October was not good for marijuana shares. All the big five Canadian marijuana producers saved. And the dreadful achievement came in a month when the highly anticipated recreational marijuana market in Canada opened the business.
The conventional wisdom would probably be that the launch of a multibillion dollar market would be a good thing for the shares. A twist on the old investment word "Buy rumors, sell the news" seemed to rule the day – actually ruled that month.
But October has now entered the history of the dust. Are there any marijuana stocks worth buying after the bloodbath? The answer is "yes". One of them is another member of the "big five club". Here is why the best major marijuana stock to be purchased in November is none other than Aphria (NYSE: APHA) (NASDAQOTH: APHQF) .
<img alt = "Hands holding american cash with a marijuana leaf
[Kilde: Getty Images.]
Why not the others?
Aurora Cannabis (NYSE: ACB) Cronos Group : CRON) and Tilray (NASDAQ: TLRY) fell much more than Aphria did in the awful October. You may think that they would be better bargains. But they are not.
The main reason Aurora and Tilray fell so hard that their shares had risen much higher than their business prospects were justified. Aurora enjoyed a big boost in September after reports showed that Coca-Cola talked to the company about a potential partnership to develop cannabis-infected beverages. However, Coca-Cola later announced that it was not interested in cannabis-related products.
Tilray skyrocketed because of a high-end combination of some positive news, a high level of short-term interest rates and a very low shareholder sorry. The two latter factors probably played the biggest role in Tilray's jaw-dropping winnings. They also played a key role in the stock's big retreat.
Even with their pullbacks, Aurora Cannabis and Tilray are still priced at nesebled prices. Aurora's market coverage is close to three times greater than Aphria's. Tilray's market coverage is about four times greater than Aphria's.
Cronos Group, on the other hand, is less than Aphria. Why is not it the smarter place for November? It does not have all the positive measures that Aphria does.
It leaves Canopy Growth (NYSE: CGC) . Canopy is close to and large cash infusion from Constellation Brands puts it probably on the best position for all Canadian marijuana growers in the long run. But the Canopy price tag is still very high.
The attraction of Aphria
So why Aphria? Its share performance drew the other major five Canadian marijuana shares through most of 201[ads1]8. One major reason why Aphria did not trade on a major US stock exchange as the others did. It is no longer the case. From November 1, Aphria's stock is listed on the New York Stock Exchange (NYSE) together with Canopy Growth and Aurora Cannabis.
Aphria is on track to increase its annual production capacity to 255,000 kilograms next year. It should rank third among Canadian marijuana producers, which leave only Aurora Cannabis and Canopy Growth.
The company also has a good form for serving the Canadian recreation market for marijuana. Aphria secured delivery agreements with all 10 provinces plus Yukon territory. It coincided with Southern Glazer, the largest wine and liquor distributor in North America, for distributing recreational cannabis products across Canada.
Aphria's international opportunities are also very promising. It has a solid presence in Germany, the largest international marijuana market outside the US and Canada. Aphria is also well positioned in other medical marijuana markets worldwide, including Australia and Latin America.
But do not the other major players also have good production capacity and a lot of growth potential at home and abroad? They do. But, with the exception of Cronos Group, they are all much bigger than Aphria. In terms of bang for money, Aphria looks like the best choice among the major Canadian marijuana shares.
Large companies outside the cannabis industry should be able to see the value offered by Aphria as well. Aphria is probably near the top of the list for all major alcoholic beverage companies or tobacco companies who want to look up a partner to target the global cannabis market. Canopy already has a big partner, but it would not be surprising if Aphria was the next marijuana producer to land a big deal.
Still Some Dangers
While Aphria appears to be the best major marijuana share to buy in November, the company is still facing many risks. There is a real possibility that the awful October for marijuana shares will stretch out in a nasty November. Adolf's CEO Vic Neufeld already warned the opening of the Canadian recreation market for marijuana that there could be significant supply chain problems in the first months.
At some point, supply will come up and exceed demand. This will result in a completely different set of problems for Aphria and its peers.
But the cannabis industry has a huge potential in the long run. Aphria looks like the most attractively valued shares among the major players in order to take advantage of this growth.