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$100 Billion Pot Companies? These 3 Stocks Could Be the First

Dan Caplinger, The Motley Fool

Marijuana stocks have been taking off, and investors have never been more excited about the prospects for the cannabis industry. Now that recreational marijuana is legal in Canada, Canadian cannabis companies have come to the forefront, with companies like Canopy Growth (NYSE: CGC) and Tilray (NASDAQ: TLRY) seeing especially high interest among marijuana investors.

Tilray CEO Brendan Kennedy recently said that he expects the marijuana industry to produce stocks with market capitalizations in excess of $100 billion in the future. Kennedy clearly wants Tilray to be one of those companies, and many shareholders in Tilray and other Canadian cannabis companies have high hopes about their ability to command the Canadian market and then build up international businesses elsewhere.

Raw cannabis in a jar, next to rolling papers on a wood table.

Image source: Getty Images.

If you really want to identify the companies that are most likely to be the megacap players in the cannabis space in the near future, though, you don't need to look north of the border. In all likelihood, well-established stocks like the three below will be the first to hit the $100 billion threshold, tapping the marijuana craze to add to their already extensive and profitable businesses.

1. Constellation Brands

Among companies that have already taken major positions in the marijuana industry, Constellation Brands (NYSE: STZ) leads the field. With a market capitalization of more than $40 billion, the maker of Corona and Modelo beers has bought its way into the cannabis space with successive investments in Canopy Growth. The beer maker's most recent investment of roughly $4 billion took its stake in Canopy up to 38%, and Constellation also received warrants that give it the option to take a controlling interest in the cannabis specialist.

Some speculate that Constellation will eventually take Canopy over outright, bringing the cannabis company fully onto its consolidated financial reports. So far, Constellation's measured approach reflects a healthy skepticism about whether marijuana will overcome challenges like an extensive black market and ongoing regulatory challenges in key jurisdictions to grow even more quickly. If pot takes off, though, Constellation will be in the best position among current players in the cannabis space to take advantage and push its market cap higher to 12-figure territory.

2. Philip Morris International

For a long time, investors have understood that it would be a natural progression for tobacco companies to get into the marijuana business. With extensive experience in dealing with smokeable products and with extensive distribution networks already in place, companies like Philip Morris International (NYSE: PM) are in an obvious position to diversify their product offerings with cannabis. Even though the federal government in the U.S. would potentially have the right to fight against partnerships between American companies and marijuana companies in Canada, the fact that Philip Morris does all of its business outside the U.S. gives it an advantage over domestic companies like Altria (NYSE: MO) as well as tobacco players like British American Tobacco (NYSE: BTI) that operate both in the U.S. and globally.

So far, Philip Morris has expressed little interest in cannabis, saying that it's more dialed in on its efforts to embrace reduced-risk tobacco products like its iQOS heated tobacco system. But that hasn't dissuaded investors from holding out hope for a change in strategy in the future. With a market capitalization well in excess of $100 billion already, even a major deal for one of marijuana's biggest pure-play companies wouldn't be out of Philip Morris International's reach.

3. Coca-Cola

Cannabis investing isn't all about smoking marijuana. Companies in several industries have embraced the potential benefits of cannabis derivatives, including cannabinoid, or CBD for short. Several companies, such as New Age Beverages (NASDAQ: NBEV), have looked at making drinks that have CBD in them, with the intent of letting consumers participate in the growing wellness craze surrounding the cannabis-derived chemical. That's drawn interest from giants in the industry, including Coca-Cola (NYSE: KO).

Lately, reports have surfaced suggesting that Coca-Cola might be in talks with either Aurora Cannabis (NASDAQOTH: ACBFF) or Aphria (NASDAQOTH: APHQF) to make a partnership similar to what Constellation Brands has done with Canopy Growth. With a market capitalization approaching $200 billion, Coca-Cola would need an extensive investment in order to move the needle compared to its existing revenue sources. But given the challenges that the beverage giant has had with its namesake soft drinks, Coca-Cola would likely embrace moving in a direction that would generate new excitement among its customer base.

Think big with marijuana

Investing in major consumer giants like Coca-Cola, Philip Morris International, and Constellation Brands might not be as exciting as putting money directly into cannabis producers. However, if you prefer the relative safety of these established franchises over the home-run potential that tiny marijuana stocks have, then these three stocks could well become the giants of the marijuana industry in the near future.

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Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool recommends Constellation Brands. The Motley Fool has a disclosure policy.