What would a $ 10,000 funding in Cover Development and Aurora Hashish be value now?

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It’s probably more than you think, but only one of the two Canadian firms may give backers reason to be excited about the future.

Author of the article:

David Yasvinski

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February 26, 2020 • • March 6, 2020 • • Read for 2 minutes Aurora Cannabis and Canopy Growth Corporation have come down a rougher path than most. Aurora Cannabis and Canopy Growth Corporation have come down a rougher path than most. Photo by TuelekZa / iStock / Getty Images Plus

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When it comes to investing in the cannabis industry – like most others – it seems to be slowly and steadily winning the race.

The burgeoning business has had some turbulent years, with companies on both sides of the border revising profit forecasts and laying off employees, despite the drug’s global sales tripling to $ 10.9 billion between 2014 and 2018, according to The Motley Fool. That number is set to rise to $ 50 billion by 2030, if Wall Street is to be believed.

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Two popular Canadian companies, Aurora Cannabis and Canopy Growth Corporation, have come down a harder road than most, but investors who stepped into pragmatic pessimism before the unbridled optimism are still in good shape. That’s because a $ 10,000 investment made in one of the companies four years ago is now worth between $ 38,430 (Aurora) and $ 107,990 (Canopy Growth).

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Since Canopy has lost more than half of its market cap since the exciting days last April and Aurora has fallen 85 percent since March, a celebration might even be in order. Newer investors can of course be forgiven if they don’t feel ready to, as those who got in over the past two years are likely to wonder if they were high at that point.

FILE: Canopy Growth workers cut marijuana plants at the Tweed facility in Smiths Falls, Ont.  / Photo: Darren Brown / Postmedia News Files FILE: Canopy Growth workers cut marijuana plants at the Tweed facility in Smiths Falls, Ont. / Photo: Darren Brown / Postmedia News Files Photo by Darren Brown / Postmedia News Files

But there is real hope that Canopy could bring good things to life after new CEO David Klein takes over the helm of the company. Previously, with the appointment of Klein, the chief financial officer of Constellation Brands, which holds a 38 percent stake in Canopy, ended months of speculation about which direction the company would head after consecutive quarters of declining sales.

CIBC analyst John Zamparo wrote in a statement to clients that, given his tenure at Constellation, Klein’s appointment “should raise the interest of institutional shareholders and steer the company toward its goal of global industry leadership.”

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Zamparo added, “In our view, the move likely underscores a shift already underway at Canopy to a greater focus on managing existing operations, with less emphasis on just growing.”

Klein will have his hands full at Canopy, but he’s probably given investors more reason to be optimistic than those who put their money into Aurora.

FILE: Aurora Cannabis is the worst-positioned Canadian producer with 2.3 months of liquidity.  / Photo: David Kawai / Bloomberg FILE: Aurora Cannabis is the worst-positioned Canadian producer with 2.3 months of liquidity. / Photo: David Kawai / Bloomberg Photo by David Kawai / Bloomberg

The company has stopped building two large grow operations to save money and is selling a third greenhouse. This will result in a decline in domestic production even if the company struggles to contain international markets.

Aurora even had to make changes to its secured line of credit, which reduced the capital it has access to by $ 141.5 million.

Investing in the cannabis industry feels like throwing an arrow at best, with few getting the job done. Right now, at least, Canopy investors have fresh reasons to hope their goal is true.

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