If you're looking for two cheap pot stocks to buy, Aurora Cannabis (ACB) and OrganiGram Holdings (OGI 1.85%) could be good options. They've both struggled in 2020, with Aurora down 54% year to date and OrganiGram falling by 39%. At reduced prices, they could be attractive buys for contrarian investors who are willing to take on some risk.

Let's take a look at which of these stocks is a better fit for your portfolio today.

Is Aurora Cannabis finally on the right path?

Aurora's been one of the riskier buys in the cannabis industry, but there's hope that the Alberta-based cannabis producer is turning things around. In the company's third-quarter results, which Aurora released on May 14, Aurora recorded net sales of 75.5 million Canadian dollars. It's a nice bounce back from what was a troubling second quarter when its net revenue came in at just CA$56 million, which was lower than what it reported in each of the previous three quarters.

Cannabis greenhouse.

Image source: Getty Images.

In addition to sales growth, concerns surrounding profitability and its sheer ability to weather the COVID-19 storm are weighing on many investors. In February, before the pandemic hit North America, investment bank Ello Capital estimated Aurora's liquidity was so bad that it might only have a couple of months of cash left

But Aurora's cash situation is improving. As of March 31, the company's cash and cash equivalents totaled CA$230.2 million -- up from CA$172.7 million on June 30, 2019. The cannabis producer is also burning through less cash. In Q3, it used up CA$59 million in cash from its day-to-day operating activities. That's the lowest it's been in the past three quarters.

The company's doing what it can to be leaner and in June announced it was laying off a significant amount of its workforce, including 25% of its selling, general and administrative (SG&A) staff. It said there will also be a 30% reduction in production staff, which will happen during the next two quarters. It addition, it's shutting down five facilities across Canada.

It's all in an effort to improve the company's financial health, and Aurora is optimistic that it will post a profit later this year. In Q1, the company reported an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss of CA$50.9 million, which was worse than the CA$36.6 million loss it incurred in the prior-year period.

OrganiGram's also shedding expenses

New Brunswick-based OrganiGram is in a similar boat, as it struggles with keeping its financials out of the red. On July 3, OrganiGram announced it cut 25% of its workforce.

In the same update announcing the staffing changes, OrganiGram said it expects net revenue for the upcoming third quarter will be down from the second quarter. On the plus side, it expects to see SG&A expenses fall next quarter. The company's conference call, which will review the latest results, is scheduled for July 21. 

OrganiGram released its Q2 results back on April 14, and they weren't great. Net revenue of CA$23.2 million was down 14% year over year, and its net loss of CA$6.8 million was 7% deeper from the prior-year period. This coming quarterly performance will be the second consecutive period of net revenue decline, which is bad news for its financial position.

The company reported cash of CA$41.1 million as of Feb. 29. In its three most recent quarters, OrganiGram burned through between CA$11 million and CA$16 million from its day-to-day operating activities. But with COVID-19 impacting the business and leading OrganiGram to cut a significant part of its workforce, it could be a sign that things are getting worse. 

Which stock should you go with today?

Before deciding which stock to buy, let's compare how they've done against they Horizons Marijuana Life Sciences ETF (HMLSF 3.48%) this year:

ACB Chart

ACB data by YCharts

Neither of these two stocks are particularly inspiring and both are doing much worse than the Horizons ETF. I wouldn't buy either stock today given that both of these companies look to be in a panic trying to cut costs as quickly as they can. It's concerning when companies lay off such a significant percentage of their workforces. 

However, if you're inclined to pick between one of these two stocks, I'd go with Aurora. The company has more resources and assets that it can sell to keep generating cash. And with a keen focus on profitability this year, there's hope that its financials will improve in upcoming quarters.

But with that said, only investors with a high-risk tolerance should consider buying either of these two pot stocks because they are anything but safe investments.