Canada’s recreational marijuana market is expected to reach sales of $5 billion annually, a number that has excited investors and sent pot stocks soaring this year.
But the medical marijuana space is likely to become a much larger market overall. Brightfield Group estimates that the medical cannabis space will top $22 billion within the next four years, making it an enticing opportunity for smart investors.
These two stocks in the medical marijuana arena look poised to profit in a big way.
CannTrust Holdings (OTC: CNTTF)
Ontario-based CannTrust (OTC: CNTTF) is a federally-regulated medical marijuana company that produces medical-grade cannabis and cannabis oils. CannTrust also conducts medical research for marijuana-related pharmaceutical products.
CannTrust recently went international sending off its first shipment of cannabis oil to Denmark’s StenoCare, a move that will help CannTrust break into the lucrative European medical marijuana market.
What really interests me about CannTrust is that the company is making a profit, which most pot companies can’t say. Analysts are expecting CannTrust will earn $0.85 per share this year, and $0.29 per share in 2019.
Its profits should also climb with its recreational marijuana brands. The company has supply agreements in place in the Atlantic provinces and is approved to sell across Canada.
Another bright spot for CannTrust is the DEA’s recent move to place FDA-approved drugs with CBD in the “Schedule V” category, which the agency defines as having the lowest potential for abuse and ranking drugs with CBD in the same category as cough suppressants.
With this rescheduling, CannTrust may soon be able to ship its products to the U.S. which could be a boon for the company and could send the stock much higher.
Hexo Corp. (OTC: HYYDF)
Hexo (OTC: HYYDF), which was formerly known as Hydropothecary, is up 294% in the last year, and nearly 10% in the last month alone.
Despite this, the company has largely flown under the radar this year compared to other pot stocks. But Hexo is one stock that should be on your radar, both for its position in the medical marijuana space and its move into the recreational market.
Hexo is a key player in the medical marijuana market in Canada, offering several different products to treat several different conditions. The company currently has an annual production capacity of 25,000 kilograms, though it is working to quadruple its capacity with construction already underway to expand its facilities and boost production by 108,000 kilograms per year by the end of 2018.
This major expansion will help Hexo supply 25,000 kilograms of recreational marijuana to its home province of Quebec, according to terms agreed on with the province this past April. This represents a 35% share of Quebec’s retail cannabis market, which is huge for the company.
Hexo also plans to open 26 “Fire & Flower” retail stores across six provinces in 2019. The company has already obtained licenses for two stores in Manitoba and should get the green light from Alberta, British Columbia, and Ontario soon.
The company is also one of only two Canadian growers—the other is Canopy Growth (NYSE: CGC)—to have signed on for a partnership with a major alcoholic beverage company, Molson Coors Brewing (NYSE: TAP), to develop a cannabis-infused beverage.
With its strong presence in the medical marijuana space, and good positioning ahead of the recreational market opening up, Hexo could prove to be a strong player in Canada’s multi-billion marijuana market in the long term.