Marijuana is among the fastest-growing industries worldwide, and Canada -- one of the largest nations to have legalized recreational marijuana entirely -- is one of the top markets. Since that October 2018 legalization, cannabis sales in the Great White North have soared. In 2019, Canadians bought $1.2 billion worth of legal cannabis, with the majority of the sales coming from Alberta, Quebec, and Ontario.

It's true that the global marijuana market has had its ups and downs, and like every other sector, it was affected by this year's coronavirus lockdowns and quarantine measures. That said, Canopy Growth (NASDAQ:CGC), Cronos Group (NASDAQ:CRON), and Aphria (NASDAQ:APHA) are three top Canadian pot stocks that might appeal to investors looking for a great place to put their money in this exploding industry. Here is why.

Hand holding bag with cannabis leaf on it

Image source: Getty Images.

1. Canopy Growth

As the largest Canadian marijuana producer by market cap, Canopy Growth has established itself with its diverse collection of brands. Canopy's cannabis-infused beverage segment holds a 54% market share with five ready-to-drink beverages under the Tweed, DeepSpace, and Houseplant brands. It also operates retail stores under the Tweed and Tokyo Smoke names, and by Sept. 30 -- the end of second-quarter 2021 -- it had 48 of these locations across the nation.

That said, Canopy Growth -- along with the rest of the industry -- faced many headwinds in 2019, including an oversupply of cannabis products. This year has brought its own challenges with the COVID-19 pandemic, which forced many industries to shut down -- accompanied by restrictions on travel, quarantine policies, and stay-at-home orders. For its part, Canopy Growth had to close some of its retail stores in March and shift to e-commerce, which affected its operations.

In Q2 2021, revenue was $135 million Canadian, up 77% compared with Q2 of the previous year. The increase was driven by sales from two acquisitions: Sales from vaporizer maker Storz & Bickel, which Canopy bought in December 2018, and from sports nutrition producer BioSteel, purchased in October 2019. Canopy Growth saw negative adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of CA$85.7 million, better than the loss of CA$150.4 million it posted in the same quarter of the prior year. By the end of the quarter, Canopy Growth had cash and short-term investments amounting to CA$1.7 billion.

Canopy's diversified portfolio and strong market position are moving it slowly toward profitability. This stock may be a great pick for investors who are excited by its position as a leader.

2. Cronos Group

Toronto-based cannabis company Cronos Group manufactures and sells marijuana under two adult-use brands -- Spinach and COVE -- and medicinal brand Peace Naturals. It also offers three hemp-derived CBD brands: Lord Jones, Peace, and the newly launched Happy Dance skincare line, which features CBD cocoa butter, CBD bath bombs, and CBD coconut melts.

Its 2018 partnership with tobacco giant Altria Group (NYSE:MO) has attracted investors' attention. The big investor's deep pockets can help offer stability, especially when it comes to generating positive cash flow -- an important goal for many pot companies.

In third-quarter results for the period ending Sept. 30, Cronos showed an impressive 96% year-over-year revenue increase, to $11.4 million. Management said this was driven by higher sales of adult-use cannabis in the Canadian market, similar growth in Israeli medical marijuana sales, and the acquisition of Redwood, which markets and distributes hemp-derived CBD consumer and skincare products under the Lord Jones brand. During the quarter, the company saw a gross loss of $1.5 million, $1.6 million less than it lost in the same quarter of the previous year -- which is good progress.

The future of Cronos looks bright, and this one is a good pick for investors who want a company with a diversified portfolio of recreational and medical marijuana products across the world.

3. Aphria

Well-established in the industry, Aphria  is a provider of both medical and adult-use cannabis. The company owns two medical brands, Broken Coast and Aphria, and several adult-use brands, including Solei, Riff, Broken Coast, Good Supply, and P'Tite Pof. Aphria also recently launched a new brand called B!ngo, marketed as "everyday" cannabis.

Aphria saw a decent 16% year-over-year revenue increase to CA$145.7 million in its first quarter of fiscal 2021, which ended Aug. 31. This represented a 4% decrease from the previous quarter. Management says the decline was driven by the coronavirus pandemic, which led to the reduction of in-person visits to physicians, pharmacies, and dispensaries. During the quarter, the company reported an adjusted EBITDA of CA$10 million, a 17% increase from the prior quarter and its sixth consecutive quarter of positive adjusted EBITDA. By the end of August, it had cash and cash equivalents of CA$400 million on the books.  

On Nov. 4, Aphria entered into an agreement to acquire SweetWater Brewing Company, one of the largest craft brewers in the U.S. SweetWater produces various craft brews and distributes them across 27 states plus Washington, D.C., over approximately 29,000 retail locations. The move will gradually increase Aphria's EBITDA and diluted earnings per share.

Which is the best pick?

Both Cronos Group and Aphria have a strong financial position and diversified portfolios, and they look like good picks for investors interested in multiple stocks. However, Canopy Growth is also a great stock for investors who have a higher risk tolerance.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.