Canadian marijuana growers are in a classic upward trend. My favorites are Aphria, Aurora, and Canopy Growth. They are behemoths. Highly liquid, massive growth opportunities. Canopy Growth is the largest marijuana grow operation in the world, and Aphria and Aurora are close behind. Which one should you buy though? Well, it all depends on what you want. I’m not one to say ANYTHING is a sure thing, but these marijuana companies come pretty close if you want big profits.
Pros: The lowest cost producer by a long shot. Cost per gram is .79 CAD. What Aphria spends in 1 year on hydro-electro bills, indoor growers like Canopy and Aurora spend in 1 month. Under ACMPR, it costs Aphria $55 per square foot to build a greenhouse, while indoor growers can range up to $300.00. They are the only licensed producer that have been consistently profitable almost every quarter, with a recently quarterly earnings increase of 1500%. Yes, you read that right. While all the other marijuana stocks were posting losses of several hundred percent in 2016, Aphria was posting a profit. They have a production capacity of 2500kg per year, which is quickly growing as they complete new phases, and they are projected to have 30000kg production capacity by July next year. When Aphria completes phase 3 and 4, they are projected to a have production capacity of 75 000kg per year.
Cons: Greenhouse growing doesn’t result in the ascetic benefit you get from growing indoor. Conditions aren’t as controlled, so you don’t get that perfect looking bud. They also have been threatened with delisting by the Toronto Stock Exchange if they don’t properly explain the risks involved with their business activities in the United States. The TSX was vague in the press release, so we have to wait until this story develops to fully understand what they meant. As somebody who has watched these stocks religiously for years, I don’t believe this is a real concern.
Aphria is a long term hold. Continuous quarterly earnings increases, revolutionary new product, strong RSI, and a positive general market direction. The only thing it doesn’t have is official institutional sponsorship, although it has secured 100’s of millions from several private placement deals worth 10’s of millions each. I expect this stock to easily reach, at least, $20.00 per share before July.
Canopy Growth Corp (WEED)
Pros: Their grow op in the old Hershey chocolate factory is the largest grow op in the world. They have a production capacity that far exceeds its competitors, at 39 000kgs per year. They have pursued a strategy of aggressive acquisition, acquiring Mettrum and Bedrocan, massive grow operations in their own right. Canopy has six grow operation all together, greenhouse and indoor. It’s the hottest marijuana stock on the market with the heaviest trading volume. For more information, visit this website http://www.newswire.ca/news-releases/canopy-growth-corporation-reports-first-quarter-fiscal-2018-financial-results-640279773.html
Cons: Net loss for the 4th quarter 2017 was 21 million, an increase from 5 million in the previous quarter of 2016. If marijuana is legalized for recreational use, there is a chance that the extremely stringent medicinal regulations surrounding medical marijuana production could be changed. Medicinal regulations are always hyper redundant for any industry, and if the market opens for the average user, the regulations could lighten, opening the door to competitors holding significantly less debt, with a clear defined path ahead of them. Canopy is operating under the assumption that these regulations won’t change. Servicing the current regulations is very expensive, and Canopy has built its gargantuan business model based on these regulations
For now, it is the best swing stock. Long term, I’d ere on the side of caution until the regulatory framework is better defined. A good trade right now, with a fair float, and when it moves, it moves big. A lot of unsophisticated investors, and when it runs, buying the dip is almost a sure thing when day trading. Honestly, you could make millions with this stock due to its high trading volume. Snoop Dogg even bought this stock, and promotes it!
Pros: Aggressively expanding, with operations in Alberta, the lowest taxed province in Canada, with the lowest cost of electricity. Aurora is currently building the Aurora Sky facility with a, get this, 100 000kg per year growing capacity, dwarfing its competitors. They also have another facility in Quebec that will have a capacity of 4000kg per year once completed, which sounds small compared to the Aurora Sky facility, but to put into context, currently, Aphria is only producing 2500kg per year right now. Its current production cost per gram is $1.91 CAD. Aurora is also aggressively pursing a presence in the international market, having entered into an agreement to ship 50kg to Germany, and acquiring a 20% stake in an Australian licensed grower.
Cons: Extremely over leveraged and without producing profits yet, posting huge net losses every quarter. It faces the same risks as Canopy, where its production costs incorporate the stringent medicinal marijuana regulations that significantly increase cost. If recreational regulations are lightened, it could open the door to competitors with much less debt and a clearer path of action. Right now, Aurora and Canopy are planning for a future that is undefined, leveraging themselves significantly. Aurora also issued almost 400 million shares, almost tripling the Aphria and Canopy share size. In the world of stocks, 400 million shares can cause a lot of resistance, but this doesn’t seem to be a factor right now.
If everything goes well, Aurora will be positioned to be the biggest producer in the world. It will be in the province with the lowest taxes, and lowest energy costs, and its international presence could bode well down the road, but the regulatory framework is a grey area right now. Since I started following Aurora, its been the most predictable swing trade. Between the months of October and December of last year, the pattern was very predictable, going up and down weekly, or even daily, between $2.00, and $2.20. It hasn’t breached the $2.00 mark in almost a year, except for a brief moment inter-day when it touched 1.90, but that got quickly gobbled up. Aurora is probably the second best swing trading marijuana stock right now, with the heavy trading volume, and a lot of zeal, not to mention unsophisticated Canadian oil field workers in Alberta. I myself am one of them. The last company I worked for was paying the pipefitters, I’m not lying, $20,000 per month after overtime. $5,000 per week. As an apprentice, I was paid $2600 net per week. Everybody was talking about Aurora at work, and if you want to use technical analysis, weed stocks, in my opinion, are in the last Elliot Wave of this long term trend. This is the last run, and it will be one for the ages.
Thanks for reading until my next article keep it profitable,