Canadian cannabis stocks have quietly outperformed the Canadian stock market over the last month and capital continue to flow into these companies says Michael Berger, Associate Editor of MoneyShow.com, who highlights two Canadian cannabis stocks that he views as long-term investments.

With Canada on the verge of legalizing recreational cannabis, more capital has entered the industry.

One the most significant developments in 2015 was Justin Trudeau’s and the Liberal Party’s success in the Canadian general election. The outcome was a huge victory for the cannabis industry and a catalyst for Canadian cannabis stocks. Justin Trudeau and the Liberal Party have said they will make marijuana legalization a priority.

In 2014, Canada created a Federal medical cannabis program called Marihuana for Medical Purposes Regulations (MMPR). The program has enabled the country to move from a system that allowed patients to buy from a single government‐approved grower or to either grow their own or purchase from non‐commercial growers, to one of multiple commercial providers.

Health Canada estimates that there are roughly 30,000-40,000 qualified patients in Canada.

Industry Leader Raises $11+ Million

The potential for legal recreational cannabis has helped stocks rally and has caused more capital to flow into the industry.

On Monday, Canopy Growth Corporation (CGC.V) (TWMJF) closed its previously announced short form prospectus offering on a bought deal basis including the exercise in full of the underwriters' over-allotment option.

Canopy Growth raised $11,505,750 after 5,002,500 common shares were sold at $2.30 per share. The offering was underwritten by a syndicate led by Dundee Securities Ltd. and including GMP Securities L.P.

Expanding and Executing

Canopy plans to use the proceeds to expand its cannabis oil extraction capacity at Tweed Inc., to add grow rooms, to invest in information technology and to develop international business opportunities.

The international development expenditures will relate to developing local strategic partnerships, entering new regulated markets, conducting medical research, and investing directly in such partnerships.

The balance of the net proceeds will be used for general working capital purposes including salaries, general maintenance, utilities, costs of compliance with Health Canada and other regulatory compliance, and for the Company's costs associated with client acquisition.

A Burgeoning Industry

The Canadian cannabis industry has experienced unprecedented growth during the last two years and we believe this to be just the tip of the iceberg.

Earlier this month, OrganiGram Holdings Inc. (OGI.V) (OGRMF) released a preliminary review of its second-quarter results and reported more than $55,000 in net income. OrganiGram also said that it achieved positive year-to-date EBITDA and cash flow from operations during the quarter.

OrganiGram is a licensed medical marijuana producer in Canada which operates through its subsidiary OrganiGram Inc. The company’s facility is located in Moncton, New Brunswick and is regulated by the Marihuana for Medical Purposes Regulations.

First Inning of Multi-Decade Growth Cycle

During 2016, CGC.V has fallen 14.1% while OGI.V has rallied 14.8%. OgraniGram’s US traded symbol, OGRMF, is up more than 31% so far in 2016 while Canopy’s US symbol, TWMJF, has fallen 5.6%.

OGI.V has rallied 50% during the last month, and the primary driver being the company’s favorable preliminary earnings report.

We believe that Canopy Growth and OrganiGram are the two industry leaders in Canada and we see upside to current levels. Once Prime Minister Trudeau and the Liberal Party legalize recreational cannabis, we expect see both Canopy Growth and OrganiGram rally more than 100%.

Although this number may seem high, both companies saw its share price rally more than 100% after Trudeau was elected in October.