When it comes to the fast-paced marijuana industry, Aurora Cannabis (ACB 3.67%) is arguably the most popular choice among investors. Following 15 acquisitions since August 2016, Aurora has built itself into a production and international powerhouse.
According to the company's most recent investor presentation, it should be producing at an annual run rate of 625,000 kilos by the midpoint of next year. This assumes that Aurora's three largest facilities -- Aurora Sun, Aurora Nordic 2, and Exeter -- are licensed and brought on line over the course of the next year. The assumption here being that Aurora's premier output should lead to lucrative long-term supply deals domestically and abroad.
This is also a company that has a production and/or distribution presence in 24 countries worldwide, including Canada. These external sales channels could prove especially important if and when dried flower becomes oversupplied in Canada.
These marijuana stocks have run circles around Aurora Cannabis of late
But for all that Aurora appears to bring to the table, healthy returns for investors have not been the result -- at least since the beginning of 2018. Ever since the curtain closed on 2017, Aurora Cannabis' share price has increased by a meager 9%. Meanwhile, the following three pot stocks have absolutely run laps around Aurora Cannabis, in terms of total return, over the same time frame.
Although it's easily the most hated marijuana stock on Wall Street, at least based on the number of sell ratings it's attracted from analysts, Cronos Group (CRON 2.79%) has absolutely left Aurora eating its dust since the green flag waved on Jan. 1, 2018. Shares of the popular but controversial Cronos are up 106% in that time frame.
The bulk of Cronos Group's rally was recognized in the first quarter of this year, which is when it closed on a $1.8 billion equity investment from tobacco company Altria. The investment gave Altria a 45% stake in the company, and should allow the two to work toward developing vape products for the North American market. It also makes Cronos Group a logical takeover candidate for Altria in the future, given that Altria's U.S. tobacco business is struggling as more adults quit smoking tobacco products.
Perhaps even more exciting is what Cronos Group might do with its newfound fortune. As it stands now, the company isn't even a top-10 player in terms of aggregate output, so it could certainly use its capital to purchase additional production, or diversify its product portfolio. Acquisitions aren't out of the question, either -- with Cronos Group very much needing to bolster its overseas presence.
This investment from Altria has played a big role in lifting Cronos Group's market cap, but it'll need to put this cash to work if it's to continue outperforming Aurora Cannabis.
Surprisingly, one of the top performers since the beginning of 2018 is small-cap Aleafia Health (ALEAF 7.00%), which has returned 107%, or almost a full 100 percentage points more than Aurora Cannabis over the same period.
The excitement surrounding Aleafia Health primarily involves its now-completed all-stock buyout of Emblem. Both companies operate medical clinics that can prescribe cannabis, as well as control their own marijuana supply chains. As a combined entity they control approximately 40 medical clinics, which have seen 60,000 patients, and expect to produce 138,000 kilos, when fully operational. This 138,000 kilos makes Aleafia Health a top-10 producer by peak output, despite the fact that it's a relative unknown in the industry.
Thus, on one hand, Aleafia Health offers the ability to keep higher-margin medical marijuana patients within its cannabis universe by prescribing in-house pot products.
On the other hand, it's a largely unproven producer that's still trying to secure domestic and international supply agreements, as well as complete its capacity expansion projects. It's very inexpensive at a market cap of $312 million considering it's capable of 138,000 kilos in maximum annual production, but Wall Street will need to see visible signs of execution from management if it's to continue outperforming the most popular pot stock, Aurora Cannabis.
The largest pot stock in the world by market cap, and the only grower that's within a stone's throw of challenging Aurora's lead in weed production, Canopy Growth (CGC 1.95%), is the third marijuana stock that's run circles around its peer since the beginning of 2018. In Canopy's case, it's delivered an 89% return, compared to Aurora's 9% gain.
As was the case with Cronos Group, Canopy's surging share price owes a lot to the closure of a $4 billion equity investment from Constellation Brands (STZ -0.49%), which was announced in August and closed in November. The investment, which was actually Constellation's third in Canopy Growth, gives it a 37% stake in the company, and comes with warrants that, if exercised, could boost its stake up to 56%. Investors are counting on the duo to develop nonalcoholic cannabis-infused beverages, and haven't dismissed the idea of Constellation eventually acquiring Canopy Growth.
As for Canopy, the equity investment from Constellation Brands gave it access to precious cash that it could use to execute on its long-term strategy. It's already acquired Colorado-based ebbu, an intellectual property company focused on the hemp business, and was awarded a hemp production and processing license in New York State that'll see it spend $100 million to $150 million on the construction of a processing facility. This cash was also important in providing the up-front capital as part of its $3.4 billion rights offer to acquire U.S.-focused dispensary operator Acreage Holdings if the U.S. federal government ever legalizes cannabis.
Unlike Cronos Group and Aleafia Health, Canopy is a leader in production, portfolio diversity, and has a strong international presence. As long as management sticks to the script, it could continue to outperform its closest competitor.