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6 Best Cannabis Stocks to Buy on U.S. Exchanges

John Divine

These are 2019's top pot stocks.

The marijuana industry is one of the hottest and fastest-growing areas on Wall Street, and that means the best cannabis stocks to buy are getting easier to find. When Canada became the second country in the world to legalize recreational marijuana in 2018, a flurry of legitimate pot stocks began to pop up. In 2019, the industry is still in its infancy, and it's tough to keep track of who's who. Here's a look at six of the best publicly traded cannabis stocks that trade on major U.S. exchanges, and what each company specializes in. Though some look expensive, they may grow into their valuations quickly, so watch for pullbacks.

Canopy Growth Corp. (ticker: CGC)

Canopy Growth Corp. is one of Canada's most vaunted marijuana stocks, with its hands directly in the rapidly growing weed business north of the border. CGC grows and sells both medicinal and recreational marijuana. The furor surrounding legalization drove demand and helped the well-positioned Canopy Growth, which was the first publicly traded cannabis company in North America, nearly quadruple sales in the fourth quarter of 2018. From high-quality herbs to oils, concentrates, gels and hemps, CGC's operations run the gamut. Like many weed stocks, the company could possibly be overvalued currently, with a valuation above $15 billion on roughly U.S. $63 million in 2018 sales.

Aurora Cannabis (ACB)

Remember, the allure of cannabis stocks is almost all about the future. With the primary hurdle to success (i.e. its pesky illegality) no longer an issue in Canada, Aurora's rapidly increasing production capacity gives it a leg up on many of its competitors. ACB is working on boosting its 92,000-square-foot operations by an order of magnitude, with 1.1 million square feet of greenhouse in the works. Unlike Canopy Growth, ACB's primary focus is on the medical marijuana industry, which despite having a smaller footprint, benefits from higher margins due to specialty products and demand-driven price inelasticity. A big-name partner is what $7 billion ACB could sorely use.

Cronos Group (CRON)

The fortunes of Cronos Group have changed dramatically in the last year, as Altria Group (MO), which owns Philip Morris USA and makes Marlboro and Virginia Slims, bought a 45 percent stake of CRON for $1.8 billion. Although that's not a negligible equity concession, the benefits of partnering with a blue-chip tobacco giant like Altria -- especially at this early stage of the game -- could be litany. Altria also aggressively bid to acquire a 30 percent chunk of the vaping leader Juul in 2018, giving Cronos an interesting cross-pollination opportunity (if you will) down the road. Shares of this cannabis market leader trade on the Nasdaq.

Constellation Brands (STZ)

How is Constellation Brands in the conversation when investors hunt for the best cannabis stocks to buy? Before last summer it wouldn't have been, but the U.S.-based beer and wine behemoth saw the groovy green avalanche of marijuana legalization on the horizon and decided to branch out. In August 2018, the brewer behind Corona Extra, Modelo Especial, Ballast Point and dozens of other brands acquired a 38 percent stake in Canopy Growth for about $4 billion. With a $31 billion valuation, STZ is arguably the safest of all the marijuana plays, although importantly it's not a pure play on weed. With cannabis potentially cannibalizing alcohol demand, STZ's acquisition makes sense.

Tilray (TLRY)

One of the freshest marijuana stocks on the block, Canada's Tilray was incorporated in 2018 and wasted no time in going public. Within no time the stock was skyrocketing as Wall Street's frenzied, manic obsession with pot stocks sent TLRY shares soaring from $20 to $300 in a few short months. Tilray focuses on the research, production and distribution of medical cannabis. Very recently, the $7 billion Tilray decided to branch out, acquiring Manitoba Harvest, a hemp-based food company with major distribution in the U.S. The $316 million move should help diversify the business. Like TLRY's peers, growth prospects look impressive but the trade-off is volatility.

Aphria (APHA)

Last but not least is Aphria, another marijuana stock based in Canada. A producer and seller of medical cannabis, the company has more than 300,000 square feet of production facilities, and seeks to sell in both Canadian and international end markets. Products include the typical range of indicas and sativas, not to mention cannabis oils. As far as valuation is concerned, be forewarned: APHA is enormously volatile, even when it comes to weed stocks. Some Wall Street critics have questioned the value of Aphria's recent acquisitions, implying future writedowns will be necessary, though APHA disputes this.

The top cannabis stocks in 2019.

To recap, here are six of the top marijuana stocks available on U.S. exchanges:

-- Canopy Growth Corp. (CGC)

-- Aurora Cannabis (ACB)

-- Cronos Group (CRON)

-- Constellation Brands (STZ)

-- Tilray (TLRY)

-- Aphria (APHA)

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