WEED, LOVE, TLRY, XLY & CRON: 5 Canada pot stocks to hold for 10 years

Highlights

• The S&P/TSX Cannabis Index has lost 38.4 per cent year-to-date (YTD) and nearly seven per cent Monday
• With both big US political parties on the green band wagon and a record 68 per cent of Americans approving of pot for recreational use, its legalization is arguably not a question of if but of when
• These stocks are trading at, or just slightly above, their 52-week lows

Investing in cannabis stocks may sound like risky business with it not legalized at the federal level in the US and let’s face it over the past sort of six to nine months it has been one of the most volatile sectors.

However, with both big US political parties on the green band wagon and a record 68 per cent of Americans approving of pot for recreational use (91 per cent of Americans approve of it for medicinal use), its legalization is arguably not a question of if but of when.

Certainly, it is hard to see weed still being illegal in the US five years from now. On that note, let us look at five Canadian marijuana stocks.

Canopy Growth Corp (TSX:WEED)

Canopy Growth possesses an acquisition option for Acreage Holdings should marijuana be legalized at the federal level in the US.

WEED closed Monday, May 9, at C$7.23 and its trajectory over the last year has generally been downward.

It has lost 76.4 per cent in a year. Its year-to-date loss of 34.5 per cent is mildly better than its index.

Its 52-week low of C$6.48 came on April 28.

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Cannara Biotech Inc (TSXV:LOVE)

Despite losing over eight per cent during the trading session, it has a much better YTD performance (loss of 18.5 per cent) than the stocks of the big companies by market cap on this list.

A penny stock, LOVE ended Monday at C$0.11. The stock has lost 24 per cent in a year and its one-year low of C$0.105 came on May 4.

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Tilray Inc (TSX:TLRY)

Tilray Inc has exposure to the US market for its cannabis products via Manitoba Harvest. It also accesses its southern neighbor’s beer market through SweetWater.

Like the stocks of the two other big cannabis companies on this list – Canopy Growth and Cronos – TLRY has, for the most part, had a downward trajectory over the last year.

It has lost it has lost 71 per cent in a year and 36 per cent in 2022, mirroring WEED and the S&P/TSX Cannabis Index.

The stock’s closing price on Monday of C$5.68 is its 52-week low and it is now probably on the brink of being undervalued.

TLRY has a price-to-earnings (P/E) ratio of 12.2. This denotes how many dollars needs to be invested for each dollar of profit earned.

Since it is the only stock on this list with a positive P/E ratio, it may be that it is the only company that is not currently experiencing loss.

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Auxly Cannabis Group Inc (TSX:XLY)

Another penny stock, XLY closed at C$0.155 Monday and despite losing over three per cent in the session, it is still in the green by nearly 15 per cent month-to-date and about seven per cent over the last 30 days.

On a YTD basis, it has seen the least loss on this list, that of 16 per cent and its trajectory looks to be on the rebound. It is nearly 17 per cent better than its 52-week low of C$0.1325 seen on February 11.

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Cronos Group Inc (TSX:CRON)

In addition to directly selling hemp-derived CBD products in the US, the company has an option to acquire 10.5 per cent of PharmaCann, which operates in multiple US states.

CRON has performed better than the other two big companies on this list, down 26.7 per cent YTD. It closed at a new 52-week low of C$3.65 Monday.

The last two times this year it came into this region, it rebounded.

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Bottom line

The S&P/TSX Cannabis Index has lost 38.4 per cent year-to-date (YTD) and nearly seven per cent Monday. The above stocks are trading at, or just slightly above their 52-week lows.

In terms of their current valuation metrics there isn’t much that is impressive. But they make for an interesting watch long-term, over the next 10 years, considering legal developments in the sphere.

Three are big established companies and two are penny stock companies that might see growth considering they have fared better than the sphere has in this bearish phase.

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Please note, the above content constitutes a very preliminary observation based on the industry, and is of limited scope without any in-depth fundamental valuation or technical analysis. Any interest in stocks or sectors should be thoroughly evaluated taking into consideration the associated risks.