Marijuana isn’t just another growth industry. It has the potential to be a once-in-a-generation growth opportunity for patient investors who have a keen eye for this fast-paced industry. Between 2018 and 2030, various Wall Street firms have called for a fourfold to sixfold increase in global sales, which should be more than enough to create some big-time winners in this space.
The big question, as always, is: What marijuana stocks to buy? Typically, investors have gravitated toward growers, since they’ll most directly benefit from an uptick in medical and recreational demand. And among the many growers, it’s pot stocks like Canopy Growth, Aurora Cannabis, and Cronos Group that garner the most attention. These also happen to be the three largest cannabis stocks by market cap, so this shouldn’t be that big a surprise.
But the thing about most growers is that it’s hard to differentiate between them. Sure, some may have more provincial supply deals than others — or, in Aurora’s case, be able to outproduce every other weed grower. However, there isn’t a truly unique factor that allows them to stand out.
That’s not the case for the following three marijuana stocks, which are breaking the mold and doing things a bit differently.
Ontario-based CannTrust Holdings (NYSE: CTST) is angling to be a top-five and perhaps even top-three grower, but that’ll depend on just how much cannabis is produced from the up to 200 acres of outdoor growing space it plans to buy and develop. The company is currently guiding for 200,000 kilos to 300,000 kilos per year when at full operation. But, as noted, it’s not CannTrust’s sheer output that makes it unique. Rather, it’s the company’s growing methods that allow it to stand out.
At CannTrust’s flagship Niagara campus (840,000 square feet when complete), as well as its much smaller Vaughan facility (60,000 square feet of growing space), the company is relying on hydroponic growing methods. Hydroponics involves growing plants in a nutrient-rich water solvent as opposed to soil. It’s not necessarily a higher-yield form of growing, but when there’s nearby access to cheap sources of water and electricity, which Niagara certainly has, it can lead to low-cost production. In CannTrust’s case, its combined 900,000 square feet of cultivation devoted to hydroponics should produce 100,000 kilos a year, or 111 grams per square foot, which looks to be modestly above the industry average. So it’s really the best of both worlds.
Then there’s the company’s outdoor-grown cannabis. Outdoor marijuana isn’t often going to be of exceptional quality, but it does serve an intriguing purpose for CannTrust. Although the company didn’t mention a specific figure, it plans to utilize a good portion of this outdoor grow for extraction purposes. The extracts can be used to make edibles, concentrates, infused beverages, topicals, and a whole line of derivative products that’ll be legalized by no later than mid-October in Canada. These derivatives carry much juicier margins than traditional dried flower, making CannTrust a good bet to be among the top producers of alternative cannabis consumption products.