Aurora Cannabis (NYSE:ACB) and Scotts Miracle-Gro (NYSE:SMG) shareholders are probably glad that 2018 is behind them. Aurora’s share price fell 35% last year — although the steep drop stemmed entirely from dilution caused by issuing new shares — while Scotts Miracle-Gro stock plunged nearly 43%.
It’s a new year now, and both stocks have gotten off to a good start. 2019 should be a better year for both Aurora Cannabis and Scotts Miracle-Gro for several reasons. But which is the better pick for long-term investors…
The case for Aurora Cannabis
If you like simple investing theses, you’ll probably love the investing thesis for Aurora Cannabis. It can be summarized in two statements:
- Global demand for cannabis will soar.
- As the producer with the greatest production capacity, Aurora Cannabis stock will soar, too.
I doubt that anyone would honestly argue against the first proposition. Supply isn’t keeping up with demand in Canada’s recreational marijuana market. And the country still hasn’t finalized regulations for another potentially massive market — cannabis edibles and concentrates.
Countries around the world have legalized medical marijuana — Australia, Germany, and the United Kingdom, to name just a few. Mexico should soon follow Canada and Uruguay in legalizing recreational marijuana. Piper Jaffray analyst Michael Lavery recently predicted that the global cannabis market will top $250 billion annually and could reach $500 billion.
There’s also no question that Aurora Cannabis isn’t on course to rank as the top marijuana grower in terms of production capacity. With its flurry of acquisitions over the past couple of years, Aurora should be able to produce up to 700,000 kilograms of cannabis per year.
Of course, it takes more than just production capacity to be successful. Aurora also has a fast-growing global distribution network. Perhaps the only key ingredient that Aurora doesn’t have that several of its rivals do is a big partner outside the cannabis industry. However, it could be just a matter of time before the company checks off that box, too.
Aurora’s market cap currently stands at close to $6 billion. With the global cannabis market growing by leaps and bounds, the company should be able to achieve strong growth over the next decade if it executes well.
The case for Scotts Miracle-Gro
Why buy Scotts Miracle-Gro stock? The reasons are…
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