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Pot Stocks in 2019
The year has been a strong so far for marijuana stocks. But not all pot stocks are created equal; some are certainly better than others, both in the short term and projecting ahead. With that in mind, we’re going to look at two high-potential marijuana penny stocks.
Remember, with marijuana penny stocks, there’s always risk involved. Being smaller, they tend to have higher volatility. But with the risk comes the possibility for reward, and as you’ll see below, these marijuana penny stocks have been rewarding investors for a long time now.
High Potential Pot Stocks
A preface to this section: I wouldn’t necessarily describe these as the outright best pot stocks.
For instance, Canopy Growth Corp (NYSE:CGC) would be among my top picks for long-term buy-and-hold strategies. That’s mainly due to the company’s impressive fundamentals and powerful size. The difference between CGC stock and the two listed below is that they have higher potential than Canopy. Which is to say that while Canopy is still likely to see big gains down the road, these two companies have a higher ceiling, albeit with more risk.
With that out of the way, let’s take a look at my two picks for the biggest gains in 2019.
Chart courtesy of StockCharts.com
Marijuana Penny Stock: HEXO Stock
I’ve been on the HEXO Corp (NYSE:HEXO) bandwagon for a long time now. And that ride has paid off handsomely; this year alone, HEXO stock has nearly doubled in value.
The company has long been on my radar for one key reason: its price. HEXO stock trades at around $7.00, but has the potential to easily climb much higher than that. Combine that with a relatively small market cap at $1.39 billion and you have room for much higher growth moving forward.
After all, HEXO stock has only begun to see gains. Whereas many companies (Canopy included) saw 1,000s of percentage points in growth over the past few years, HEXO Corp has only seen a few hundred percent.
Now, obviously, most investors would be thrilled to see triple digit returns on a yearly basis, but this is the marijuana market—that’s a paltry sum relative to some of its competition.
As such, there’s still a lot of opportunity for growth left in HEXO’s future, and that’s because while it has a marijuana penny stock price, it has a marijuana titan profile.
The company scored a partnership with “Big Alcohol” via Molson Coors Brewing Co (NYSE:TAP).
It has a killer supply agreement with Quebec—one of Canada’s largest provinces—that is set for the next five years.
It’s making savvy business decisions, like strong acquisitions, the most recent being its buy of Newstrike Brands Ltd (OTCMKTS:NWKRF, CVE:HIP). The deal will see Hexo Corp’s production capacity expand while also putting it firmly in eight Canadian provinces. (Source: “HEXO Corp to acquire Newstrike Brands Ltd.,” Globe Newswire, March 13, 2019.)
And the numbers are great: gross revenue increased 1,269% versus the same period last year and increased 144% from the previous quarter. The company produced 4,938 kilograms (about 10,886 pounds) of dried cannabis in the quarter, an increase of 39% over the previous quarter. Of that, 2,689 kilograms (about 5,928 pounds) was sold in the quarter, an increase of 142% from the last financial report.
“This is an exciting time for HEXO as we continue to achieve milestones on the way to becoming a top two cannabis company,” said Hexo CEO Sebastien St-Louis. (Source: “HEXO reports over $16.2 million in total gross revenue in the second quarter of fiscal 2019,” Globe Newswire, March 14, 2019.)
All things considered, it’s a good time to be an owner of shares of HEXO Corp. I could see the share prices easily ballooning to $20.00 at some point in 2020.
Marijuana Penny Stock: OGRMF Stock
The next marijuana stock that I believe has among the highest potential is OrganiGram Holdings Inc (OTCMKTS:OGRMF, CVE:OGI).
Unlike HEXO, which I believe to be an undervalued industry titan masquerading as a marijuana penny stock, OrganiGram is a much more traditional low-price share.
The company has under $1.0 billion in market cap and doesn’t yet have a listing on a major U.S. exchange. That is an increasing rarity among the top pot stocks, and OGRMF stock is sitting firmly on the that threshold.
All the marijuana companies above it are household names for pot investors. That means that OrganiGram Holdings Inc is on the cusp of becoming an industry powerhouse, which makes for the best time to yield gains.
Unlike HEXO Corp, which already has a ton of achievements under its belt, OrganiGram is so attractive to me for precisely the opposite reason: it still has so much yet to achieve.
Getting a U.S. listing, a major partnership, or even becoming an acquisition target are all very real possibilities in the company’s future and would send share prices soaring, particularly an acquisition or major partnership.
OGRMF stock has already doubled in 2019 and I see no reason why those gains will slow, one reason being the company’s stellar financials.
OrganiGram’s net sales for the quarter hit CA$12.4 million, up from CA$2.4 million in the same prior-year period and up from CA$3.2 million in Q4 2018. That represents a 419% and 287% jump, respectively. (Source: “OrganiGram Reports Record Net Revenue of $12.4 Million Up 287% Sequentially Quarter-over-Quarter; Adjusted Gross Margin of 71%,” OrganiGram Holdings Inc, January 28, 2019.)
Net income similarly grew, hitting CA$29.5 million (CA$0.195 per diluted share). This is a stark contrast to its net loss of CA$1.2 million ($0.012 per diluted share) last year.
These were among some of the best numbers to come out of the industry so far post-legalization, and the report netted OGRMF stock a healthy boost to its share prices. Better yet, OrganiGram wrote in its report that it fully expects Q2 2019 to have at least double the net revenue of the first quarter, so it only gets better from here.
Trading around $7.0, OGRMF could also eclipse $20.00 during 2020, and I doubt that we’ve seen the end of its gains in 2019.
Analyst Take
There is no shortage of winning marijuana stocks in 2019. But while many have registered strong performances so far, some have seen their best days behind them. After all, it’s hard to compare a mature company’s growth scale to that of its early days in a nascent, highly volatile industry.
But with HEXO Corp and OrganiGram Holdings Inc, you have two marijuana penny stocks where I believe the best is yet to come. Both these companies are high on potential and fundamentals, a potent combination that is an investor’s dream.
I’ve been recommending these stocks for over a year now to good effect. I see no reason why they won’t continue in their winning ways moving forward.
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