In the world of pot stocks, your options are seemingly limitless. To reduce the agony of parsing which stocks might be winners and losers, you might just settle on the biggest names out there. Companies like Canopy Growth and Tilray, for example. With legal marijuana sales growing at a rate higher than 20%, how could you go wrong?
But choosing wrong is exactly what you’d be doing, say Compass Point Research & Trading analysts. It’s true Canadian marijuana producers like Canopy and Tilray might receive higher valuations than those in the United States. But Canadian marijuana sales will only hit $2.7 billion in 2020, according to the analysts projections, while the U.S. forecasts at $4.8 billion that same year.
“[W]e cannot help but notice a striking level of disparity when comparing the major Canadian companies to the largest American multistate operators,” says Compass Point analysts Rommel Dionisio and Isaac Boltansky, according to Barron’s.
Part of the advantage in buying stocks in United States-based marijuana companies is the inevitable advent of more customers and growth through legalization efforts. Illinois just became the 11th state to legalize recreational marijuana, which grew the amount of Americans living in adult-use marijuana states to 30%.
This isn’t a catch-all analysis, but it does stand to reason why going American is the better choice for pot stocks. As Compass Point notes, major Canadian players like Canopy will likely remain an industry leader, but its shares are trading at a premium compared to its competition. More lucrative growth is available by staying away.