The marijuana industry is growing at an extremely quick pace, and it's not hard to understand why. Following the legalization of recreational cannabis in Canada this past October, as well as steady legalizations at the state level in the U.S., the pot industry is now a legitimate business model. Since it's now a validated industry, investment dollars are pouring in, and so is demand for pot products.

According to a recently released co-authored report from Arcview Market Research and BDS Analytics, global weed sales are expected to increase 38% in 2019 to $16.9 billion and to push to north of $31 billion by 2022. Looking out even further, Wall Street investment bank Cowen Group has forecast global sales of as much as $75 billion a year by 2030. It would seem as if pot stocks could do no wrong.

A dollar sign shadow cast on a large pile of cannabis leaves.

Image source: Getty Images.

One investment bank really likes these five pot stocks

But as investors, we know this isn't true. Regardless of the forecasted growth trajectory, there are always winners and losers within an industry, and legal cannabis will be no different. With this in mind, investment bank Jefferies initiated coverage on nine pot stocks earlier this week, bestowing two "sell" recommendations, two "hold" recommendations, and five "buy" recommendations. Below you'll find the five stocks Jefferies thinks you're smart to own going forward.

Aurora Cannabis: $9.13 target price, representing upside of 18%

Arguably the most popular marijuana stock right now, and a favorite among millennial investors, is Aurora Cannabis (NYSE:ACB). Aurora is an easy stock for investors to rally behind because of its projected output, which will likely lead all Canadian growers. The company is conservatively calling for "over 500,000 kilograms" when at full production capacity, but I foresee Aurora pushing closer to 700,000 kilos when fully operational.

Aurora Cannabis has also done an excellent job of moving into overseas markets. With a newly announced acquisition in Portugal, Aurora has a presence in 24 countries on five continents. This should come in handy by 2021, when Canada could be producing far more dried cannabis flower than it can sell domestically. Foreign markets where medical pot is legal will be especially important as Aurora Cannabis looks to offload excess domestic production.

The company also noted in its most recent quarterly operating results that it's on track to generate recurring positive EBITDA (earnings before interest, taxes, depreciation, and amortization) by its fiscal fourth quarter (April 1, 2019, to June 30, 2019). Although this doesn't guarantee profitability, it suggests that Aurora is on the right track to generating a recurring bottom-line profit.

An indoor cannabis grow farm under special lighting.

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OrganiGram Holdings: $7.60 target price, representing upside of 18%

Atlantic-based OrganiGram Holdings (NASDAQOTH:OGRMF) is the next marijuana stock Jefferies thinks you should buy (and yours truly couldn't agree more). With most growers based in Ontario, Quebec, or British Columbia, OrganiGram often gets lost in the mix. But with 113,000 kilos in peak annual production forecast by management, it'll solidly be a top-10 producer on an annual basis.

What makes OrganiGram particularly unique, aside from just its geography, is its use of a three-tiered growing system at its Moncton campus in New Brunswick. Using tiers to grow plants maximizes the 490,000 square feet the company has devoted to growing cannabis. In fact, there's a good chance OrganiGram's yield per square foot could be among the three highest in the industry. Couple that with exceptionally low costs due to efficient space usage and the company's focus on a single grow site, and it's easy to see why profit projections are so robust for OrganiGram.

OrganiGram has plans to move beyond dried flower, too. With a focus on cannabis oils and hemp, OrganiGram's product diversity will help protect its operating margins from being adversely impacted if the per-gram price of dried cannabis tanks.

An indoor hydroponic cannabis grow farm.

Image source: Getty Images.

CannTrust Holdings: $11.41 target price, representing upside of 24%

CannTrust Holdings (NYSE:CTST), which just uplisted to the New York Stock Exchange this past Monday, is another grower that Jefferies thinks you should own. Once again, I agree wholeheartedly, with CannTrust fully expecting to yield north of 100,000 kilos a year when at full production capacity.

What makes CannTrust such an intriguing company is its focus on hydroponic growing at its Niagara and Vaughan facilities. Hydroponics involves growing plants in a nutrient-rich water solvent as opposed to soil. Since the company has relatively inexpensive access to water and electricity in both locations, hydroponics offers a high-yield, low-cost means of growing pot. Plus, with the Niagara facility also employing moving containerized benches -- i.e., a perpetual harvesting system -- production should be far less lumpy compared to its peers.

Of course, CannTrust had itself a bit of a scare recently. Permitting delays stifled a proposed 600,000-square-foot expansion at Niagara in the town of Pelham for roughly six months. Recently, CannTrust and Pelham agreed on a 390,000-square-foot expansion, albeit with added automation to improve yield and efficiency. If I were a betting man, I'd count on CannTrust making acquisitions in the not-so-distant future to further increase its annual output in light of its Niagara permitting holdup and reduced expansion (based on square footage).

A close-up of an ultra-premium cannabis plant flowering.

Image source: Getty Images.

Flowr Corp.: $4.33 target price, representing upside of 4%

A tiny tot that found itself on Jefferies' buy list is British Columbia-based Flowr (NASDAQOTH:FLWPF), which is probably on track for about 60,000 kilos in peak production by 2021 at its Kelowna facility. But before you dismiss this company as just another junior grower, keep in mind that not all production is equal.

Whereas most growers are focusing on sheer number, Flowr is all about quality. More specifically, this is a company that's looking to carve itself a sizable chunk of the ultra-premium cannabis market. Since more affluent clientele are far less perturbed by economic fluctuations than the average consumer, Flowr should be better positioned than most growers to outperform in any economic environment. Additionally, with projected yields of 300 to 450 grams per square foot, Flowr might top all growers in terms of efficient production.

Despite being small, Flowr has had little issue attracting a brand-name partner in Scotts Miracle-Gro. Scotts' subsidiary Hawthorne Gardening will be providing cultivation, lighting, and irrigation systems, while Flowr utilizes growing data analytics and its knowledge of ultra-premium cannabis in an effort to test new strains and maximize yields.

A label that says "edibles" lying atop cookies and brownies, with a single cannabis leaf siting atop a cookie.

Image source: Getty Images.

The Green Organic Dutchman: $4.64 target price, representing upside of 51%

Last but not least, Jefferies believes investors should buy The Green Organic Dutchman (NASDAQOTH:TGODF), which of the five companies listed has the most potential upside.

Why The Green Organic Dutchman? For starters, it may wind up being the fourth- or fifth-largest producer in Canada, depending on how much capacity expansion Tilray undertakes. TGOD, as the company is also known, has forecast peak annual output of 195,000 kilos, which includes organic builds in Ontario and Quebec and partnerships abroad, including Jamaica. Significant production is often a precursor to long-term supply deals, which may be a reason Jefferies is so high on this stock.

Another reason to like TGOD is its focus on cannabis alternatives. Of its 195,000 kilos in peak production, 40,000 kilos are expected to be devoted to edibles and cannabis-infused beverages, both of which will become legal in Canada by no later than mid-October. As one of Canada's largest producers, this alternative cannabis operation looks to be a dangling carrot for a beverage or snack company looking for a marijuana partner.

Will Jefferies' buy recommendations prove prescient or poor? Only time will tell.