The industry is composed of cultivators and packagers of cannabis plants, dispensaries for medical and recreational marijuana, plus companies that use cannabis byproducts called CBDs, which are non-psychoactive derivatives of cannabis and can be used for a variety of purposes such as inflammation, chronic pain, and depression.
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Marijuana stocks have given cannabis investors nothing but false starts over the past few years. Most recently, there were a plethora of issues facing the industry throughout 2022, including inflation, overproduction, lack of capital, job losses and cratering stock prices.
The Prime Alternative Harvest Index (opens in new tab), which tracks the performance of some of the cannabis industry's most prominent companies, delivered a fifth consecutive calendar year with double-digit negative returns. Perhaps worse: A $10,000 investment in the index at its inception on Dec. 18, 2017, would today be worth around $1,930.
The long-term prognosis for the cannabis industry is good. Ultimately, the following nine picks look like the best marijuana stocks (and funds) to benefit from this ongoing growth and maturation.
Scotts Miracle-Gro (SMG (opens in new tab), $82.47) stock has been on a roller-coaster ride for the past four years. At the end of 2018, it traded south of $60, but by April 2021, it had reached an all-time high of $250, a cumulative total return of nearly 320%.
On the consumer side of cannabis, it has a $150 million six-year convertible note in RIV Capital (CNPOF (opens in new tab)), which represents a 42% stake. In March 2022, RIV Capital acquired Etain Health (opens in new tab), one of New York state's original medical marijuana producers, for $247 million. Etain has one of 10 vertically integrated licenses from the state.
Still, IIPR remains one the best REITs on Wall Street, as well as one of the best marijuana stocks, according to analysts. Piper Sandler analyst Alexander Goldfarb has an Overweight rating (the equivalent of Buy) on IIPR, with a $140 target price, some 55% higher than current levels.
If you're looking for a pure-play cannabis company in the U.S., Massachusetts-based Curaleaf Holdings (CURLF (opens in new tab), $3.82) is one way to go. The firm got its start in New Jersey in 2010, developing one of the first vaporizers to administer a single measured medical marijuana dose.
CURLF operates in 21 states, including New York, New Jersey, Arizona, Florida, Illinois and Massachusetts. It owns and operates 147 dispensaries and 29 cultivation sites. And Curaleaf is becoming one of the world's leading cannabis companies by using science to enhance the customer experience.
A total of 39 states, as well as Washington, D.C., have legalized medical marijuana. Twenty-one states and D.C. have legalized adult-use cannabis. As more states legalize recreational weed, Curaleaf should be able to continue to grow its business organically and through acquisitions.
Cresco Labs (CRLBF (opens in new tab), $1.78), like Curaleaf, is a multi-state operator (MSO) with operations in 10 states, sporting 56 retail licenses, 21 production facilities and 56 operational dispensaries. Its national brands include Cresco, Reserve, Remedi and Mindy's (edibles). On a wholesale basis, its 350 products and more than 5,000 stock-keeping units (SKUs) are sold in more than 1,000 dispensaries across the U.S.
In March 2022, the company announced that it would acquire U.S. and European cannabis cultivator Columbia Care (CCHWF (opens in new tab)) in an all-stock transaction worth $2.0 billion. Shareholders will receive 0.5579 Cresco shares for every share held in Columbia. The transaction is expected to be completed by the end of the first quarter of 2023.
Cresco is one of Wall Street's favorite marijuana stocks. Of the 19 analysts following the stock, 13 give it a Strong Buy, three say it's a Buy, and three have it at Hold. Plus, the average target price of $6.88 implies the stock will more than triple over the next 12 months or so.
More recently, Tilray acquired Montauk Brewing for $35 million in cash and stock. Idyllically located at the tip of Long Island, Montauk is, according to Tilray's announcement, the fastest-growing craft beer brand and number-one craft brewer in New York City. It distributes its beer to more than 6,400 locations in the U.S.
Not forgetting that this is an article about the best marijuana stocks, British American Tobacco invested an additional $5.1 million last March in Canadian cannabis producer OrganiGram Holdings (OGI (opens in new tab)), bringing its stake in the company to 19.5%. The two continue to collaborate on new cannabis-related products.
The ETF tracks the performance of the Solactive Cannabis Index, a collection of companies that generate at least 50% of their revenue, operating income or assets from cannabis. Approximately 62% of the ETF's holdings are Canadian companies.
By comparison, the MJ ETF follows the performance of the Prime Alternative Harvest Index, which in addition to tracking cannabis stocks, also includes cigarette manufacturers such as Altria (MO (opens in new tab)) and a 20.1% weighting in the ETFMG U.S. Alternative Harvest ETF (MJUS (opens in new tab)). As a result of the ETF weighting, the Canadian content in MJ is slightly less than 42%.
With the gradual legalization of marijuana in the United States, there has been increased curiosity in public marijuana companies. While the speed and pervasiveness of new legislation remain unclear, there are already ways to start investing in marijuana stocks should that fit your investment strategy.
As of Nov. 2019, more than 30 states have passed laws that broadly legalize marijuana in some use. Marijuana has been made legal for recreational use in Alaska, California, Colorado, Maine, Massachusetts, Michigan, Nevada, Oregon, Vermont, Washington, and Washington D.C.
There are many different marijuana products ranging from recreational and medicinal goods to various methods of ingestion, as well as a cornucopia of auxiliary services ranging from growth to packaging.
Since 2018, both the New York Stock Exchange and the NASDAQ have had pure cannabis companies listed. The first cannabis company to make its debut on the NASDAQ was the Cronos Group, and the first company to debut on the NYSE was the Canopy Growth Corp. At the time of publication, many cannabis companies are penny stocks, which are primarily traded on over-the-counter (OTC) markets. Penny stocks inspire skepticism and heighten risk perception on the part of investors.
These companies grow cannabis in indoor facilities and greenhouses. They also harvest crops and distribute the finished goods to customers. Some also have brick and mortar shops that distribute marijuana for both medical and recreational purposes.
The bread and butter of the cannabis biotech sector is the research and production of new drugs and goods that make use of cannabinoids, which are the active compounds within cannabis. This sector is expected to continue its growth given all the companies, governments, and universities worldwide that are doing research into this growing field.
Marijuana is a fledgling market carrying a variety of risks that stem from the uneven pace of its legalization. Rather than a nationwide rollout, marijuana is being decriminalized piecemeal, leading to great confusion and the potential for sudden government intervention.
Along with legal risks, there are political concerns when it comes to marijuana. The Trump Administration, for example, often appears to be driven by a desire to reverse course on any gains made by the Obama Administration, placing much of the marijuana industry into a state of uncertainty.
Investors interested in marijuana stocks should also be prepared to do their research. Study the management team, its growth strategy, and its financial status. If the business has yet to be profitable, then study its cash on hand. If the company needs to raise money by affecting its stock offering that may dilute the value of existing stocks. Given the likelihood of a supply glut in Canada, check to see if the companies have deals in place with other nations, such as Germany.
Scotts Miracle-Gro has the distinction of being the leading provider of hydroponics products to marijuana producers. While the company holds a debt of nearly $2 billion, this debt is the result of its expansion efforts and the company has committed to reducing this debt. Scotts also has the advantage of being a successful company outside of the marijuana arena; as much as 90% of its profits come from lawn and garden products.
Given the fledgling nature of the industry, many marijuana stocks have a composite rating of less than 30. The one exception is Innovative Industrial Products, which has a rating of 96 as of Sept. 2019. IIP provides real estate capital to the medical-use cannabis industry.
Marijuana is still a fledgling industry, which means that assumptions about its promise should be balanced with concerns about its risk. For those who take a studious approach, marijuana may prove to be a fruitful investment. For casual observers, marijuana will remain an oddity until it matures into a commodity.
When it comes to investing in the legal marijuana industry, they don't call it the "green rush" for nothing. Many analysts are projecting massive growth for the cannabis industry. New Frontier, a Washington DC-based cannabis research firm, expects total US legal cannabis sales to exceed $57 billion by 2030. 59ce067264