Bank of America has a surprise stock pick and it’s in the marijuana industry

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The banking giant starts covering marijuana stocks

Bank of America (BoA) is the latest to set its eyes on marijuana stocks. The banking giant began covering several marijuana companies last week, three of which were given “buy” ratings. It’s another example of marijuana’s continued expansion into the mainstream, with more emphasis being placed on the industry than has ever been seen before. While two of the “buys” should be expected, the third may come as a surprise.

Canopy Growth and Aurora Cannabis are two of the most popular marijuana stocks on the market and, of course, are part of BoA’s new coverage. Canopy’s ties to Constellation Brands give it great market position and funds and, by the end of the year, should be able to deliver at least 500,000kg of cannabis a year. Aurora is rapidly becoming an international name, creating a number of partnerships in countries around the world, including Germany, Portugal, the UK, Poland, Colombia and many others.

BoA gave HEXO its top pick in the industry. It predicts an increase of 59% in the company’s stock price above its close on April 17 and the company explained, “HEXO is our Top Pick in cannabis, screening compelling in our valuation framework vs. peers (EV/sales [enterprise value-to-sales] and DCF [discounted cash flow]), and with fundamentals grounded by the most de-risked cannabis supply in Canada (off-take with Quebec), an innovation-forward organization and potential for additional value-add partnerships (beyond that already developed with Molson Canada).”

HEXO has also teamed up with Molson Coors Brewing to launch a line of non-alcoholic cannabis-infused beverages. They are expected to hit the market this fall and could lead to additional cannabis products, pushing HEXO even higher.