Personal Finance
CGC

A Foolish Take: The Winning Strategy for Marijuana Investing So Far in 2019

Bar chart with stock returns year to date in 2019 for Canopy Growth, Cronos Group, ETFMG Alternative Harvest, and Tilray

The marijuana industry has been a hotbed of investment activity, and there have been plenty of ups and downs in the share prices of cannabis stocks over the past several years. Given how new the industry is and how much competition there is among up-and-coming players in the space, it can be daunting to decide how to invest in a way that's both prudent yet also gives you a chance at strong returns.

Conservative investors often look for ways to ride on the coattails of industry insiders, and one strategy that's been surprisingly effective so far in 2019 is also quite simple. Investing in the two cannabis companies that have made major deals with third-party consumer goods giants -- Canopy Growth (NYSE: CGC) and Cronos Group (NASDAQ: CRON) -- has been a huge success so far in 2019, outpacing even the strong returns of the ETFMG Alternative Harvest ETF (NYSEMKT: MJ) :

Bar chart with stock returns year to date in 2019 for Canopy Growth, Cronos Group, ETFMG Alternative Harvest, and Tilray

Data source: YCharts. Chart by author.

Marijuana investors have greater confidence in these stocks because they know their partners are committed to their success. Constellation Brands (NYSE: STZ) understands the potential consumer shift from alcohol toward cannabis as legalization efforts widen, and it's working hard to put Canopy in the best possible position to use its distribution and marketing expertise. Similarly, Altria Group (NYSE: MO) has recognized the secular decline in cigarette smoking, and embracing Cronos Group's ability to provide alternatives for smokers is a no-brainer.

Meanwhile, cannabis companies that haven't yet come up with partnerships have fallen behind their counterparts. Tilray (NASDAQ: TLRY) in particular has been a notable laggard, and although a 16% gain in just a month would ordinarily be cause for celebration, many shareholders would be happier if Tilray could attract a high-profile partner like Constellation or Canopy. If that were to happen, it's possible that Tilray's gains would come a lot closer to Canopy's and Cronos Group's.

Offer from The Motley Fool: The 10 best stocks to buy now

Motley Fool co-founders Tom and David Gardner have spent more than a decade beating the market. In fact, the newsletter they run, Motley Fool Stock Advisor , has tripled the S&P 500!*

Tom and David just revealed their ten top stock picks for investors to buy right now.

Click here to get access to the full list!

* Stock Advisor returns as of Nov. 14, 2018.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool recommends Constellation Brands. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

CGC MJ CRON STZ TLRY

Other Topics

Stocks

The Motley Fool

Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

Learn More