If you’re starting to get impatient with the cannabis industry, it might be time for a new method to the madness. After a stellar summer in 2018, things have slumped and then some for pot stocks. Only a few are trading even close to fair value, even though some have posted a profit.
If you’re an investor looking to stick it out with cannabis, now can certainly be a great time to get in while prices are down. The cannabis market coupled with an incoming recession has left stock prices at or near 52-week lows, making it an ideal time to buy.
However, there is also the option to buy for a quick turnaround. That leaves now as another great time to invest. After all, you could always buy up stocks and sell a little bit at a time. That way, you’re making money but also keeping some shares stored away.
As for the stocks that you could potentially look into, I would choose those that promise the fastest way to sales. While they might not be number one down the road, if you’re looking for some short-term potential, I would absolutely consider Aphria (TSX:APHA)(NYSE:APHA), Hexo (TSX:HEXO)(NYSE:HEXO), and Aleafia Health (TSX:ALEF).
It seemed like Aphria might actually be headed for collapse with scandal after scandal hitting the company. This was then met with incredibly disappointing sales quarter after quarter that sent shares plummeting, as the company’s production seemed to be quite limited. But this stock has made a huge comeback since then.
When the fourth quarter hit, the company saw sales growth of 158% quarter over quarter in its adult-use recreational marijuana market, much of this was due to its acquisition of CC Pharma in Germany. As the company goes more global — with CC Pharma set up in nine countries with legalized medicinal marijuana — this could mean huge sales for Aphria, both here and abroad. In fact, revenue is estimated to rise almost 200% in fiscal 2020.
Hexo also has some major potential moving forward, though it has a bit more to prove as a long-term investment. Where Hexo is interesting is with its partnership with Molson Coors Canada, as the pair are working on developing cannabis-infused beverages. When the derivatives market becomes legal in October, and products become available by December of this year, Hexo should seriously start to benefit.
I would say Hexo should start seeing this market hit its books some time in the new year, which would certainly help, as Hexo’s recent quarter reported only $13 million in sales. While again, it might not become a top spot in the cannabis industry, the edibles market is a highly lucrative area that could see sales increase significantly in the short term. Analysts expect Hexo sales to rise by 1,110% in fiscal 2019, and 452% through 2020.
Finally, we have Aleafia, a smaller company that has been making some huge moves to come out as a new cannabis contender. The company’s strength lies in its recent acquisition of Emblem, which led to its largest sale in the company’s history for $1,000,000. This was then followed up by a licence from Health Canada to quadruple the size of its 292,000-square-foot Port Perry Outdoor Grow facility to 1.1 million square feet. This jumped the company up to the top 10 cannabis companies in terms of production.
Meanwhile, the company is on a strong road to profits to take advantage of this facility. In its latest quarter, expenses were down by 41% quarter over quarter, with 377% growth in sales between the first and second quarter to $2.53 million, and which marked record revenue for the company. Analysts were predicting $2 million in profit by fiscal 2020, but that could certainly go up with this news.
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Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool owns shares of Molson Coors Brewing.
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