3 Top Marijuana Stocks to Watch in February

Marijuana stocks as a group might have performed poorly in 2018, but 2019 is a totally different story. Many of these stocks stormed out of the gate in January and haven't looked back.

We asked three Motley Fool contributors who closely monitor the cannabis industry to identify their top marijuana stocks to watch in February. Here's why they chose Aphria (NYSE: APHA), Origin House (NASDAQOTH: ORHOF), and Tilray (NASDAQ: TLRY).

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This marijuana stock could still have running room

Todd Campbell (Aphria): Canadian marijuana stocks have been rocketing higher in 2019 following changes to hemp regulations in the U.S. that could allow them to start doing business in America. That potential has kindled excitement that has sent Aphria's shares soaring. But unlike some of its competitors, there could still be more running room left for it.

That's because Aphria's shares got punished last year on concerns over its corporate governance. Allegations of self-dealing by key executives tied to acquisitions last year caused short-sellers to pounce, pushing Aphria's valuation to among the lowest in the marijuana industry.

Those concerns may be overblown now that co-founder Vic Neufeld has agreed to turn over the CEO reins later this year. If an internal investigation into the acquisitions comes up with little to worry over, shares could leap as the overhang disappears.

There's plenty for investors to cheer, too. Aphria has historically been one of the lowest-cost marijuana growers in Canada. Based on its greenhouse expansion plans, it has a shot at being the third-largest marijuana company on the planet. Its top-tier status as a grower suggests it could enjoy significant sales growth as Canada's recreational marijuana market matures. The country's adult-use market opened in mid-October, and last month, Aphria said sales totaled 21.7 million Canadian dollars ($16.36 million) in the quarter ending November, up from CA$8.5 million in the same quarter of 2017.

That's remarkable sales growth, yet it only hints at Aphria's opportunity. Statistics Canada estimates that roughly CA$6 billion is spent annually on marijuana in Canada. Most of that is still done on the black market, so as that changes, it should provide significant tailwinds to demand. If Aphria can make a move into the U.S., it could tap into a market that industry watchers peg at $50 billion per year!

Admittedly, the internal investigation is ongoing, so this stock remains risky. Nonetheless, I think new management and the market opportunity make this a pot stock worth buying.

California dreamin'

Keith Speights (Origin House): If you're going to really make it to the big time as a marijuana business, you've got to be in California. The state claims the largest marijuana market in the world. And Origin House is well positioned to hit the big time, in my view.

Origin House is the largest distributor of cannabis products (of the legal variety, at least) in California. The company currently reaches around 70% of the cannabis dispensaries in the state. It also has built a lineup of in-house cannabis brands.

There are three main reasons I think Origin House is a marijuana stock to watch in February. First, its stock is hot -- up more than 35% year to date -- and it could get even hotter. Second, Origin House continues to add new brands to its portfolio. The company expects to boost its sales from in-house brands to roughly 50% of total revenue.