There are dozens of marijuana stocks for investors to consider, but not every marijuana stock is equal. It's still the early days for the marijuana industry, and while the $150 billion market offers significant potential, many marijuana upstarts are likely to fail. Given bankruptcy risks and recent sky-high stock market valuations, it's gotten increasingly harder to separate the wheat from the chaff.

In this clip from The Motley Fool's Industry Focus: Healthcare, analyst Shannon Jones asks guests Todd Campbell, Sean Williams, and Keith Speights what marijuana stocks are smart buys now. Tune in to find out why Organigram (NASDAQ:OGI), Aphria Inc. (NASDAQOTH: APHQF), and Liberty Health Sciences (OTC:LHSIF) top their list of the best buys in the industry today.

A full transcript follows the video.

This video was recorded on Oct. 10, 2018.

Shannon Jones: The moment you all have been waiting for, I get the chance to pick the brains of our marijuana gurus and experts. I want to hear about your top picks. Sean, how about you kick us off?

Sean Williams: All right, why not? I'm weird. I like small-cap stocks. That's me! That's always been me!

Todd Campbell: [laughs] Lean right into it.

Williams: I'm weird! [laughs] I have two companies. We'll call them a 1A and a 1B. I can't pick between which one I like more.

There are two. The first is OrganiGram Holdings. It's a pretty small company. Under $1 billion market cap. The interesting thing about OrganiGram is, people forget about it. It's Atlantic-based. There are no Atlantic-based growers that are big. They're the small-time players. But here's OrganiGram, kicking out an expected hundred 113,000 kilograms a year. That's going to put it in the top 10, I believe. And everyone's forgetting about it. All the growers are in British Columbia, they're in Ontario, they're in Quebec. There are no Atlantic growers. That gives it a geographic advantage over everyone else.

What I really like about OrganiGram, other than the fact that CEO Greg Engel was nice enough to give me an interview --

Keith Speights: Good interview!

Williams: Good interview! Thank you, Greg Engel, if you're listening! It's the fact that they're really maximizing their grow space. They have a 480,000 square foot grow space up in Moncton, New Brunswick, I believe, across two facilities. Most growers have a million, maybe more than a million, square feet of growing space, and they're kicking out about 100,000 kilograms a year. OrganiGram is kicking out 113,000 kilograms on 480,000 square feet because they have a three-tier grow system.

They're focused on those high-margin cannabis oils. They really have a good patient focus. They really want to move into the alternatives once they come out. It sounds like they're really excited about that. At least, that's the impression I got from Greg Engel. That's OrganiGram. I'm really excited about it. A little sketchy on the valuation because that's what all marijuana stocks are right now. But that's probably the 1A.

If there's a 1B, it's CannTrust, based in Ontario. The interesting thing about CannTrust, they're growing through hydroponics. Rather than growing plants in soil, they're growing them in a nutrient-rich water solvent. Along with their containerized bench system, which is supposed to help with harvesting, they should have less lumpy harvesting. Normally, you'd plant the crop, X amount of time later, you harvest the crop. This will be a lot faster, a lot more continuous, and hopefully should help with long-term supply deals. It doesn't hurt that they've been profitable, too.

Campbell: Very interesting. One of the things I was thinking matter when we were asked to pick out names, you could say, "Tilray! Aurora!" Don't. So I think it's kind of cool to hear about something that's under the radar like that. I think it's something that's valuable to our listeners to recognize, there are other companies out there. Of course, those companies also present some pretty extreme risks, too, that everybody should be thinking about.

When I was trying to settle in on what I would pick, I decided that I wanted to try and see if I could focus on finding a company that maybe was getting a little bit forgotten but wasn't quite a small. I settled on Aphria. I think Aphria is going to be the third biggest player in Canada. They're on pace for about 255,000 kilograms of production early next year.

What's really interesting to me about them is that 250,000 kilograms of their production is being done in greenhouses. The reason that that's important is that greenhouse production is cheaper than indoor production by a lot. That gives them a competitive advantage where maybe, maybe, if you're going out and it becomes an issue of, most marijuana demand ends up being for ingredient rather than dried flower, then the low-cost provider could have a valuable edge over some of these other companies. I think that's something that really attracted me to it.

I also like that they're not, I'm not going to say promotional, but they haven't been as aggressive, they haven't been as out in front of everybody, as these other companies. It makes me feel like maybe they're just putting their head down getting their work done and establishing themselves in this business. So, I kind of like that. One of the reasons that I like that is because its valuation, I don't think, is nearly as stretched as some of these other ones. I looked earlier today, I think we're about $3 billion market cap. For comparison, Canopy is still over $10 billion, and Aurora is much larger. Now, they're bigger companies. Canopy is going to crank out, what, 500,000 kilograms, Sean?

Williams: Something around there.

Campbell: And Aurora is aiming for 550,000.

Williams: 570,000, but that doesn't even count ICC Labs.

Campbell: Yeah. So it's not going to be as big as they are, but it may have an edge in pricing and profitability. If you look at, over the last 12 months, their ability to translate more money down after all their expenses, it's pretty impressive.

It's really hard right now when we try and talk valuation with marijuana stocks, because they don't make money, and there are so many one-off expenses that are screwing up the net income for these companies. You've got stock-based compensation, all these other things. So, I'm looking at gross margin right now when I look at these companies. And by far, of all the biggies, Aphria has the highest gross margin. If you're comparing Aphria to Canopy, it's by a lot. So, I think that would be the name that, if I was a new investor coming in and considering these, maybe I would look at Aphria as one of the first ones I would consider.

Speights: I would actually agree with both of you guys. I like both of the picks that you've mentioned. I'm going to throw in a real twist: Liberty Health Sciences. It's even smaller than OrganiGram. What I like about Liberty, they're actually based in Canada, but their operations are nearly exclusively in Florida. Now, you might not realize, Florida is projected to be the third-biggest marijuana market in the U.S. By 2022, the projections I've seen, I've seen on the low end, $1.7 billion, upwards of $1.8 billion. And it's only medical marijuana legalized in that state. They will rank only behind, of course, California No. 1, Colorado No. 2. Florida is projected to be the third biggest marijuana state in the U.S. So, that's a big market.

Here's the cool thing. The state has very limited licenses for production. They've only awarded 14 licenses. Liberty has one of those. The licensing they give gives the company the ability not only to grow, but to have up to 30 retail dispensaries. Liberty Health Sciences is positioned in the Florida market. They're rapidly cranking out more retail locations. They also do home delivery throughout the state, medical marijuana.

I talked to their CEO, George Scorsis, a couple of weeks ago. He said their estimate right now is, they have about a 15% market share in Florida. But by early next year, they're going to be the biggest producer, because like a lot of the Canadian companies, they're really ramping up their capacity. He thinks there's going to be a lot of product shortages very soon in the state. As they ramp up that production capacity, he really projects they're going to have a 25% market share. So, I thought, "Well, that's the CEO. He's going to really play this up."

Campbell: He's probably not going to say that it's ...

Speights: Yeah. But if you do the math -- think about this. Let's say $1.8 billion. That seems to be a consensus-type projection for Florida. $1.8 billion. Even if they don't increase their market share, even if they only have 15% -- I won't do the math in my head here -- the market cap is only around $360 million right now. This company has some real room to run. Let's say 20%. That's $360 million a year at 20% of the market.

Liberty Health Sciences is a company that really has some real opportunity. We talk about some of these absolutely outrageous valuations -- Tilray.

Williams: [laughs] No name-dropping.

Speights: I mean, honestly, I look at a Liberty Health Sciences flying under the radar -- kind of like OrganiGram, flying under the radar -- but it's a legitimate business and has some really great business prospects. So, I like the stock right now.

Campbell: It's so hard, right, Shannon, with some of these U.S. marijuana plays. We hear all of these people who say, "You have to be worried about marijuana in the U.S.," because we don't necessarily have an administration in Washington right now that's a big fan. The change because of Epidiolex, that did not do anything to marijuana. It's still a schedule one drug. There's all sorts of banking restrictions. There's these things, and maybe, Keith, that's why.

Speights: I'm sure. That's exactly why. The companies that operate primarily in the U.S., they're still under that dark cloud of marijuana being illegal at the federal level. We could place bets on whether or not the bill that's being pushed through right now might pass, that at least the federal laws could change where the government will not get in the way of states. But I don't think we're going to see a crackdown. That's my opinion.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.