3 Marijuana Stocks With a Killer Advantage

Let's face it: Marijuana is a commodity. That makes it challenging for marijuana businesses to differentiate themselves from the competition. But it's not impossible to do so.

Actually, three marijuana stocks appear to be in great shape to stand out from the pack for a long time to come. You could even say that Canopy Growth (NYSE: CGC), Cronos Group (NASDAQ: CRON), and Scotts Miracle-Gro (NYSE: SMG) have a killer advantage. Here's why.

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1. Canopy Growth

Canopy Growth claims the biggest market cap of any marijuana stock on the planet. But that's not its killer advantage. Instead, Canopy's relationship with Constellation Brands (NYSE: STZ) is what elevates the company above its peers.

Constellation is best known for its premium beers Corona and Modelo. In 2017, the company bought a 9.9% stake in Canopy. Last year, Constellation upped the ante considerably with another $4 billion investment in Canopy Growth. The deal provided a huge influx of cash to Canopy.

Canopy is already putting that money to good use. The company announced in January that it's building a major hemp production facility in New York state. Canopy expects to launch its first hemp-based cannabidiol (CBD) products in the U.S. later this year.

The company also plans to leverage Constellation's expertise in establishing successful consumer brands. Canopy and Constellation intend to launch a variety of cannabis-infused beverages in Canada in the latter part of 2019, assuming there aren't any delays to the completion of the applicable regulations. And should federal marijuana laws change in the U.S., Constellation's distribution channels and marketing prowess would be a major asset for Canopy in entering the U.S. marijuana market.

2. Cronos Group

Cronos Group struck its own major deal with a company outside the cannabis industry. In December, tobacco giant Altria (NYSE: MO) announced that it was investing $1.8 billion in Cronos for close to 45% of the Canadian marijuana producer.

This transaction closed on March 8, so it's still too early to know specifically how Cronos will use its newfound cash. Cronos Group CEO Mike Gorenstein said, though, that the deal with Altria will "allow us to expand our product development and commercialization capabilities."

Gorenstein also noted that Altria's regulatory expertise should enable Cronos to compete more effectively in the global cannabis market. That seems like a pretty good assumption. Altria has successfully navigated highly regulated markets across the world for decades.

While Cronos Group's partnership with Altria is its biggest differentiating advantage, the company also has another collaboration that could be a game changer. Cronos teamed up with Ginkgo Bioworks last year to develop genetically engineered yeast strains that produce high-quality cannabinoids. If this process can be scaled up to meet commercial needs, Cronos could be in a fantastic position to produce cannabinoids like CBD and THC more quickly and at much lower costs than current methods allow.

3. Scotts Miracle-Gro

Scotts Miracle-Gro's killer advantage is pretty simple: It's the biggest hydroponics supplier in the world's biggest legal marijuana market. Thanks to a string of acquisitions, Scotts' Hawthorne Gardening subsidiary ranks as the top provider of hydroponics products to the U.S. cannabis industry.