2 Pot Stocks With Jaw-Dropping Growth Potential

Legal marijuana is among the fastest-growing industries in the world. Most research firms and industry insiders have the so-called “white” cannabis market expanding at a compound annual growth rate of over 35% in the next six years.

Perhaps even more impressively, top executives in the space, such as Canopy Growth (NYSE:CGC) co-CEO Bruce Linton and Tilray (NASDAQ:TLRY) CEO Brendan Kennedy, believe the industry can sustain its blistering growth rate for the entirety of the next decade, if not longer. The underlying reason is the growing belief that cannabis and cannabis-based products will eventually disrupt multiple high-dollar industries, such as alcoholic and non-alcoholic beverages, cosmetics, food, pharmaceuticals, and even tobacco.

With such an astonishingly high growth rate in mind, it’s no wonder investors have bid up the prices of marijuana stocks to record highs over the past two years. If any of these companies simply matched the industry’s projected growth rate over the next decade, an initial investment of $50,000 would translate into a return on capital of over…

$1,000,000. That kind of return on capital is unheard of for stocks that don’t involve unacceptable amounts of risk, such as penny stocks trading on largely unregulated exchanges.

Marijuana investors, though, have a glaring problem right now. Alpha dogs in the industry such as Canopy and Tilray currently sport towering valuations that strongly imply that most, if not all, of this projected upside is already baked into their stock prices. On the flip side, most of the small- to mid-cap companies in this space are simply too risky to consider as long-term growth vehicles. The majority of these second-tier players don’t have the economy of scale necessary to survive the industry’s upcoming supply glut and corresponding margin compression.

What’s the solution?  The list of names that can arguably survive the flood of marijuana set to hit the market over the next two years and that don’t already have multibillion-dollar market caps is exceedingly short: HEXO (NASDAQOTH:HYYDF) and OrganiGram Holdings(NASDAQOTH:OGRMF) appear to have what it takes. Here’s why.

HEXO’s unique value proposition

HEXO’s management has said it expects a small handful of companies to control the vast majority (around 80%) of the cannabis market within the next few years — an admission that few companies of its size have been willing to make for obvious reasons.

But HEXO has two solid reasons for being upfront with potential investors about this rather dire forecast. The company has built a solid competitive moat by way of a five-year supply contract with Quebec’s Societe Quebecoise du Cannabis, which operates Quebec’s cannabis stores, and it also has a partnership with Molson Coors to develop non-alcoholic cannabis-infused beverages. HEXO has thus secured a sustainable source of revenue worth up to…

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