Best Cannabis Stocks in Canada 2023

If you want to make money on Cannabis stocks in Canada, you need to do your research. This is true of all stocks and investing, but it’s especially true for Cannabis stocks.

This article is meant for you would-be Mary Jane investors who want to know what’s hot and what’s not. We’ll explain what Cannabis stocks are, which Cannabis stocks are the best right now, and how you can invest in them.

Just like traditional stocks, cannabis stocks represent shares in a company that is involved in the cannabis industry.

The cannabis industry isn’t just your local ganja retailer. It’s a global network of producers, suppliers, manufacturers, researchers, vendors, promoters, etc. Someone has to grow and harvest the marijuana plant. Someone else turns the harvested plant into a marketable product like a gummy, an infused beverage, a medication, a pre-rolled blunt, and so on. As more and more countries like Canada peel back old cannabis laws and step toward partial or full legalization, companies involved in the cannabis industry will be able to expand their reach and grow.

Right now, investing in cannabis stocks is highly risky. But, that doesn’t necessarily mean it’s a bad idea.

Many cannabis stocks are at record lows which may be attractive to some investors who believe the price will rise as more countries legalize marijuana in all its forms–medical, recreational, and everything in between. However, it’s also possible that some existing cannabis companies are sinking ships, and the best thing to do is get off as fast as your feet will carry you.

If you belong to the former group, and you see untapped value in cannabis stocks ahead of a meteoric rise, then read on, because cannabis stocks are currently declining, and the more information you have the better decisions you can make.

Choosing the right cannabis stocks can be broken into two major factors: what’s right for you and what stocks are demonstrating the best performance/potential for growth.

Here are some factors that you should consider before choosing a Cannabis stock:

What is the market cap?

Market capitalization (market cap) is how the stock market evaluates a company’s value. The market cap of a particular company is calculated by multiplying the price of a single share by the number of the company’s outstanding shares. So, a company with 1 million shares at $20 each would have a market cap of $20 million dollars.

Market cap is usually split into three or four categories: large-cap ($10 billion or more), mid-cap $2 billion to $10 billion), small-cap ($300 million to $2 billion), and less commonly, micro-cap companies (less than $300 million).

Most cannabis stocks currently fall in the small and micro-cap categories. This makes them more speculative and less reliable in the eyes of investors, brokers, and analysts. This is partly because cannabis, especially recreational cannabis, is a comparably burgeoning market.

If you want to invest in cannabis stocks, it may be wise to choose a company with a higher market cap to avoid some of the inherent risk.

Is it on an official exchange?

Another way to reduce your risk when investing in cannabis stocks is to choose a company that is traded on the Toronto Stock Exchange (TSX), the New York Stock Exchange (NYSE), NASDAQ, or similarly reputable stock exchange.

Stocks that aren’t traded on these exchanges may be called over-the-counter stocks, or penny stocks. These are usually companies that don’t meet the size or financial stipulations to qualify to be traded on a formal exchange. Instead, they’re traded on a broker-to-dealer network that doesn’t always require the same amount of transparency that formal exchanges demand. This makes OTC stocks highly risky. If you’re comfortable with that risk, great! If not, then stick to cannabis stocks present on reputable exchanges.

Is it a direct or indirect marijuana company?

A direct marijuana company is primarily or exclusively active in the cannabis industry. An indirect marijuana company is active in other industries while also dabbling in marijuana to some extent.

Direct marijuana companies are subject to a single market and its ups and downs. This makes them a bigger investment risk. On the other hand, since they have “more skin in the game”, they may be more motivated to achieve profits in the cannabis industry than an indirect company which has a more stable business foundation and may treat their cannabis arm as expendable if the market isn’t moving in the right direction.

What are analysts saying?

Choose your experts wisely.

Anyone can claim that a certain stock is primed to blast off, but expert analysts don’t chase fads. Thorough research and reputation are the two surest ways to separate the pros from the posers.

Morningstar, for example, is an excellent option for reliable investment research and analysis. And no, they aren’t sponsoring this article.

Wealthsimple Trade

It’s one of the best online brokers, and you can do everything from your phone. Wealthsimple Trade offers several Canadian and U.S. cannabis stocks including HEXO corp., Cronos Group, Aurora, Canopy Growth, and more.

Another benefit of investing with Wealthsimple is free ETF trades, though, they don’t currently list any cannabis ETFs on their app.

Questrade

Questrade is another highly lauded favourite among online brokers. The app is easy to use and offers both self-directed and managed accounts. Cannabis stocks on major stock exchanges are also available in Questrade.

Questrade also offers free ETF trades and has fantastic research tools and resources. Trading individual stocks on Questrade costs between $4.95 and $9.95 which may deter small-scale investors.

While many cannabis companies’ stocks are declining, the industry is poised to recover, but that depends largely on the U.S. and other markets steam-rolling legalization laws through the political process. For courageous, or reckless, investors, now might be the time to buy. Money is made in buying, not in selling. Maybe cannabis stocks can only go up now.