saw a whopping 137% increase. Further, gross profit rose by 23% to US$82.4 million, with adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) up by 37% to US$119.8 million.
Tilray stock also managed to narrow its net loss to US$15.4 million. This was a significant drop from US$119.8 million from the year before. Plus, it also reduced its debt by around US$300 million!
Looking ahead
There is, therefore, a lot of reason to think that Tilray stock will continue this trend once more as a growth stock. The company is now the 5th largest craft brewer in the United States. It’s also managed a successful execution of its lifestyle business strategy. This includes its acquisitions of craft beer brands, along with other cannabis companies.
As for cannabis, it holds the top spot in recreational cannabis market share in Canada. Altogether, Tilray stock projects a strong 2025. The company believes it should hit between US$950 million and US$1 billion in net revenue.
However, there are other companies that might be more valuable, though perhaps not in the spotlight. Tilray stock now looks fairly valued, according to some analysts, with the Canadian market struggling to create profitability for cannabis companies.
Even so, Tilray stock looks like a strong growth stock that could certainly beat out the market. With shares up 11% in a day and the TSX up 11% in a year, it’s clear which is the winner.
