Cannabis Stocks To Buy Now
To begin, cannabis stocks refer to companies that are involved in the cultivation, production, and distribution of cannabis and its derivatives. As cannabis has become increasingly legalized for both medicinal and recreational use in several countries, the industry has experienced rapid growth and garnered significant investor interest.
cannabis stocks to buy now
However, the cannabis industry is still heavily regulated and faces several challenges. These include legal and regulatory hurdles, supply chain issues, and uncertainty surrounding future legalization. In addition, the industry is highly competitive and requires significant investment in research and development to remain competitive.
Starting off, Trulieve Cannabis Corp (TCNNF) is a leading vertically integrated cannabis company, focused on cultivating, producing, and distributing high-quality cannabis products for medical and recreational use in the United States. The company operates in several states, including Florida, California, and Massachusetts, and has a diverse product portfolio, including flowers, edibles, concentrates, and accessories.
Next, Innovative Industrial Properties Inc. (IIPR) is a real estate investment trust (REIT) that focuses on the acquisition, ownership, and management of specialized industrial properties leased to licensed operators in the cannabis industry. The company provides real estate capital solutions to cultivators, processors, and distributors of medical and adult-use cannabis.
However, Zuanic reiterated that his top picks in the US cannabis sector are Curaleaf, Green Thumb Industries, Trulieve, and Cresco Labs.
Canadian cultivators have been even less friendly to shareholders. Since the country legalized marijuana for recreational purposes among adults on Oct. 18, 2018, the eight largest publicly traded Canadian cannabis companies (by revenue) have generated an average return on capital of negative 89.5%.
This consolidation phase ought to provide some much-needed relief on the supply side of the value chain in oversaturated markets like Colorado, Oregon, and the whole of Canada. In short, cannabis wholesale and retail prices could start to bottom by the end of the year.
Which cannabis stocks are the best buys as the industry slims down? Cresco Labs (OTC: CRLBF) and Green Thumb Industries (OTC: GTBIF) are two top-shelf MSOs that have what it takes to survive the industry's early growing pains. Here is why investors might want to buy these two cannabis stocks in February and hold them for the long term.
Even though U.S. cannabis sales are forecast to grow at an exponential rate over the balance of the decade, the challenging financial environment has kept most cannabis companies from reaching their full potential. The long and short of it is that cannabis's Schedule 1 status under the Controlled Substances Act creates a legal liability for financial institutions who might serve businesses selling cannabis and/or cannabis-related products.
This key hurdle was supposed to be overcome by the passage of the SAFE Banking Act late last year. But this landmark bill has so far failed to pass in the Senate, despite public support from top Democrats and Republicans. So, until MSOs have access to mainstream financial services, investors ought to stick to companies that are capable of making it through the industry's early lean years. In effect, the name of the game in cannabis investing right now is survival, pure and simple.
It will also create several important cost-saving synergies, and give the new entity a commercial presence in every major cannabis market in the United States. This transformational deal should cement Cresco's competitive position as a leader in the high-value U.S. cannabis market, making it one of the safer cannabis stocks to own in this challenging operating environment.
Green Thumb is a unicorn of sorts. The MSO is one of only a handful of U.S. cannabis companies currently generating a profit on an annual basis. It also has a fairly strong balance sheet, evinced by its industry-low debt-to-equity ratio of 30.2. Most MSOs, by contrast, sport debt-to-equity ratios well north of 60. Green Thumb thus qualifies as one of the best-managed and most successful cannabis companies operating in the U.S. right now.
Bottom line: Green Thumb has already proven it can weather the slow crawl toward cannabis banking reform, the ongoing price compression across all categories of cannabis products, and the challenges inherent in operating across multiple states with varying rules and regulations. The same simply can't be said for many of its competitors.
George Budwell has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Ayr Wellness, Cresco Labs, Green Thumb Industries, Organigram, and Trulieve Cannabis. The Motley Fool recommends HEXO Corp. and SNDL. The Motley Fool has a disclosure policy.
The final stock on my list is Tilray (TSX:TLRY), a Canada-based marijuana producer. Tilray has reported 14 consecutive quarters of positive adjusted EBITDA (earnings before interest, tax, depreciation, and amortization), which is a rarity among TSX pot stocks.
In the last few years, Tilray completed the acquisitions of SweetWater Brewing and Manitoba Harvest, which should allow it to gain traction in U.S. markets if and when cannabis is legalized at the federal level.
The online investing service they've run for nearly a decade, Motley Fool Stock Advisor Canada, is beating the TSX by 16 percentage points. And right now, they think there are 5 stocks that are better buys.
Despite cannabis stocks having a very challenging year, this quarter has been quite strong. The New Cannabis Ventures Global Cannabis Stock Index is up 31.4% since 9/30, when it posted an all-time closing low:
As we have shared over the past few months, we are optimistic that better returns lie ahead for the cannabis sector. With a powerful rally now underway, we want to warn our readers that investors need to be careful with the securities they select for investment.
At 420 Investor, we focus on 31 stocks and hold just 12 currently in our model portfolios. We are careful to avoid heavily promoted stocks, we look for management teams that are strong and we pay attention to the financials and are always checking the story, too.
To get real-time updates download our free mobile app for Android or Apple devices, like our Facebook page, or follow Alan on Twitter. Share and discover industry news with like-minded people on the largest cannabis investor and entrepreneur group on LinkedIn.
Use the suite of professionally managed NCV Cannabis Stock Indices to monitor the performance of publicly-traded cannabis companies within the day or over longer time-frames. In addition to the comprehensive Global Cannabis Stock Index, we offer a family of indices to track Canadian licensed producers as well as the American Cannabis Operator Index and the Ancillary Cannabis Index.
Perlmutter, a member on the Rules panel a co-sponsor of the MORE Act, has long been a supporter of legalizing cannabis. He's also sponsor of the Secure and Fair Enforcement Banking Act, a cannabis reform bill designed to provide multistate operators access to banking and other financial services. Colorado and Washington became the first states to legalize the recreational use of marijuana in 2012.
"We're confident something is going to move this year," Perlmutter added. "It's much easier for banks and other financial institutions, insurance companies, credit unions, real estate companies to do business with cannabis businesses. It really would allow the industry to start moving forward."
Cowen analyst Jaret Seiberg calls Wednesday's House vote "symbolic" and estimates Democrats would need at least 10 Republican votes in the Senate to overcome a filibuster and pass a cannabis bill. However, he said the House debate could prove insightful with midterm elections looming this November.
In a note last week, Seiberg said, "There is a high probability that Republicans will control the House next year. This debate will be a chance to see how many support legalization even if they object to the MORE Act. This would be especially relevant if the House goes Republican but Democrats manage to keep control of the Senate. It would mean there would be a path for cannabis legislation next year."
Canopy Growth CEO David Klein said federal legalization would be transformative for the Canada-based company in the eyes of investors. Canopy bought MSO Acreage for $3.4 billion in 2019, it sells the Martha Stewart's CBD line in the U.S.. and it acquired U.S. cannabis edible brand Wana in a $298 million deal in October 2021.
Constellation Brands, the spirits and beer giant, owns a 36% stake in Canopy. Stifel analyst Andrew Carter has forecasted that higher margin drinkable cannabis would see accelerated growth in 2022. According to data from Headset, drinkable cannabis currently makes up 1% of the U.S. market.
Industry analysts generally see a murky path forward for all of the cannabis reform bills on Capitol Hill, but but they feel that meaningful steps towards legalization are expected to continue to spark interest in cannabis stocks.
2022 was a terrible year for cannabis stocks. In fact, the 70.4% decline in the New Cannabis Ventures Global Cannabis Stock Index was the worst year ever. It followed a very disappointing year that saw the index decline after peaking at over 4 times the low level from early 2020 and resulted in a decline of 89.5% and a new all-time low. The market in 2023 has lifted a bit, but it is not up as much as the broader stock market and the volume is very light. After dropping a stunning 29% in December, the index is up 4.7% in 2023:
The downturn in stocks has a lot of causes but few predicted it publicly in advance. One of the biggest challenges was that the strong cannabis demand after the pandemic hit in 2020 was a big surprise that helped boost the revenues and the stocks, but the subsequent abatement in demand growth also surprised investors and operators. Additionally, many companies producing cannabis in the U.S. have gotten more efficient, which has resulted in a lot of supply now. Less demand and more supply have pressured prices. The low prices have also been hit by the illicit market activity in some states. 041b061a72