2 Small-Cap Cannabis Stocks to Bet on in 2020

If you want to make big gains in 2020, stick with small-cap stocks. Research has consistently shown that, over time, small-caps outperform larger peers. If you want to make major gains, find small-cap stocks benefiting from secular growth opportunities like cannabis.

The risk here should be clear. Emerging market opportunities lack clarity while small competitors are initially at a disadvantage. But these factors are exactly what allows you to double, triple, or even quadruple your capital in short order.

Already, the stocks below have proven an ability to rise multi-fold in less than 12 months. Last year’s bear market pushed prices back down, making now a perfect time to reconsider these rapid-growth stocks.

This stock has the most upside

Green Organic Dutchman Holdings Ltd (TSX:TGOD) has more upside than any pot stock I’ve ever come across. There are commensurate risks, but if you want the potential to make the maximum amount of money from cannabis stocks in 2020, this should be your number one choice.

Green Organic has always been one of the smaller companies in the cannabis space. In 2018, it briefly became a billion-dollar company, but that was when several competitors were achieving valuations above $20 billion. Now that valuations have come down to earth, Green Organic has again become a small-cap stock.

Today, it has a market cap of just $220 million. That’s peanuts to the vast majority of investors. The marijuana industry already had a limited number of analysts, and with its diminutive size, Green Organic receives very little Wall Street coverage.

All of this places a huge discount on shares. In 2020, the discount could disappear entirely as sales traction begins to ramp up. It’s easy to ignore the company since it’s largely pre-revenue. Once profits emerge, Green Organic could make quite a splash.

Despite producing essentially no pot in 2019, production is expected to surpass 20,000 kilograms in 2020. Long term, its infrastructure should be capable of producing more than 200,000 kilograms per year.

When 2019 results are revealed, the company is expected to have generated around $12 million in sales. This year, sales could surpass $75 million. With the stock at an all-time low, now could be the time to buy.

Don’t venture alone

With a $500 million market cap, HEXO Corp (TSX:HEXO)(NYSE:HEXO) is a bit larger than Green Organic, but it’s still well within small-cap territory. Due to its platform model, the gains for this stock could be similarly huge.

Green Organic is taking the approach that many pot stocks are taking: growing its own cannabis and branding its own products. This isn’t a terrible strategy, but as pot prices continue to commoditize, it’ll be more important than ever for these companies to differentiate their brands.

Instead of betting on itself to create new brands that build customer loyalty, HEXO is betting on pre-existing brands that consumers already know and love. For example, it has a deal with Molson Coors Canada Inc. to co-create cannabis-infused beverages. Their first drinks should hit shelves this month.

HEXO’s platform model allows outside companies, who may not want to invest heavily to build their own cannabis arms, to tap into its cannabis infrastructure to launch pot-based products. As the Molson case study proves, it’s really a win-win. Molson was able to target the pot market quickly and inexpensively, while HEXO was able to leverage one of the most trusted brands in Canada.

With its model now validated, HEXO wants to secure more partnerships in other categories in 2020. If it can achieve deal traction, this stock should move considerably higher.

You might be missing out on one of the biggest opportunities in Canadian investing history…

Marijuana was legalized across Canada on October 17th, and a little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.

Besides making key partnerships with Facebook and Amazon, they’ve just made a game-changing deal with the Ontario government.

This is the company we think you should strongly consider having in your portfolio if you want to position yourself wisely for the coming marijuana boom.

Learn More About This TSX Stock Now

More reading

The Motley Fool recommends HEXO.

Fool contributor Ryan Vanzo has no position in any stocks mentioned. 

Source: The Fool
2 Small-Cap Cannabis Stocks to Bet on in 2020
The Fool

The Motley Fool
Contributor at mjcanada.ca
The Motley Fool is dedicated to helping the world invest — better. Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, mutual funds, and premium investing services.

In all we do, we take a different approach.

We believe – and have proven over decades – that the individual investor can beat the market.

We believe that anyone can do it, even if they don’t have a lot of time or money to devote to investing.

We believe in a long-term outlook, helping people build wealth over time.

We believe that the person best positioned to take care of your financial future is you.

And we work tirelessly on behalf of our hundreds of thousands of members who are enjoying the opportunities that come with having enough money to do the things that matter to them.

While we are headquartered in Alexandria, Va., The Motley Fool advocates for the individual investor around the globe with offices in the UK, Australia, Canada, Singapore, and Germany.

Related News