5 Biggest International Marijuana Markets -- and the Stocks Best Positioned to Profit in Them

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Hockey legend Wayne Gretzky's statement about skating "to where the puck is going, not where it has been" has become a cliche -- but it's still good advice in both hockey and investing. That old quote came to mind recently as I read the projections for international marijuana markets in 2022 included in The State of Legal Marijuana Markets, published by Arcview Market Research and BDS Analytics.

Just as more states in the U.S. are legalizing marijuana, so are more countries around the world. This expansion presents opportunities for marijuana-related businesses. But where do the greatest opportunities lie? Here are the countries that Arcview and BDS Analytics think will be the biggest marijuana markets four years from now outside the U.S. and Canada, along with the stocks most likely to profit in those markets.

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1. Germany

It's not surprising that Germany ranked at the top of the list of international marijuana markets. Arcview Market Research and BDS Analytics project that marijuana sales in the country will reach close to $1.6 billion in 2022, with more than 691,000 legal consumers in the country. That's a huge jump from the estimated marijuana spending of $263 million in Germany this year.

Germany legalized medical marijuana in 2017. Unlike in some countries, German patients can obtain medical cannabis relatively easily. More than 20,000 pharmacies in the country are allowed to fill medical cannabis prescriptions.

2. United Kingdom

The United Kingdom's second-place position on the list of top international marijuana markets of 2022 might be unexpected. Marijuana laws in the U.K. are strict right now. Estimated medical marijuana sales in 2018 are only around $7 million.

However, the U.K.'s Advisory Council on the Misuse of Drugs recently changed its stance on the therapeutic benefits of cannabis. As a result, physicians will soon be allowed to prescribe medical marijuana. Arcview and BDS Analytics think that the medical marijuana market in the U.K. will reach $288 million by 2022.

3. Switzerland

Switzerland is the only country in the top five list that currently allows the legal adult use of low-THC marijuana. While the Swiss technically legalized cannabis for use in health products, marijuana cigarettes are available in stores to adults age 18 and older with no prescription required.

Marijuana spending in 2018 is estimated to be around $130 million. By 2022, the total is projected to increase to $163 million, reflecting a relatively modest compound annual growth rate (CAGR) of 6%.

4. Italy

Italy legalized medical marijuana in 2013. Currently, however, the country's regulations restrict cannabis use. As a result, marijuana sales this year are expected to be less than $7 million.

Arcview Market Research and BDS Analytics think that Italy's regulatory climate for marijuana will be less of a barrier over the next few years. By 2022, marijuana spending is projected to reach $156 million.

5. Mexico

Mexico rounds out the top five ranking of the largest international marijuana markets of 2022. The country legalized medical marijuana in June 2017, albeit only for products with THC levels of 1% or lower. Mexican sales of legal marijuana are projected to reach $99 million by 2022 as regulations are relaxed, up from an estimated $14 million this year.

Mexico's tourism secretary made headlines earlier in 2018 when he expressed his opinion that the legalization of marijuana would help curb violence in the country. Although support for full legalization is growing in the country, it's unlikely that Mexico will legalize recreational marijuana within the next four years.

Best-positioned marijuana stocks

Several Canadian marijuana growers appear to be in the best position to profit from these international markets, especially in Germany. I'd put Canopy Growth Corporation (NYSE: CGC), Aurora Cannabis (NASDAQOTH: ACBFF), Aphria (NASDAQOTH: APHQF), Cronos Group (NASDAQ: CRON), and Tilray (NASDAQ: TLRY) at the top of the list.

Canopy Growth generated more than 10% of its total revenue from the German market in its fiscal 2018 fourth quarter. The company's German subsidiary, Spektrum Cannabis, should continue to enjoy solid sales growth. So far, though, Canopy hasn't reported any sales in any of the other four top international marijuana markets of 2022.

European markets, particularly Germany, were even more important to Aurora Cannabis in its latest quarter. The company made more than 14% of total revenue in Europe. Aurora is also building a 1 million-square-foot facility in Denmark to meet increased marijuana demand in the region.

Thanks to its acquisition earlier this year of Nuuvera, Aphria now has operations in Germany with its subsidiary, Nuuvera Deutschland. Aphria also claims one of seven cannabis import licenses in Italy.

Cronos Group signed an exclusive distribution agreement last year with Pohl-Boskamp, a pharmaceutical supplier that serves more than 12,000 pharmacies in Germany as well as operating in other countries. Cronos hasn't announced any significant sales in international markets yet, however.

Tilray became the first Canadian marijuana grower to export medical cannabis to Europe in 2016. The company currently exports to nine countries outside of Canada, including Germany.

But while these five stocks could be in the best position to benefit from the global expansion of marijuana, investors should keep a couple of things in mind. First, all of the companies are ramping up production capacity so rapidly that the increase in global demand might not be enough to sustain the stocks' sky-high valuations. Second, Germany has established regulations for the domestic cultivation of medical cannabis. This should reduce the level of imports from Canada over the next few years.

It's possible that skating to where the puck will be won't be good enough for these top marijuana stocks -- at least not in the near future.

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Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.