by Fred Fuld III
If you have been watching some of the Canadian cannabis companies, you would have seen that many of them are on fire.
For example, Tilray (TLRY), based in British Columbia, has almost tripled in the last 15 days, shooting up from around 40 a share to over 109 per share.
The Toronto, Ontario based vertically integrated cannabis company, Cronos Group (CRON) has risen over 21% in the same time frame, moving from 42.65 to 47.23.
Many of the American marijuana stocks haven’t moved much during the last couple weeks, and some have even dropped.
Numerous investors are looking to invest in this industry, but are concerned about the volatility of many of the cannabis stocks and the stability of ongoing operations of the companies in this industry.
Yet, investors still want to participate. It is interesting to note that marijuana legalization may actually lead to reduced deaths in a community, according to the National Institute on Drug Abuse, a division of the U.S. Government’s National Institute of Health, which published the article: “Study Links Medical Marijuana Dispensaries to Reduced Mortality From Opioid Overdose.”
Fortunately there is a way for investors to take advantage of the growth of the marijuana sector though “blue chip’ companies.
Wikipedia defines Blue Chip as “a corporation with a national reputation for quality, reliability, and the ability to operate profitably”. So you might be asking, what stocks fit into this category?
Several large publicly traded corporations have, or are looking for, significant ownership interests in marijuana companies, and as more and more states legalize the use of marijuana, and the possibility of Federal legalization, these stakes could provide significant returns to the cannabis blue chops (maybe I should call them Green Chip companies?).
For example, Constellation Brands, Inc. (STZ), the large beer, wine, and liquor distributor, recently upped its stake in the medical marijuana company, Canopy Growth (CGC). Constellation has been around since 1945, trades at 15 times earnings, and pays a yield of 1.4%.
Molson Coors Brewing Company (TAP) is partnering with HEXO Corp. (HYYDF), formerly known as The Hydropothecary, a Canadian marijuana producer. Molson Coors is a $13 billion market cap company which has a very favorable price to earnings ratio of 8.7 and offers a decent dividend yield of 2.47%.
In the biotech and pharmaceutical arena, and a cannabis pure play, GW Pharmaceuticals plc (GWPH) has been developing cannabinoid prescription medicines since 1998. The stock has a market cap of almost $4 billion, but is currently generating negative earnings.
If you are looking for more speculative stocks, stay tuned for our more in-depth article on marijuana companies.
Also, check out the exclusive interview with Chet Billingsley, CEO of Mentor Capital, which invests in pre-IPO cannabis companies.
Disclosure: Author owns and has a short put position in CGC.
I predict these stocks will get high. 🙂
I liked your article. But don’t you think some of the Canadian cannabis companies are also blue chip?
I guess it all depends what you mean by blue chip. The stocks mentioned in the article have been around for many years.