There are always a number of popular trends in the market. Some of those trends shift over time. While many of today’s top trends are based on technology, one big trend has been with marijuana stocks.
From production to drug makers to suppliers and beyond, weed stocks have been in and out of favor with the market several times over the past few years.
Right now, they look to be coming back into favor after a long bull market. There are a number of top pot stocks that could provide market-beating returns on the next rally.
Here are ten that look particularly attractive:
Marijuana Stock #1: Aurora Cannabis (ACB)
Aurora is a one-stop producer and distributor of medical cannabis products. It has worked to become vertically and horizontally integrated in the space. Consequently, Aurora is involved in everything from breeding new strains of weed to producing oils, vaporizers, and other medical cannabis products.
It’s also an industry leader with a growing global footprint. The company has operations in over two dozen countries right now, and is in five continents. That gives this play a global flavor that many other players in the space lack.
As with many companies in the space right now, the overproduction and hype from prior years is still working its way through the system. That’s led to an astounding 85 percent drop in the company’s value in the past year.
However, things are starting to turn around. Shares have now doubled off their market-panic-induced lows. And even with a panic going through the cannabis space as a whole, ACB managed to increase its revenue growth 16 percent year-over-year.
When a sharply-declining stock price meets a company that’s continuing to grow, chances are the stock price is wrong. This looks like a clear winner for the space in the years ahead.
Marijuana Stock #2: Tilray (TLRY)
Tilray is another Canadian-based producer and distributor of medical cannabis. The company has less of a focus on creating medial products, focusing instead of being a pure-play producer of cannabis.
That’s given shares a wild ride over the years. From its IPO in 2018 around $30, shares surged nearly five-fold to $150 before unwinding that huge move—and then some. Today, shares are under $10, for a loss of over two-thirds from its IPO and a loss of over 90 percent from its peak.
However, things are turning a corner. At their bottom, shares were trading for around $2.50, so they’ve already more than tripled off their lows.
Even better, revenue growth rose nearly 120 percent in the past year. And company insiders own over 67 percent of shares. Their long-term interests are likely aligned with anyone who buys shares today.
Besides the high insider ownership, we like the high short interest on the stock as well. As short sellers look to eventually take profits, they’ll have to start buying shares to close. That could create a short squeeze that gives shares a pop in the coming months.
Marijuana Stock #3: Cronos Group (CRON)
Cronos Group is a cannabinoid company, mostly focusing on hemp-related products. That includes hemp-derived supplements and cosmetic products, under the Lord Jones, COVE, and PEACE NATURALS brand. The company also engages in the traditional manufacture and marketing of weed as well.
So far, the company’s efforts to brand cannabis, which has many features of a commodity in terms of its growability and consistency, appears to be paying off. Shares are down 60 percent in the past year, less of a drop than most of the other major names—to say nothing of the penny stocks in the space.
The company’s financials are also looking attractive here, with revenue growth of 180 percent in the past year. The company is also one of the few reporting a profit right now, and with a staggering 3,182 percent profit margin.
This is another marijuana play with high insider interest, with insiders owning 45 percent of the company. It also still has an elevated short interest by traders, and may also be susceptible to a short squeeze sending shares higher in the near future as well.
Marijuana Stock #4: Canopy Growth Corporation (CGC)
With a $6 billion market cap, Canopy Growth Corporation is one of the biggest players in the space right now. Size tends to confer a sense of safety, and that’s also the case here. Shares of this cannabis play are down only 58 percent in the past year.
That’s where the good news ends. Right now, the company doesn’t make a profit. And its revenue growth was just 14 percent in the past year. In some spaces, that’s a great number. But other companies in the marijuana space have been sporting high-double or even triple-digit levels of growth.
We also like the fact that insiders own 41 percent of shares at Canopy. However, there’s a much smaller short interest here compared to other companies, so the odds of a short squeeze leading shares higher are much lower as well.
Still, the company’s portfolio of various cannabis and hemp products under a large number of brands make this look like an attractive play. It may not have the highest return potential from here, but it’s likely to hold up best in a downturn. That makes it an attractive position to hold in any cannabis portfolio.
Marijuana Stock #5: Innovative Industrial Properties (IIPR)
Unlike many other players in this space, Innovative Industrial Properties is a real estate investment trust (REIT). The company is focused on acquiring properties that can be used for cannabis operations.
The company’s business model is heavy on a sale-leaseback transaction. In this kind of model, IIPR finds a cannabis company, buys the property they’re operating on, and then rents the property back following the sale. This kind of transaction provides a cannabis operator with immediate cash from the sale, which can be used to expand operations.
Real estate is traditionally a more conservative investment play. With shares of this marijuana play down just 23 percent in the past year, Innovative Industrial Properties has been one of the best performers in the space. Revenue us up 209 percent in the past year as well, a great growth metric.
Also, as REITs are required to pay out cash flow as dividends, the company is also one of the few firms in the space currently paying an income—and a 4.6 percent dividend at present as well. This is a less volatile, cash-producing play on this beaten down space, and one that makes for an attractive holding for any pot stock portfolio.
Marijuana Stock #6: Aphria (APHA)
Another Canadian-based producer of medical cannabis, Aphria sells a variety of brands such as Solei, Good Supply, and Broken Coast.
Unlike many of the big names so far, this company has yet to break into the growing and lucrative U.S. market. That gives it some huge growth potential, on top of the growth that it’s already shown in the past year with a 90 percent jump in revenue.
With shares down 40 percent in the past year, this is a company that didn’t get as strong a rally during the last bull market for the cannabis space either.
However, once the company expands into the U.S., it will likely see a boost in brand recognition, and the share price should head higher as this off-the-radar play moves onto the radar of a number of traders and investors.
During the last speculative peak for shares, they reached $16, about a four-fold rise from where they trade today. Add in the growth potential here, however, and shares could be in for a far bigger percentage gain.
Marijuana Stock #7: Green Thumb Industries (GTBIF)
Green Thumb Industries currently trades on the pink sheets—or, in other words, not on any major market exchange.
However, this is no penny stock, over the counter (otc) play. This is a $2 billion company that trades around $10 per share. But that still means the share price is still largely driven by retail investors, not professional traders.
It’s another medical and recreational cannabis producer, with a number of brands such as Rhythm, Dogwalkers, and Beboe. The company operates about 40 retail stores, with 96 total locations across 12 markets, all in the United States.
Revenues are growing like a weed, up 267 percent in the past year. And shares are only down a modest 11 percent in that same timeframe. That’s likely the result of not having institutional money flow in and out of shares.
Given that most producers and operators are based out of Canada, this all-American play has plenty of room for international expansion—as well as into other parts of the U.S. market as well. Expect shares to take a big move upwards as they move off the pink sheets in the future and onto one of the major exchanges.
Marijuana Stock #8: GW Pharmaceuticals (GWPH)
GW Pharmaceuticals is focused more on the medical applications of cannabis. The company has a federally-approved drug, Epidiolex, for the treatment of epilepsy. And they’re working on some new projects that could likely allow them to treat other ailments as well.
That gives this company the traits of a biotech play, albeit one with a marijuana twist. That’s reflected in the share price, which are currently just over $120 per share. Even at that price point, shares are still down nearly 30 percent in the past year.
As with many other marijuana plays right now, the company is ramping up production and moving towards profitability. Revenue rose 207 percent in the past year.
Best of all, this company is a great defensive play as well. There’s $500 million in cash on the balance sheet, and just $40 million in debt. The company has ample capital to develop new drugs and medical applications for cannabis and related products in the years ahead.
Marijuana Stock #9: Akerna Corp (KERN)
Akerna Corp offers another unique take in this fast-growing industry. It’s a technology company that provides clients and government entities with data management systems for product tracking. That puts this company in the high-profit-margin data information business and outside the more commodity-like prospects of simply cultivating cannabis.
With many investors interested in the cannabis space on news of further legalizations, it’s not as simple as that. And any cannabis product being used for medicinal purposes, much like a prescription drug, likewise needs to be tracked to determine usage and avoid potential abuse.
That’s why this niche company could become an industry leader. Right now, it’s got a modest $100 million market cap, but that will likely move far higher as legalization and legal usage trends continue to rise.
Shares of Akerna are down about 63 percent in the past year. For this space, that’s a poor return, but far from the worst of the selloff. But with 43 percent of shares owned by insiders and with no debt on the balance sheet, this is an attractive longer-term bet on the space as a whole without picking winners and losers in the cultivation space.
Marijuana Stock #10: Cresco Labs (CRLBF)
Another pink sheet/otc play, this company also trades under $5 per share, making it a penny stock. But with a valuation near $1 billion, it’s still in an attractive space. And shares are well off their 52-week highs near $11.
Cresco is another cultivator and manufacturer of medical cannabis. It has a number of edibles under the Mindy’s brand, as well as vape products, concentrates, gels and the like. The company has 22 dispensaries in eight stages, so it’s a smaller play with room for growth— if it’s not acquired by a bigger competitor.
This is yet another company with a poor share performance in the past year despite some great growth numbers. Cresco saw its revenue rise 217 percent in the past year. While the insider ownership is a bit low and the total debt is a bit high relative to other top buys now, this is another name in the space likely to move higher in time, especially as shares move from trading otc onto a major exchange.
Are marijuana stocks the best place to invest in right now?
It looks that way. Marijuana stocks are an unloved, out-of-favor sector that’s showing a fair amount of interest after a long bull market. That makes them somewhat attractive, so long as you pick an appropriate price point and don’t mind the big swings in the market.
Are pot stocks a good investment?
As with any investment, there are a number of factors. Right now, with valuations beaten down and with long-term sales still well intact, it looks like a better investment than when shares have already had a massive bull market and talking heads are touting the benefits of pot stocks.
Why are pot stocks dropping?
Pot stocks fell because they were a “hot” investment sector for a while as legalization trends played out. Fast returns garnered interest from momentum traders. As soon as everyone who wanted in was in, there was nowhere for these stocks to go but down. Now, that trend is finally showing signs of reversing, and there are plenty of opportunities as a result.