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Better Marijuana Stock: Cronos Group vs. The Green Organic Dutchman

By Keith Speights – Apr 10, 2019 at 8:15AM

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Which stock wins in a matchup between these two Canadian cannabis producers?

Cronos Group (CRON -2.52%) has received plenty of attention from U.S. investors in recent months. The Green Organic Dutchman (TGOD.F -1.45%) for the most part hasn't benefited from a lot of publicity in America. But guess which stock has performed better so far this year? Pat yourself on the back if you answered The Green Organic Dutchman (TGOD).

However, Cronos Group has a much better long-term track record, even ranking as the top-performing marijuana stock of all time. Past performance doesn't matter much in determining which of these two Canadian marijuana stocks is the better pick now, though. Here's how Cronos and TGOD stack up against each other on what does matter.

Marijuana leaf on top of U.S. cash

Image source: Getty Images.

The case for Cronos Group

There are at least 1.8 billion reasons to like Cronos Group. Those reasons correspond to the dollars invested in Cronos by tobacco giant Altria (MO -0.56%) in exchange for a 45% stake in the company. Cronos benefits from its relationship with Altria in two important ways.

First, the company now has a nice cash stockpile. Cronos plans to put that money to good use by expanding its product development and commercialization capabilities. Altria's cash should also help Cronos reduce its dependence on dilution-causing stock offerings. 

Second, Cronos now has a huge partner at its side with a long history of building successful commercial brands across the world. There are several similarities between the cannabis and tobacco industries that could make Altria's relationship with Cronos more valuable over time.

Cronos also has another partnership that could be really important in the not-too-distant future. Last year, Cronos teamed up with Gingko Bioworks to produce cannabinoids from engineered yeast strains. The potential for this technology is enormous in that it could slash the time and expenses associated with producing cannabinoids from cannabis plants. 

In the meantime, Cronos is making more money than ever thanks mainly to the Canadian adult-use recreational marijuana market. The company also has a good start on the international front, with partnerships and joint ventures in Europe, Australia, Israel, and Colombia.

Cronos Group's annual production capacity currently stands at around 40,000 kilograms. However, the company expects to boost that level to close to 117,000 kilograms with its Cronos GrowCo joint venture and increase its capacity even more with its ownership interest in NatuEra.  

The case for The Green Organic Dutchman

The Green Organic Dutchman is way behind Cronos in production capacity for now. But that could soon change. 

By the end of 2019, TGOD expects to be able to grow 65,000 kilograms of cannabis per year. And that's just a start. The company anticipates increasing its annual production capacity to 219,000 kilograms by the latter part of 2020. That's enough to rank TGOD at No. 5 among all Canadian marijuana producers in production capacity

Until it brings more capacity on line, TGOD won't have any significant revenue. However, once its early capacity expansion efforts are completed, the company should be in a pretty good position. TGOD has already lined up a distribution partner for the Canadian adult-use recreational market formed by Canada's largest wine distributor, Philippe Dandurand Wines.

The company plans to focus heavily on the Canadian cannabis edibles and beverages market that's anticipated to open later this year. Last year, TGOD announced that it will dedicate roughly 40,000 kilogram-equivalents of its peak annual production to cannabis edibles and beverages.

TGOD has also laid the groundwork for international growth. The company has joint ventures in Denmark and Mexico. It partnered with Epican to target the medical marijuana market in Jamaica. TGOD also owns HemPoland, a Poland-based hemp cannabidiol (CBD) producer. 

At least one analyst thinks TGOD could skyrocket. Jefferies projects that the stock could jump 45% above its current share price. The investment firm especially likes TGOD's focus on the premium organic cannabis market. 

Better marijuana stock

Based on bang for the buck, The Green Organic Dutchman probably looks like the better pick. Its market cap is only around 15% of Cronos Group's, but TGOD's projected production capacity is significantly higher than Cronos Group's expected capacity.

However, there's more to being successful in the global cannabis industry than just capacity. I think that Cronos Group's Altria relationship gives the company a big advantage that might not be as obvious right now as it will be in the near future.

TGOD might continue to outperform Cronos in 2019. Over the long run, though, I suspect that Cronos -- joined at the hip with Altria -- will be the bigger winner.

Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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