Did you know that about one in five Canadians (aged 15 or older) reported using cannabis (or derivative products) in the last three months of 2020?
It’s remarkable, considering cannabis was legalized in 2018 and derivates in 2019.
If that’s just after a couple of years of market penetration, imagine how prevalent marijuana use would be in a decade or so.
And that’s where your focal point should be when you are planning on investing in this particular market and are looking into some of the best marijuana stocks in Canada.
Marijuana, Cannabis, And Cannabinoids – What Do Investors Need To Know
Understanding the terms associated with marijuana stocks, especially the ones that are used interchangeably, can ensure that you are investing in the right companies.
Cannabis: The term “cannabis” refers to Cannabis sativa, a subspecies from the cannabis plant family. As an umbrella term, the word is used for the plant, its extracts, and often for different medical and recreational products using the cannabis plant.
Marijuana: The government of Canada considers marijuana a “slang” term that refers to the dried Cannabis flowers and some of their elements. This is mostly used recreationally.
The medical community in the US refines this definition to include cannabis flower parts or products derived from or using the cannabis plant that contains a specific substance: Tetrahydrocannabinol (THC). That’s what causes the “high.”
So marijuana entails the specific part of the flowers or products created with substances/elements extracted from cannabis flowers that generate the intoxicating effects, whether taken medically or recreationally.
For recreational purposes, the terms can be used interchangeably, but for medical purposes, the difference might be more pronounced.
Cannabinoids: Out of several hundreds of substances that can be extracted from the cannabis plant, there are about a hundred that are called cannabinoids.
They impact the “Cannabinoid receptors” in our body, which are partly responsible for important body functions like pain, memory, and appetite. THC and CBD (Cannabidiol) are two of the most common cannabinoids.
List of Cannabinoids Stocks/Cannabis Stocks/Marijuana Stocks In Canada
From an investment perspective, there is very little to no difference among these terms. The stocks of almost all the companies in this domain, whether recreation or medical oriented, can be called marijuana stocks, cannabis stocks, or cannabinoid stocks.
Even if you look into stocks dedicated to isolating cannabinoids, they will fall (by extension) under both cannabis and marijuana categories.
History Of Marijuana Stocks In Canada
Marijuana – While not technically the newest asset class in Canada, it rose to prominence in 2018 when it was legalized by the federal government. Marijuana companies that had to follow stringent guidelines when it came to the cultivation, development, and distribution of even medical marijuana, finally got free rein.
The stocks went through the roof within a year, but the hopeful speculation that triggered this rise soon turned to dismay as real-life logistics and distribution issues of legal cannabis products started arising, especially in the presence of the new, more emboldened black market.
Many giants fell and started trading at a fraction of their peak valuations just a few years ago. The second phase of legalization (dubbed Cannabis 2.0), which focused on a whole range of derivative products, including beverages and edibles, stirred the market a bit but not enough to reinvigorate it.
However, the tide is turning, though quite slowly. In 2020, the legal Cannabis market size grew to about $2.6 billion, and it’s expected to grow more than three times by 2026.
I go over if marijuana stocks will cover in more depth after this list.
Best Marijuana Stocks In Canada
Canada has one of the largest numbers of marijuana companies in the world. Some of the best marijuana stocks in Canada, with the potential for powerful growth when the industry finally turns a corner for the better, are:
1. Canopy Growth Stock (TSX)
Market Capitalization: $4.3 billion
While it has fallen a long way from its glory days valuation, Canopy Growth is still one of the most formidable marijuana stocks currently trading on TSX. And one of the strongest points in its favor is its resilience.
The stock has managed to survive catastrophic falls, but the company is still in business, and the acquisitions and investments it has made so far are likely to pay off well in the future as the industry matures.
By 2021, most of the company’s revenue was generated in-house (Canada), but it has its eyes set on the US, and it’s already in the process of acquiring the most well-known edibles brand in the country.
Canopy’s financial future and, consequently, the stock’s potential are tied quite heavily to the US market.
2. Tilray Stock (TSX/NASDAQ)
Market Capitalization: $4.2 billion
Tilray has become one of the most promising global marijuana players after its merger with Aphria and has the largest global footprint. It has products and brand recognition in both the adult-use and medical marijuana markets.
The company has regional subsidiaries focused on Europe, Latin America, and Australia, and it’s rapidly expanding its US presence with acquisitions like its MedMan, a major Cannabis retailer in the US.
Tilray has 20 different brands, and its geographic reach makes it ideally poised for growth as the global wave of Cannabis legalization hits more countries and opens up new avenues for Tilray to leverage its presence.
3. Aurora Cannabis Stock (TSX/NASDAQ)
Market Capitalization: $1.3 billion
Aurora Cannabis is another marijuana giant you should consider investing in. The company went through a rough phase when it diluted its shares for its aggressive acquisition spree.
However, what it has acquired in the process will most likely help it rise to or even beyond its glory-days valuation, as the demand for medical and recreational marijuana rises in North America.
The company has four medical marijuana brands under its name and six adult-use recreational cannabis brands.
These brands offer a wide range of products, including edibles and vapes, for both mainstream market segments and premium customers. The company has an impressive local and US presence, but Israel is the extent of its global reach (so far).
4. Village Farms International Stock (TSX/NASDAQ)
Market Capitalization: $715 million
Village Farms is quite different from most other marijuana stocks in Canada, and this difference has been in the stock’s favor so far, i.e., it hasn’t fallen as hard as other marijuana companies yet.
The difference is that it’s primarily a greenhouse company, the largest one of its kind in North America. But the company has reoriented its expertise and resources (greenhouse facilities) to enter the cannabis space.
One of its brands is Quebec-exclusive growers. One offers derivative products like vapes and edibles. Two brands focus on Hemp (low THC products).
And the fifth brand under its banner is a clean energy company, endorsing Village Farm’s commitment to sustainability. So the business model and with it, the risk is well spread out.
5. OrganiGram Holdings Stock (TSX/NASDAQ)
Market Capitalization: $660 million
OrganiGram is one of the newer players, especially compared to old giants like Aurora and Canopy. The company started out in 2013 and indoor cannabis growth.
That’s a different business and marketing approach and a stark comparison from many companies that boast more natural production facilities, but OrganiGram’s unique 3-level indoor cultivation (with finer control using micro-climates) approach gives them an edge in both yield (per area) and quality.
It started out as a medical marijuana company which is still its international focal point (in Israel and Australia), but it has also grown its presence in the adult-use business segment and now has five brands under the banner, with three value-focused and one premium brand.
6. HEXO Stock (TSX/NASDAQ)
Market Capitalization: $313 million
If you are looking for a marijuana company focused (almost exclusively) on adult-use marijuana products, HEXO would be a great fit. However, note that this is an investment decision that can potentially cut you off from the benefits of a medical marijuana boom.
However, it’s heavy lean towards adult-use cannabis ensures that the company resources are not diluted.
Thanks to its merger with Redecan, HEXO has become one of the top recreational marijuana players in the market, thanks to Redecan’s loyal clientele and an impressive range of products.
The collective market share, especially led by HEXO’s local and US-market penetration, allows it to rival companies significantly larger in comparison, by market cap at least.
7. InterCure (TSX/NASDAQ)
Market Capitalization: $282 million
If you are interested in a company currently trading on the TSX but with international origins, InterCure is one of the few “non-US” choices there are.
This Israeli company has been around since 1994 and is one of the largest Cannabis companies in Israel (if not the largest). It only started trading on the TSX in early 2021, and so far, it has managed to maintain a reasonable valuation.
The stock is cyclical at best, and if it keeps performing at its current pace, it might become a better choice for making some quick profit in the short term rather than getting amazing returns in the long run.
8. Valens Company Stock (TSX)
Market Capitalization: $212 million
Valens is one of the few publicly listed B2B marijuana companies in Canada. It offers testing services for cannabis businesses, which involves finding out impurities and grading the quality of the finished products.
It also offers white label product-development services. But the company is also expanding its own B2C business segment and has already made acquisitions to grow in that area.
It focuses on top-of-the-line flower-based products and already has a sizeable market in-country as well as California. It has production facilities in Canada, the US, and Australia, and this access to three well-primed markets can be potentially explosive for the company.
9. Auxly Cannabis Group Stock (TSX)
Market Capitalization: $155 million
Auxly is an Ontario-focused adult-use Cannabis company with the number one market share when it comes to vapes. It’s also growing its market share of edibles, flowers, and oils.
The company has an impressive online presence, including its presence on the OCS – Ontario’s only legal online retailer/platform. The company has five brands under its name.
It has minimal focus on medical marijuana, with just one brand focused on the wellness aspect of cannabis with six over-the-counter products in its portfolio.
The stock showed enormous potential in the beginning, growing over 8,000% between Jan 2017 and Jan 2018, and while that may not be a repeatable feat, the stock is still worth considering.
10. PharmaCielo Stock (TSXV)
Market Capitalization: $145 million
This medical-oriented cannabis producer is headquartered in Toronto with a production facility in Colombia, which gives it access to different growing conditions, soil nutrients, as well as access to low-cost labor.
Despite the relatively small size, the company has the largest turnkey cultivation footprint in the world.
It also has a diverse range of products, divided into psychoactive products based on THC and non-psychoactive ones using CBD.
It’s a relatively small player but with a different yet promising operational approach that has the potential to pay off big, especially if the company starts preparing more than just THC and CBD extracts.
Four US-based Marijuana Stocks
There are several US-based marijuana companies that are available to Canadian investors either directly from the US stock exchanges or via Canadian National Stock Exchange (CNSX). Three of them are:
Curaleaf Holdings has a market capitalization of about $7.9 billion and is based in Massachusetts, US. It’s primarily a wellness-oriented company with 22 cultivation and 30 operation sites and over a hundred local dispensaries.
It already operates in 23 US states, and if the federal legalization bill passes, the company is expected to grow a powerful national presence.
Illinois-based Green Thumb Industries is another wellness-oriented cannabis company with a market cap of about $6.3 billion and seven brands under its banner. It also has retail stores/dispensaries under nine different brands, each with its own regional presence.
Another Illinois-based cannabis company is Verano Holdings. With five consumer-use, two retail brands, 12 production and processing facilities, and 93 retail sites, Verano is one of the largest players in the US Cannabis industry. It currently operates in 15 states.
Will Marijuana Stocks In Canada Ever Recover?
Most likely. It’s not a definitive yes because we can never predict a future trend with a hundred percent certainty, but all the evidence points towards it happening.
In 2018, marijuana stocks spiked because there was too much hopeful speculation associated with the potential risk of legal marijuana, but when sales numbers started to come in, investors realized how aggressively disassociated the financial fundamentals were from the price the stocks were traded at.
Worsening the matters were delays in the legal process associated with new licenses for marijuana retailers. The charm wore off quickly, and investors started leaving the sinking ship.
However, there is a silver lining. Many marijuana stocks are so cheap right now that even a slight bump upwards can result in hefty returns. And the long-term potential of the stocks seems promising if you stick with these companies for long enough.
Cannabis products are penetrating the market at a decent pace, and marijuana stocks can rise to new heights, making investors rich in the process, even if they never return to their glory days valuations.
How To Buy Marijuana Stocks In Canada
The cheapest way to buy marijuana stocks is from discount brokers. My top choices in Canada are:
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To learn more, check out my full breakdown of the best trading platforms in Canada here.
The marijuana stocks are primed for growth, although it might not be as explosive as it was the right time.
But even if it isn’t, buying some of the best marijuana stocks in Canada when they are in a rut and holding on to them for long enough, you may have a chance of accelerating the growth of your portfolio by a significant margin (assuming you invest enough capital).