Canadian marijuana stocks are having a moment in the sun today. Shares of Aurora Cannabis (ACB 2.71%) are up by a healthy 7.4%, while Canopy Growth (CGC 4.70%) stock is higher by 14.3%, and Tilray Brands' (TLRY -1.34%) equity is in the green by 5.6%, as of 12:35 p.m. ET Thursday.
What's causing this industrywide move higher? These beaten-down Canadian marijuana stocks appear to be getting a lift from today's news that inflation seems to be tapering off. The U.S. Labor Department announced this morning that the Cosumer Price Index (CPI) increased by 7.7% in October relative to the same month a year ago, which represents the smallest rise in the CPI so far this year.
Why are Aurora Cannabis, Canopy Growth, and Tilray responding this positive macroeconomic news? While the link is far from direct, slowing inflation might spur the Federal Reserve to dial back its policy of aggressive interest rate hikes. That's key for speculative growth stocks like Aurora, Canopy, and Tilray.
The reason is that investors have shied away from risky equities all year long due to the threat of hefty rate hikes in 2023. So, if the Federal Reserve decides to pivot on this seminal issue, some investors might be willing to up their appetite for risk -- which would be a boon for high-risk, high-reward cannabis stocks like Aurora, Canopy, and Tilray.
Are any of these Canadian cannabis equities a buy right now? If investor sentiment becomes more bullish, I think the shares of Aurora, Canopy, and Tilray will all rebound to some degree. After all, the stock prices of these Canadian cannabis giants have gotten absolutely trounced this year, with each company losing well over 40% of its value through the first 11 months of 2022. In short, Aurora, Canopy, and Tilray may have fallen too far, too fast this year.
That being said, Tilray is probably the best buy of the bunch from an investing standpoint. Tilray's competitive advantages in key international markets like Germany ought to deliver enormous benefits for shareholders in the coming months. What's more, the company recently inked a new partnership deal with Charlotte's Web, deepening its ties to the high-value U.S. cannabis market. Canopy and Aurora, on the other hand, still have quite a bit of work to do to solidify their long-term value propositions.