If you’re considering buying either Canopy Growth (NYSE:CGC) or Scotts Miracle-Gro (NYSE:SMG), you probably wish you could turn back the hands of time. Both stocks are up more than 50% so far in 2019. The nice gain is a welcome change for Scotts, but just a continuation of momentum for Canopy Growth, which has skyrocketed around 1,950% over the last three years.
It’s not too late to jump aboard either of these stocks. But which one is the better pick for long-term investors now? Here’s how Canopy Growth and Scotts stack up against each other.
The case for Canopy Growth
This is a great stock to buy if you believe two things. First, that the global cannabis market will grow significantly over the long term. Second, that Canopy Growth will be a leader in the market. There are good reasons for thinking that both these assumptions will prove correct.
Over 40 countries now allow the legal use of cannabis in some form. The cannabis markets in most of these countries are only in their early stages, which means there’s plenty of room for growth.
Just how big could the global cannabis market be? Over the next 10 to 15 years, it’s possible that the market could top $100 billion, with some observers thinking it could even exceed $200 billion. Over the shorter term, Arcview Market Research and BDS Analytics project a global cannabis market of around $32 billion. Regardless of which estimate you use, it seems likely that the cannabis market will indeed grow significantly.
Canopy Growth currently leads in market share in the Canadian recreational marijuana market. And it’s one of the top players in international medical cannabis markets. The company is entering the U.S. hemp cannabidiol (CBD) market by building a large-scale hemp production facility in New York State. And its deal to buy U.S.-based cannabis company Acreage Holdings (NASDAQOTH:ACRGF) as soon as federal marijuana laws change in the U.S. puts it in position to jump into the world’s largest marijuana market.
All these factors lend credibility to the argument that Canopy Growth is likely to remain a leader in the global cannabis market as it experiences tremendous growth. There’s another reason to think that will be the case: its relationship with alcoholic beverage maker Constellation Brands(NYSE:STZ).
In 2018, Constellation invested $4 billion in Canopy Growth, giving it a 38% stake in the company and warrants to gain a majority interest. In exchange, Canopy Growth received a huge cash stockpile that it has put to use in expanding operations across the world. This cash is a big advantage for the company, as is its partnership with Constellation, which has considerable expertise in developing successful commercial brands.