Small Is Beautiful

Hilary Kramer

Hilary Kramer is an investment analyst and portfolio manager with 30 years of experience on Wall Street.

While we’ve talked a lot about a few of the biggest cannabis stocks, the real high-impact opportunities are off the beaten track. This week, Hexo Corp. (NYSE:HEXO) has proven that with a 7% rebound.

Granted, HEXO has a lot of heavy lifting to do down here at $0.76 to catch up with the giants. It has been a grim year for the industry, and this stock is down a harrowing 86% in the last 12 months.

But in the grand scheme of things, that performance isn’t much worse than what the giants have suffered. Tilray Inc. (NASDAQ:TLRY) is down 85% over the same period. Aurora Cannabis Inc. (NYSE:ACB) is down 86% as well.

When the pain is equally shared, the odds favor the disruptive little company over the entrenched leader. It’s just math: a small stock can double and redouble on progress that wouldn’t even budge a giant.

The potential returns simply stack up higher the lower you look. That’s why I have been a fan of tiny and obscure names, like Pharmacielo Ltd. (OTCMKTS:PCLOF), for the long win here.

After all, when giants fall as hard as upstarts, the risk profile is equalized. You need to look to the returns instead.

Of course, you might not want to get involved with recreational cannabis at all. In that case, Aphria Inc. (NASDAQ:APHA) has matched little HEXO point for point this week.

And unlike HEXO and the giants, the downside on APHA’s medicinal business has been substantially easier. This stock is down only 37% in the last year, which is a whole lot easier to recover when the bulls are back in control.

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