Few industries have been kicking tail and taking names more so than marijuana. Having long been considered an illicit substance that was cast aside by legislators around the globe, cannabis is now a legitimate business model. Globally, over 40 countries have given medical marijuana the green light, with two (Canada and Uruguay) also allowing the recreational sale of the drug.
It’s also a business model that’s generating big-time returns for investors who’ve had the wherewithal to bet on marijuana stocks from an early date and hang on for the ride. Sure, the better than 50% gain in the Horizons Marijuana Life Sciences ETF since the beginning of the year might appear impressive, but it’s peanuts compared to the triple-digit or quadruple-digit percentage gains that some of the biggest pot stocks have delivered since the beginning of 2016, which is when marijuana mania really kicked into high gear.
Today, no marijuana stocks that garner more attention from Wall Street or investors than Aurora Cannabis (NYSE:ACB), Canopy Growth (NYSE:CGC), and Cronos Group (NASDAQ:CRON). This trio is also responsible for some of the most robust returns since the start of 2016. Here you’ll find out how much money you’d have today if you had invested a cool $1,000 into each of these marijuana stocks in 2016…
Aurora Cannabis: $20,620
Aurora Cannabis is easily the most popular pot stock among millennial investors, and arguably the most polarizing pot stock on Wall Street. It’s also a company that would have yielded close to a 2,000% return to long-term investors who’d held on for the ride since the start of 2016.
The allure of Aurora Cannabis is the company’s leading production potential and superior international push.
In terms of production, Aurora’s management is conservatively calling for in excess of 500,000 kilos of annual run-rate output by the midpoint of 2020. However, following the acquisitions of MedReleaf for $2 billion and South America’s ICC Labs for $200 million, as well as increasing the size of its mammoth organic Aurora Sun campus in Medicine Hat, Alberta, I believe well over 700,000 kilos should be expected on a yearly basis by 2022. Being the top Canadian producer should make Aurora a logical candidate to land lucrative long-term supply deals, as well as significantly lower its per-gram growing costs, which should benefit from economies of scale.
As noted, Aurora has also done an impressive job of planting the seed, so to speak, in foreign markets. Including Canada, the company has a production or distribution presence in 24 countries, which is hands-down tops in the industry. These foreign markets should be particularly valuable within the next couple of years, which is when dried cannabis flower oversupply and commoditization is expected to occur in Canada. Having ample external sales channels should help buffer Aurora’s gross margin.
Perhaps the one downside here is that Aurora’s acquisition-heavy strategy has meant issuing its common stock like Monopoly money. Since the end of fiscal 2014 (June 30, 2014), Aurora’s share count has risen by over 1 billion shares. Thus, while long-term investors have netted a handsome return since the beginning of 2016, it’s absolutely been muted since the beginning of 2018 on account of share-based dilution…
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