3 cannabis companies Cronos Group (CRON) might want to buy

The marijuana industry has come an incredibly long way in relatively short amount of time. What had been considered a taboo topic is no longer. Following the passage of the Cannabis Act in Canada last year, our neighbor to the north became the first industrialized country in the world to legalize recreational marijuana. We also witnessed the highest approval for legalizing cannabis in the U.S., according to Gallup, in its nearly 50 years of polling.

This transformation all translates into one thing: big money for opportunistic marijuana stocks…

According to Wall Street investment firms, the cannabis industry looks to be on pace for $50 billion to $75 billion in annual global sales by the end of the next decade, up from “only” $12.2 billion globally in 2018. This money has to go somewhere, which is why investment dollars have been pouring into pot stocks.

But, as investors, we also know that no two stocks are ever created equally, and there’s always room for improvement with every company — even in the marijuana industry. One case in point is Cronos Group (NASDAQ:CRON), the third largest pot stock by market cap, and one of the year’s top performers following the closing of Altria‘s $1.8 billion equity investment into the company.

Cronos Group should consider using its cash to acquire one of these three companies

On the surface, there’s not much to complain about, with Cronos Group’s share price up 64% since the year began. But dig deeper, and you’ll find plenty of deficiencies. Perhaps none is more glaring than its subpar production, which likely comes in at 120,000 kilos at peak annual output for a company with a $5.7 billion market cap. Worse yet, most of this production won’t be fully online until next year. If Cronos is to become a major player, it’s going to need to beef up its production significantly, and doing so organically might take too long with so much market share up for grabs at the moment.

Rather, flush with $1.82 billion in cash on hand, Cronos Group might be best served if it goes shopping and buys additional capacity. Though yours truly hasn’t been the biggest fan of the premiums paid for cannabis acquisitions to this point, buying capacity looks to be the best option for Cronos Group, with market share still up for grabs in Canada and in overseas markets.

The big question is, which pot stocks should Cronos consider buying? Let’s take a look…

Continue reading at THE MOTLEY FOOL