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The Top-Performing Marijuana Stocks of 2017

Sean Williams, The Motley Fool

There's more budding in the marijuana industry than just cannabis flowers. There are a handful of small-cap pot growers that are sprouting into mid-cap companies with large-cap potential if the legal marijuana movement continues to gather steam.

According to ArcView, a leading authority on the cannabis industry, the North American legal-weed market is expected to grow by 26% on a compounded basis through 2021. Should ArcView's prediction come true, we could be looking at close to $22 billion in North American sales in 2021.

A cannabis plant in sunlight.

Image source: Getty Images.

This rapid growth in sales is a function of legal market expansion -- Mexico legalized medical cannabis this past June, while Canada is working through legislation to OK recreational weed by July 2018 -- as well as an ongoing shift in the way the public thinks about pot. In the U.S., 64% of respondents in Gallup's latest annual poll favored the idea of legalizing marijuana across the country, while 94% of respondents in an August 2017 poll from the independent Quinnipiac University favored legalizing medical cannabis. 

These budding pot stocks had a banner year

All of these catalysts mean one thing: Marijuana stocks had a really good year in 2017. Quite a few delivered double-digit and, in some cases, triple-digit percentage gains for shareholders. Among those pot stocks with at least a year of listing eligibility under their belts, and a market cap in excess of $200 million, here are the top-performing marijuana stocks from 2017, each of which galloped higher by at least 247%!

Aurora Cannabis: up 344%

Standing at the top of the mountain, and giving Canopy Growth Corp. (NASDAQOTH: TWMJF) a genuine run for its money as the largest publicly traded marijuana stock on the planet by market cap, is Canadian-based Aurora Cannabis (NASDAQOTH: ACBFF). In recent days, Aurora has surpassed a $5 billion market cap, which comes on the heels of a 344% move higher in 2017.

The credit for Aurora's exceptional year goes to its mix of organic and acquisition-based expansion.

Jars of dried cannabis stacked on top of one another.

Image source: Getty Images.

From an organic basis, all eyes are on the Aurora Sky project. When completed in mid-2018, this 800,000-square-foot facility is expected to be able to produce 100,000 kilograms of dried cannabis a year at an exceptionally low cost. Aurora is touting Aurora Sky as a highly automated project that'll be pivotal to lowering its long-term growing costs and boosting margins. It's noteworthy that the completion of this facility would come right as Canada is looking to open the curtains on adult-use weed, which could produce an additional $5 billion in annual sales throughout the country when fully ramped up.

In terms of acquisitions, Aurora Cannabis completed its purchase of H2 Biopharma in early December, bringing under its wing a 48,000 square foot facility located less than an hour from Montreal that should produce 4,500 kilograms of high-quality cannabis a year when fully constructed. 

Also, Aurora has been in an increasingly heated war of words with CanniMed Therapeutics' (NASDAQOTH: CMMDF) management team following an unsolicited bid for CanniMed of up to $425 million in November. Aurora has suggested that the combined entity could produce 130,000 kilograms of dried cannabis a year and significantly lower their growing costs. CanniMed's management, however, wants nothing to do with Aurora at this point. 

The outcome of this hostile bid, along with the recreational pot legislation working its way through parliament in Canada, could very well determine if Aurora has a good or bad 2018.

Aphria: up 292%

The red maple leaf is strong in this list, with Canadian-based pot grower Aphria (NASDAQOTH: APHQF) coming in with a 292% gain in 2017. Though Aphria has made acquisitions like its peers, it has almost exclusively focused on organic expansion and partnership opportunities, which has really helped with its bottom line. In fact, Aphria and MedReleaf are the only two weed stocks to deliver a full-year profit in each of the past two years.

An indoor commercial cannabis grow farm.

Image source: Getty Images.

For Aphria, all eyes are on its four-phase expansion. When complete in January 2019, this project will have cost in excess of $100 million, but it'll have expanded the company's growing capacity to 1 million square feet. In terms of production, Aphria is expected to be able to generate 100,000 kilograms of weed a year. Though it may not be fully up to capacity by the time Canada legalizes recreational pot (assuming it does so), Aphria still has the ability to capture around 10% of total market share.

Beyond just its organic expansion, Aphria should also benefit from a recently announced partnership with Shoppers Drug Mart, which is part of the Loblow Companies. The deal will see Aphria become the exclusive online dried cannabis supplier for the 1,300 Shoppers Drug Mart locations across Canada, leading to a major boost in brand visibility. 

Aphria is even getting in on the act as an exporter. Just a handful of Canadian growers have been given the green light to export cannabis to countries that have legalized medical pot, such as Germany.

If Aphria can keep to its marginally profitable ways, and manage to stay on budget with its four-phase project, it could have another excellent year.

Canopy Growth Corp: up 247%

Rounding out the top-performing marijuana stocks is none other than Canadian-based market share leader, Canopy Growth Corp. Having also ascended above a $5 billion market cap in recent days, Canopy returned a healthy 247% in 2017 for its shareholders.

Two businessmen shaking hands.

Image source: Getty Images.

Whereas Aphria is all about organically expanding its capacity while sprinkling in an acquisition here and there, Canopy is all about growing by acquisition, with organic expansion sprinkled in from time to time. A year ago, Canopy wound up acquiring Mettrum Health and greatly expanding the number of medical cannabis patients it could reach.

More recently, as of the company's November earnings release, it announced that it had 2.4 million square feet of growing capacity under construction or development in British Columbia, with the option to purchase another 1.7 million square feet in B.C., should it choose. If Canada does legalize adult-use pot, Canopy could garner 15% to 20% of total market share, based on its capacity potential. 

Like Aphria, Canopy Growth is also able to export its dried cannabis to countries that have legalized medical weed. European countries have been particularly receptive to marijuana as medicine, though many have nascent growing industries, which Canopy, Aphria, and a handful of other players are handling at the moment.

Of all the Canadian growers, Canopy has the most to lose if parliament doesn't move forward with legislation to launch recreational weed sales by July. However, if everything remains on track, Canopy could be set for years of stellar growth.

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Sean Williams has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.