The Most Compelling Argument Why Tilray Is a Better Buy Than Aurora Cannabis and Canopy Growth

Let me first state unequivocally that I have in no way been a big fan of Tilray (NASDAQ: TLRY). Last November, I called Tilray the most dangerous big marijuana stock on the market. I didn't like the company's lack of transparency in its fourth-quarter update last week, with Tilray not disclosing metrics that most of its peers make readily available.

But there are some investors who have bought and some who continue to buy Tilray instead of other marijuana stocks. They do this despite most analysts choosing Aurora Cannabis (NYSE: ACB) or Canopy Growth (NYSE: CGC) as better picks.

Why would anyone think that Tilray is a better buy than Aurora and Canopy Growth? Here's the most compelling argument for Tilray.

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Tilray's biggest advantage

Tilray CEO Brendan Kennedy stated in the company's Q4 conference call that "the United States and European markets are orders of magnitude larger than Canada." He's right. And these global markets present opportunities for a wide range of products beyond dried cannabis and cannabis oils.

Aurora Cannabis and Canopy Growth are targeting the same markets that Tilray is, of course. The executives of these companies recognize the opportunities as much as Kennedy and his team do. But there's one thing that Tilray has done arguably more effectively than either Aurora or Canopy: build a diverse lineup of partners and acquire companies across multiple global sectors.

Sure, Canopy Growth landed the most important deal so far for marijuana producers by teaming up with alcoholic beverage maker Constellation Brands. But Canopy doesn't have partnerships with major companies in other areas outside of the cannabis industry such as consumer products (other than alcohol) and pharmaceuticals.

Aurora Cannabis doesn't have a major partner at all. The company has brought billionaire investor Nelson Peltz on board as a strategic advisor to try to line up some deals, but it remains to be seen what will actually materialize from Peltz's efforts.

Then there's Tilray. The company has multiple well-known partners across several industries. Tilray and big beer maker Anheuser-Busch InBev are working together to research non-alcoholic cannabis-infused beverages. Although the initial deal between the two companies was focused on Canada, Kennedy said in Tilray's Q4 call that "neither party hopes that agreement is just for R&D in Canada."

What about consumer products? Tilray forged a partnership with Authentic Brands Group (ABG) to market and distribute consumer cannabis-infused products. ABG has more than 50 popular brands, including Nine West, Prince, and Spyder, and a solid North American distribution network. Kennedy expects that ABG will launch its first cannabis consumer products by the end of the year. 

Tilray first teamed up with Novartis' Sandoz unit to market medical cannabis products in Canada. That agreement was revised in December 2018 to be a global partnership. Kennedy thinks this relationship is a huge plus for Tilray. As he put it, "When [physicians and pharmacists] see that Sandoz, a Novartis division, label on our products, it inspires confidence and trust. It builds a halo around our brands."

Last, but not least, Tilray's acquisition of Manitoba Harvest gives the company immediate access to the hemp CBD market in the U.S. Manitoba Harvest is the largest hemp food manufacturer in the world. Its hemp products are already sold in 16,000 retail locations, with around 13,000 of those locations in the U.S.