Both Aphria (NYSE:APHA) and Constellation Brands (NYSE:STZ) are having a pretty good year so far in 2019. Both stocks are up over 20%. One key difference, though, is that Aphria's success has stemmed from its cannabis operations, while Constellation's gains have come despite its stake in Canopy Growth (NYSE:CGC) weighing on its performance. 

Which of these two stocks is the better pick for long-term investors going forward? Here's what you need to know about the opportunities for Aphria and Constellation Brands.

Giant cannabis leaf in a shopping cart.

Image source: Getty Images.

The case for Aphria

One of the first things that stands out when you examine Aphria is the company's production capacity. Aphria can currently produce around 115,000 kilograms of cannabis on an annual basis in Canada, plus another 17,000 kilograms per year in its outdoor facility in Jamaica. Once the company's Aphria Diamond greenhouse is approved, Aphria's Canadian capacity will increase by 110,000 kilograms per year. And its Aphria Deutschland facility will add another 7,000 kilograms of capacity.

In total, Aphria is on track to produce around 255,000 kilograms of cannabis each year. That ranks the company in third place among cannabis producers based on production capacity. But Aphria's market cap is the fifth-highest in the industry. 

Aphria is also in good shape from a distribution perspective. The company has supply agreements with all 10 Canadian provinces plus the Yukon Territory for the adult-use recreational cannabis market. It teamed up with Southern Glazer's, the largest wine and spirits distributor in North America, to distribute adult-use products throughout Canada. Aphria partnered with Shoppers Drug Mart, one of the top retail pharmacy chains in Canada, to distribute its medical cannabis products. 

The company's international operations are arguably its greatest strength right now. Aphria's acquisition of German medical cannabis and pharmaceutical distributor CC Pharma earlier this year generated the majority of total revenue and helped Aphria deliver an impressive profit in the fiscal 2019 fourth quarter. Aphria was also one of only three cannabis producers selected by Germany to grow medical cannabis inside the country. The company has operations in nine other countries as well.

As for its U.S. plans, Aphria Chairman and interim CEO Irwin Simon said in the company's Q4 conference call that Aphria is "focused on building strategic partnerships and alliances for growth, which emphasize on the U.S. CBD market until medical cannabis is fully legalized." However, he added that the opportunity needs to be the right one. Aphria's tremendous production capacity, relatively low valuation, and international operations could make it an attractive partner for major companies outside of the cannabis industry.

The case for Constellation Brands

Constellation Brands made a big splash into the cannabis world with its initial investment in Canopy Growth in 2017. The alcoholic beverage maker followed up with a ginormous splash last year, investing another $4 billion in Canopy, the largest Canadian cannabis producer by market cap.

Granted, there have been some challenges for Constellation with its stake in Canopy Growth. Constellation's executives weren't pleased with Canopy's fiscal 2019 Q4 results. Canopy founder and former co-CEO Bruce Linton was booted out shortly after those results were announced. Canopy's fiscal 2020 Q1 results were even worse than the prior quarter, with the company taking a big writedown related to expectations of returns of its cannabis oil and softgel products due to what appears to be a case of channel stuffing.

But Constellation's bet on cannabis should still pay off nicely over the long run. Canopy Growth is positioned to compete really well in the coming "Cannabis 2.0" market, which includes cannabis beverages, edibles, and vapes. The Canadian cannabis producer also appears to be in a good position to win in the U.S. market, with plans to launch hemp-derived CBD products soon and an agreement to acquire U.S. cannabis operator Acreage Holdings when U.S. federal cannabis laws are changed.

The most important reason to buy Constellation Brands, though, is its core beverages business. Constellation's premium beer brands, led by Corona and Modelo, continue to dominate the U.S. market. The company thinks that it can keep up its winning ways in the premium beer market by capturing more shelf space, introducing new innovative products, and capitalizing on favorable consumer demographic trends. 

Constellation is also revamping its wine and spirits business. The company has divested some of its lower-priced brands to focus on its premium products. These moves should boost profits down the road.

In addition to its growth prospects in alcoholic beverages and cannabis, Constellation Brands offers something that most cannabis stocks don't: a dividend. The company's dividend yield currently stands at a healthy 1.47%.

Better marijuana stock

I like the prospects for both Aphria and Constellation Brands. If the global cannabis market grows even close to as much as many expect it will, both companies should be big winners.

However, investing in marijuana stocks comes with plenty of risks. The cannabis market might not expand as much as anticipated. The U.S. might not change its federal laws anytime soon. Constellation's core alcoholic beverages business gives it a hedge against these risks that Aphria doesn't have.

Constellation is profitable and growing thanks to its strong premium beer brands. It's making smart moves to bolster its wine and spirits brands. My view is that Constellation's investment in Canopy Growth will also work out over time. Aphria isn't a bad choice to potentially profit from the cannabis boom, but Constellation is a better choice.