Five Cheap Marijuana Stocks Actually Worth Investing In
Cheap marijuana stocks are easy to come by. And that’s especially true for those looking for a pure marijuana play. But not all of them will live to turn a profit.
Then there are the companies dabbling in cannabis. For instance, take Hawthorne Gardening Company. It is a subsidiary of Scotts Miracle-Gro (NYSE: SMG) dedicated to cannabis growers. The company has more than 40 years of experience in the businesses. And today, this industry leader is blazing new trails in research and development. It provides services for individual and commercial ventures.
Hawthorn has already proven to be an invaluable partner for growing operations. And this area of Scotts business is only growing. Hawthorne sales rose 71% year-over-year. And the subsidiary’s profits are up 223% year over year.
Winter isn’t normally a time when parent company Scotts turns a profit. In fact, this is the first time the gardening company has turned a first quarter profit. And that’s thanks in part to Hawthorne’s growing importance in the cannabis industry. Potential future growth trajectory paired with a modest 1% dividend yield makes for a compelling argument to invest in Scotts.
The only problem here is that it’s certainly not cheap. Same goes for other periphery players. Molson Coors (NYSE: TAP) has partnered with Hexo (NYSE: HEXO) to develop cannabis-infused beverages. And Constellation Brands (NYSE: STZ) has made an equity investment in one of the largest marijuana stocks in the world, Canopy Growth (Nasdaq: CGC). I could make a compelling argument to invest in these mainly booze-selling businesses, but…
Scotts, Molson and Constellation don’t really qualify as cheap marijuana stocks. And more importantly, they don’t have the earnings growth potential of pure-play marijuana stocks. Cannabis sales are growing quickly. And while parent companies invested in the space are poised to benefit, it’s the companies that are on the front lines that have the most to gain.
Five Cheap Marijuana Stocks Leading the Way
- Cronos Group (Nasdaq: CRON)
- Neptune Wellness Solutions (Nasdaq: NEPT)
- OrganiGram Holdings (Nasdaq: OGI)
- Aurora Cannabis (NYSE: ACB)
- Aphria (Nasdaq: APHA) & Tilray (Nasdaq: TLRY)
This Canadian-based production and distribution outfit recently entered the Israeli medical marijuana market. The company’s “PEACE NATURALS” can already be found in pharmacies throughout Israel. And on top of this expansion, Cronos had already established partnerships and production and distribution networks across five continents. All of this growth has been paying off too. Cronos recently reported 180% year-over-year revenue growth. This makes Cronos one of the few undervalued, cheap marijuana stocks still worthy of investment.
Neptune Wellness Solutions
The Roman god of the sea might not conjure up visions of marijuana for most folks. But this biotech company wasn’t always in the weed business. It started as a nutraceutical company with an emphasis on Antarctic krill oil. The company is largely responsible for creating a new omega-3 category with its product line.
But Neptune has since moved on from its fishy past and now focuses on cannabis and hemp production. It has nutrition products, natural hemp-based remedies and even a line of pet supplements. The company’s well-diversified offerings put it in an excellent position as far as cheap marijuana stocks. And its situation is particularly favorable thanks to its focus on the wellness side of business.
When Canada legalized recreational marijuana, OrganiGram was ready and came out of the gate hot. Since then, its revenue growth has been sluggish as it has reinvested in itself. But forecasters believe the company is about to turn the corner. It is one of the few companies with licenses to distribute cannabis in all 10 Canadian provinces. And if its investments in more efficient production capabilities pay off, access to all of those areas could have a huge impact on future revenue growth.
OrganiGram’s scalability makes it a value stock with potential for future volatility. But despite probable short-term ups and downs, this company remains one of the more promising cheap marijuana stocks.
Aurora had a bad year in 2020. And the couple of years before 2020 featured major ups and downs. Nonetheless, Aurora is still one of the most recognizable names in this budding industry. And that can go a long way.
Many of its competitors are ramping up production of high-margin marijuana derivatives like beverages, edibles and concentrates. Meanwhile, Aurora is taking things “back to basics” and focusing on the already profitable areas of its business. As such, Aurora recently signed an agreement with Great Northern Distributors.
The company also agreed to a $125 million bought-deal offering, which it sounds like will be used to reduce debt. On top of that, Aurora just inked a five-year supply deal with MedReleaf Australia. Aurora’s trip back to the to where it once was in terms of valuation won’t be a quick one. But that’s what makes it one of the most interesting cheap marijuana stocks today.
Aphria & Tilray
This one-two punch of a pot powerhouse gets a single write-up due to a proposed merger announced in 2020. The all-stock deal combining two of the biggest names in the marijuana space will create the largest (legal) cannabis company in the world to date. The two combined for $874 million (in Canadian dollars) in sales the past 12 months. That puts the combined company ahead of the biggest competition, including Curaleaf Holdings (OTC: CURLF) and Canopy Growth.
The deal looks good on paper because it gives Aphria better access to the U.S. and European markets. And it’s helpful for Tilray because the merger will improve its balance sheet.
“I realized that Aphria needed to expand out of Canada, and merging with Tilray was a great answer because it’s a U.S.-domiciled business with great international assets,” Aphria Chief Executive Officer Irwin Simon told Bloomberg.
When the deal is done, the company will keep Tilray’s name and trade under the ticker TLRY.
The Bottom Line on Cheap Marijuana Stocks
The “Green Wave” of legalization (or at least decriminalization) is continuing. Early in 2021, two chambers of Virginia’s General Assembly passed marijuana legalization bills. Once reconciled, the combined bill is expected to be signed by Gov. Ralph Northam.
And there’s an ever-increasing likelihood that marijuana could be decriminalized at the federal level – and thus made legal in most states.
If that occurs, the flood gates will open and Canadian pot producers like Tilray, Aurora, OrganiGram, Neptune and Cronos could suddenly have the ability to sell directly to U.S. consumers. If and when that happens, investors can expect to see skyrocketing revenue from north-of-the-border producers that have had years to prepare. In other words, these cheap marijuana stocks aren’t likely to stay cheap forever.
If you’d like to stay abreast of all the latest news in the burgeoning marijuana industry, we suggest signing up for our Profit Trends e-letter. It’s the easiest way to get out in front of important news affecting this new industry.
About Matthew Makowski
Matthew Makowski is a senior research analyst and writer at Investment U. He has been studying and writing about the markets for 20 years. Equally comfortable identifying value stocks as he is discounts in the crypto markets, Matthew began mining Bitcoin in 2011 and has since honed his focus on the cryptocurrency markets as a whole. He is a graduate of Rutgers University and lives in Colorado with his dog, Dorito.