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Here are 11 of the best cannabis stocks of 2020

Posted: 30 November 2020 2:30 pm
Female fingers hold a beautiful hemp leaf in the sun

Cannabis stocks have been riding high – here's a bunch you wish you'd bought a year ago.

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Just a few years ago, small-cap firm Canopy Growth Corp barely registered among investors at less than CA$2 a share. These days, fund managers must be banging down the doors with stocks jumping as high as CA$69 last year – a tidy 3,798% in 5 years.

The Canadian company (TSX:WEED/NYSE:CGC) is the world's biggest medicinal cannabis supplier. Like other cannabis stocks, WEED's price shot up after Canada and several US states announced the legalisation of cannabis for recreational use in 2018.

It has been a rocky journey since then. Despite the initial bullishness, investor sentiment fizzled in 2019 as the challenges facing the industry became more public.

Many companies reported worse than expected losses thanks to stringent regulations which resulted in an oversupply of pot. That, coupled with the reality that deregulation at a federal level in the US was still far in the making, sent prices crashing as much as half.

But the last few weeks has brought renewed optimism. With Joe Biden's election victory all but official, there's hope that a Democratic administration will bring the debate back on the agenda.

While there's no hard evidence Biden is any more lenient on marijuana legalisation than his predecessor, stock prices in Canopy Growth Corp jumped as much as 50% in the last 4 weeks and 20% in the last 5 days.

What are cannabis stocks?

Sparking a doobie without getting arrested seems to have been the biggest driver of pot stock prices over the last couple of years, but many cannabis companies aren't producers of marijuana (the part you smoke) at all.

Aside from recreational use, cannabis plants are used for medicinal and research purposes, while hemp (the non-psychoactive strain) is used in everything from food and beverages, clothing, beauty products and even building materials.

The differences between the three are important. For example, in Australia, medicinal cannabis was only legalised in 2016, hemp wasn't allowed until 2017 and recreational pot use has only been passed in the ACT as of January this year on a limited basis.

What are the best performing pot stocks?

Of the dozens of cannabis companies listed in Australia and around the world, many haven't recovered since the 2019 pot stock crash.

But while stringent rules might be a dampener on business, there's little doubt the legal cannabis sector will grow substantially over the next decade as legislation eases. By 2025, the industry is expected to be worth over US$38 billion, according to New Frontier Data.

If you're a believer, we've sourced some of the best performing weed stocks of 2020. We used eToro's handy CannabisCare portfolio to source top US listed medicinal cannabis stocks. And we sorted the best performers from our ASX-listed cannabis stocks list, which you can check out here.

Cannabis stocks

1. ScottsMiracle-Gro company (NYSE: SMG)

  • Market cap: US$9.577 billion
  • YTD performance: 61.82%
  • Headquarters: Marysville, Ohio
  • About: Produces the systems and accessories commonly used for hydroponic gardening. Its products are sold globally.

2. Abbvie Inc (NYSE: ABBV)

  • Market cap: US$185.18 billion
  • YTD performance: 18.47%
  • Headquarters: North Chicago, Illinois
  • About: Not entirely a cannabis stock. Abbvie is a biopharmaceutical company that produces a synthetic cannabis-based drug called Marinol.

3. Canopy Growth Group (NASDAQ: CGC)

  • Market cap: US$10.796 billion
  • YTD performance: 37.51%
  • Headquarters: Smith Falls, Canada
  • About: Produces and sells medicinal cannabis, including oils and concentrates, gel capsules and hemp.

4. GW Pharmaceuticals (NASDAQ: GWPH)

  • Market cap: US$4.045 billion
  • YTD performance: 24.05%
  • Headquarters: Cambridge, UK
  • About: A biopharmaceutical company that offers Epidiolex, a cannabis-based product used to treat seizures.

5. Novartis ADR (NYSE: NVS)

  • Market cap: US$197.893 billion
  • YTD performance: -5.21% (+6% in the last month)
  • Headquarters: Basel, Switzerland
  • About: Novartis AG produces and develops healthcare products. It signed an agreement with Tilray Canada to distribute medical cannabis products globally in 2018.

6. Incannex Healthcare Ltd (ASX: IHL)

  • Market cap: $141.92 million
  • YTD performance: 125%
  • Headquarters: Moorabbin, Australia
  • About: Manufactures home impression custom-fit oral and dental devices as well as medicinal cannabinoid treatments.

7. Althea Group Holdings Ltd (ASX: AGH)

  • Market cap: $113.965 million
  • YTD performance: 23.38%
  • Headquarters: Parkville, Australia
  • About: An investment company that holds a number of licences and permits for the importation, cultivation, production and supply of medicinal cannabis.

8. BOD Australia Ltd (ASX: BDA)

  • Market cap: $54.822 million
  • YTD performance: 90%
  • Headquarters: Double Bay, Australia
  • About: Makes natural skincare, beauty and health products, some which include hemp-based ingredients.

9. Botanix Pharmaceuticals Ltd (ASX: BOT)

  • Market cap: $136.178 million
  • YTD performance: 76.83%
  • Headquarters: Northbridge, Australia
  • About: Develops therapeutics for the treatment of skin diseases. The company also develops a cannabis-based pharmaceutical ingredient known as cannabidiol, which is used to treat epilepsy, pain, arthritis and schizophrenia.

10. IDT Australia Limited (ASX: IDT)

  • Market cap: $43.618 million
  • YTD performance: 39.29%
  • Headquarters: Melbourne, Australia
  • Company description: Develops and supplies pharmaceutical products. Its facilities are used to manufacture medicinal cannabis products.

11. Zelira Therapeutics Ltd (ASX: ZLD)

  • Market cap: $91.27 million
  • YTD performance: 46.43%
  • Headquarters: Perth, Australia
  • About: A bio-pharmaceutical company engaged in the research and development of cannabinoid-based medicines.

How to buy cannabis stocks

To invest in the rise of cannabis, it pays to understand what part of the industry you're most bullish about. After all, a company that offers products like hemp soap alone might not see much of an impact simply because marijuana use is more widely legalised.

Once you've done your research and you understand the risks, you'll need to open a brokerage account. The platform you choose will depend on which market you plan to tap into. Planning on buying US stocks? You'll need to find a US broker, such as eToro, or an ASX broker if you're looking to buy Australian stocks.

Once you've chosen a share trading platform, you'll be able to search for the company name of your chosen pot stock or its stock code. Depending on the broker you choose, it might offer additional information about each company, including broker rating, price targets, dividend payments and debt-to-value ratio.

Your other option is to invest in an ETF that tracks a whole collection of cannabis stocks. Alternatively, eToro has a medicinal cannabis portfolio that you can also track.

Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

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