One of the Top Canadian Cannabis Stocks to Buy

The global cannabis market still has billions in unrealized potential. And our pick for one of the top Canadian cannabis stocks to buy now is a company that plans on competing with the still-thriving cannabis black market.

For over a century, governments around the world have been fighting the war on drugs. But the results haven't been encouraging.

For every victory against people like Colombian drug lord Pablo Escobar, there are just as many defeats. Since 1971, the United States alone has spent over $1 trillion fighting the war on drugs.

And it continues to expend vast resources to imprison nearly half a million non-violent drug offenders. In fact, in 2015, the U.S. government spent $9.2 million every day to incarcerate people charged with drug-related offenses, according to the Center for American progress.

Issues like these are just some of the reasons for the growing arguments against the war on drugs. It's also why many believe marijuana should be legalized across the United States.

According to the latest Gallup poll, U.S. cannabis legalization now has over 66% voter support. That's a 30% increase from 2005.

Despite the progress over the past decade, there is still a lucrative and persistent illegal market for cannabis in America. Even in areas where it has been completely legalized.

And because federal legalization seems more likely than ever, the black market has stepped up its efforts to undermine the legal cannabis industry.

This may sound discouraging, but there is one legitimate marijuana stock that has focused its efforts on outcompeting the black market - on price.

And this pot stock could bring huge profits...

The Black Market for Cannabis Is Still Thriving

Cannabis is currently legal in some form in 41 of 50 U.S. states, the District of Columbia, and four out of five territories. Plus, it is also completely legal throughout Canada.

Because of this, you'd think the marijuana black market would have dried up in all of these places. But that's far from the case.

In fact, the black market remains incredibly active throughout places like Canada and California.

Why is this? One of the main reasons is the price. Taxation and regulation of legal cannabis products have not only made the products more expensive than the black market alternatives, but also less accessible.

In Illinois, a cannabis license costs a minimum of $225,000, which isn't something that the average entrepreneur could afford.

In Washington, D.C., and Michigan, for various reasons, lawmakers have been unable to devise a "process" for legalized cannabis. In response, some dispensaries have developed a process to "gift" their legal marijuana products.

In Quebec and Ontario, Canada's two most urbanized and populous provinces, the supply of marijuana remains too tight to support the new legal market, forcing consumers to turn elsewhere.

And the examples could go on forever. But the point is the black market continues to thrive in areas where cannabis is completely legal.

If consumers can get a decent, yet illegal, product at a low cost and with relatively few hassles, they're going to choose that option just about every time. Unfortunately, this hurts the legitimate marijuana market that is complying with regulations and paying taxes.

Even though black market cannabis is relatively cheap, it can also be dangerous due to the use of unknown chemicals. And let's not forget the fact that it benefits criminal cartels.

Fortunately, we have one Canadian cannabis stock that's taking the cannabis black market head on.

One of the Top Canadian Cannabis Stock to Buy Now

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Hexo Corp. (NYSE: HEXO) is our pick for one of the top Canadian pot stocks to own now. It is a completely legitimate company that is now underselling even black market cannabis.

And it's a fascinating experiment.

According to Hexo, the average Canadian marijuana consumer pays roughly CA$4.49 ($3.43) per gram for cannabis on the black market.

Hexo is now selling its "Original Stash" cannabis strain for exactly the same price through legitimate dispensaries. The only catch is that consumers have to buy 28 grams for a total price of CA$125.70 ($96.11) to match the price.

If Hexo's Original Stash manages to penetrate the black market, it's going to have an impact on all Canadian marijuana companies.

As the company sells more of that low-cost weed, it can work on lowering its production costs. In fact, some of the bigger producers are making cannabis at around CA$1 ($0.76) per gram or less.

If you assume that half of that $3.43 per gram goes to the retailers and distributors, a production cost of $0.76 would give the company gross margins of over 50%.

It's inevitable that lower-quality products would pressure the cannabis market. And in some ways, Hexo is jumping ahead on a potentially explosive market.

If the company captures a reasonable share of the low-cost cannabis market and takes away some business from black market providers at the same time, this has the makings of an excellent business model.

If you think about it, McDonald's Corp. (NYSE: MCD) brings in more revenue than every high-end steakhouse around the globe combined - all by offering low prices. And this could be the case with Hexo.

This is truly a Canadian cannabis company to watch now.

America's 1% Are Converging on the Next "Gold Rush"

The Fortune 500, big investment firms, and the Wall Street elite are all pouring billions into a new agribusiness market.

It's an investment strategy that's already worked for them before - for example...

Vanguard, Credit Suisse, and RBC were behind an IPO in this industry that shot up 659% in under one year...

Deutsche Bank and UBS were behind the scenes of a 641% windfall...

And Goldman Sachs, Black Rock, and Morgan Stanley lined their pockets with a whopping 3,813% profit...

But the biggest gains are yet to come. As medical research in this area trucks on, this could become a $1 trillion global industry. Individual investors could become millionaires practically overnight.

I know the numbers are big, but the research backs it up.

What's more, we've picked three stocks in this industry with the biggest upside potential.

Just click here to see for yourself...

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