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Is the Best Cannabis Stock of 2020 Still a Buy?

By Eric Volkman - Jan 26, 2021 at 1:00PM

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It's a bit of a sideways play on future cultivation of the drug.

In a sector that had precious few outperformers, marijuana stock GrowGeneration (GRWG 1.21%) was a standout in 2020, rising by nearly 900%. 

Inquiring minds want to know whether the shares can keep up their torrid momentum, or at least continue to head north. In this video segment from Motley Fool Live recorded on Dec. 22, 2020, healthcare and cannabis bureau chief Corinne Cardina and veteran Fool contributor Eric Volkman discussed whether GrowGeneration can continue to be a hot investment this year, too.

Corinne Cardina: The first stock I want to talk about is actually the best pot stock of 2020. This stock is GrowGeneration. When I checked yesterday, it was up 892% year to date. Eric, can you tell us what this company does, and what its future might look like?

Eric Volkman: Well, first of all Corinne, I hope you invested in January and are now ready to retire. Yeah, me too.

GrowGeneration, they're a retailer, a hydroponics retailer. Hydroponics, for those who don't know is the act of growing crops without soil. There's a lot of equipment that's required for that, poles, pipes, trays, things like that. It's a very equipment-heavy operation and a lot of marijuana is from this way.

So, GrowGeneration as a hydroponics retailer, is in a good position. It's also, now that we've spoken about acquisitions, it continues to be an acquisitive company. The difference between it and your typical marijuana grower and producer is that they don't overpay for assets. They certainly offer attractive prices, but they don't go crazy. I mean, how much can a hydroponic retailers sell for, after all?

They're buying up smaller operations in places like Arizona, which we just talked about, and I believe Michigan was a recent one. Now, both of those -- Michigan has already legalized recreation marijuana; Arizona, as we've discussed is going to. GrowGeneration is buying in smart places, in places where there is and will be demand. They're positioning themselves to be if not the number one hydroponics retailer, at least a very familiar and identifiable brand in that segment.

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