When we think “marijuana stock,” we usually think of a company that grows marijuana or makes cannabis-infused products to eat, whether for recreational or medical purposes.

But there’s another possibility, and that’s a pot stock that makes beverages.

And our top pick in this new marijuana sector is Constellation Brands Inc. (NYSE: STZ).

Constellation has long been a Money Morning top beverage stock. It’s a Fortune 500 company whose Corona beer is a well-known refreshment.

Now, thanks to a crucial acquisition, Constellation is sitting pretty at the marijuana party.

It bought a stake in Canopy Growth Corp. (NYSE: CGC), the largest marijuana grower in Canada, for $191 million in 2018.

Canopy’s business has long been focused on pot for medical use.

But the acquisition is planned to move Constellation into marijuana-infused beverages, which are being developed now.

The first set of laws to legalize recreational weed passed in Canada during June. The Canadian government plans to make marijuana beverages legal soon too.

The spirits industry has fervently opposed legal marijuana for a long time.

But instead of opposing the inevitable, Constellation plans to make money with it.

Constellation and Canopy combined are strongly positioned to benefit from legalized marijuana.

Here’s why…

The “Green Rush” Train Has Begun
You’ve almost certainly heard of the California Gold Rush. Thousands of hopefuls went to the gold fields in California to strike it rich.

Today, there’s a “Green Rush,” as hopefuls turn toward promising marijuana stocks.

Canopy has been a top Money Morning pick since Keith Fitz-Gerald, our Chief Investment Strategist, advised purchasing it last November.

The stock rose a whopping 95% from November to June 2018, versus the S&P 500’s 9% return.

But in June, the stock hit a bump, falling to $24 from $36 in a few weeks.

That’s not unusual for fast-rising stocks in innovative industries.

Fast growth can be followed by pullbacks. But Canopy is still a good stock. Of the eight analysts who follow it, FactSet shows that five rate it a “Buy.”

Many folks think it’s the blue chip of marijuana stocks, since it was the first marijuana stock to trade on the New York Stock Exchange.

But we think the choice of Constellation Brands is even better. It’s a blue chip as well, and it is poised to benefit from marijuana legalization even more than Canopy.

Constellation’s market capitalization is currently $41 billion. It has grown its earnings per share (EPS) steadily since 2013. For the most recent year, management hiked the dividend an impressive 29%.

All this before the benefits of the “Green Rush” start to flow in.

Constellation is a stable business, worth more than $7.5 billion in sales per year. It has a fixed infrastructure and multiple business relationships to leverage.

It’s true that Constellation shares fell a bit after the most recent earnings report. The major contributor to an earnings season some termed disappointing was a big jump in spending for marketing and for increasing production capacity in Mexico.

Well, marketing and growing capacity for popular brands is a good reason to spend.

There’s one more thing…

Remember that Constellation has the potential for great new products to add to its current lineup. It has the first-mover advantage in marijuana beverages just as the market takes off.

Source: Money Morning