by Fred Fuld III
Over 60% of states have legalized marijuana, either for medical purposes or for both medical and recreational use. In addition, Canada has legalized recreational cannabis throughout all the provinces after the passage of the Cannabis Act (also known as Bill C-45), joining Uruguay as the second country to do so nationwide.
If you want to invest in a new budding industry (no pun intended), it is generally considered a good idea to choose the largest stocks to invest in. They have greater liquidity, a larger following by analysts, and the large size is usually due to stronger earnings, stronger revenues, or at the very least, greater growth potential of revenues.
So if you are looking to place your investment dollars in the cannabis industry, you might want to start you due diligence with the largest companies by market cap. (market capitalization is the total number of shares times the current market price).
The biggest one by far is Canopy Growth Corp (CGC) with a market cap of $15.3 billion. The company has a big advantage in that Constellation Brands (STZ) invested a huge amount of money in the company, owning over a third of Canopy shares. Constellation known for its beer and wine, markets Pacifico and Corona beer, Robert Monday and Clos du Bois wine, and Svedka vodka. Canopy has a forward price to earnings ratio of 357 and trades at 2.87 times book value.
Coming in second place is Aurora Cannabis (ACB) with an $8.4 billion market cap. The stock has a forward P/E ratio of 555.5 and price to book value of 2.58.
GW Pharmaceuticals (GWPH) is a $5.64 billion company involved in developing cannabinoid biopharmaceutical products. It trades at 8.82 times book value.
Cronos Group (CRON) has a $5.13 billion market cap and produces and sells marijuana products in Canada, Germany, and other areas. The stock trades at 69 times forward earnings and 7.1 times book value.
Tilray (TLRY) has a $4.3 billion market cap. The company is developing cannabis infused beverages in partnership with Anheuser-Busch InBev (BUD). Tilray has a nosebleed-level forward P/E ratio of 1,111 and a price to book of 11.1.
Maybe one of these stocks will help your portfolio get higher and higher. Many tiny pot stocks are cropping up like weeds. Be careful with the smaller companies as they may go up in smoke and throw your portfolio out of joint. (Puns intended.)
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Disclosure: Author owns CGC.