Cannabis operators can't run their businesses without help. They require hydroponics products like fertilizer and lighting systems. In this Fool Live video, Healthcare and Cannabis Bureau Chief Corinne Cardina and longtime Motley Fool contributor Keith Speights talk about two ancillary pot stocks that investors should keep their eyes on: GrowGeneration (NASDAQ:GRWG) and Scotts Miracle-Gro (NYSE:SMG).
Corinne Cardina: Another ancillary sub-industry is hydroponics. Can you tell us what hydroponics is?
Keith Speights: The simple explanation is it's growing plants of any kind in liquids instead of in soil basically, and a lot of the cannabis operators do use hydroponic growing their plants. This has become a huge market. It's one of those pick-and-shovel markets that's really taken off especially the last couple of years.
Corinne Cardina: Absolutely. Let's briefly talk about two of these.
GrowGeneration, this is a company that operates almost 30 retail stores across 10 states. It also has its own private label of certain products; additives, nutrients, LED lights, and soils.
Then there's Scotts Miracle-Gro. This is one of the largest makers of lawn care products and it's actually a supplier to Lowe's and Home Depot.
Two different kinds of stocks here. One is the retailer and one is a producer of the actual equipment, although there's a little bit of overlap. Is one of these you think more attractive than the other?
Keith Speights: I think it depends on what style you have as an investor.
If you're more conservative, you might prefer Scotts Miracle-Gro because they also have their consumer lawn and garden business, and everybody knows Scotts and Miracle-Gro. They also have launched some organic products over the last year or so that have really taken off. So if you're more conservative, Scott's might be more up your alley because you're going to have some diversification there. They also pay a dividend.
GrowGeneration might be more up the alley for aggressive investors. It has been growing. I haven't looked in the last week or so, but at least a month or so ago, GrowGeneration was the fastest-growing marijuana stock so far this year.
Their opportunity is still tremendous. I think there are around a thousand hydroponic stores in the US right now. GrowGeneration, like you said, Corinne, has about 30 of them. They're the biggest. Even with only 29 or nearly 30, they're the biggest. There's a lot of room for consolidation, so I see a lot of growth opportunity for GrowGeneration.
Corinne Cardina: Awesome. We'll keep an eye on GrowGeneration as well.