These are the best marijuana stocks to invest in now.
Investing in the cannabis sector in the fall is more advantageous to investors as liquidity and share volume rises. Interest will increase since voters in Arizona, Montana, New Jersey and South Dakota will vote on legalizing and taxing recreational marijuana. As the sector now has 10 cannabis companies in North America with billion-dollar market caps — including in the U.S. — more institutional investors are also buying shares. “This is a growth industry where the top investable market cap is growing 25% to 40% across their geographies,” says Timothy Seymour, founder of Seymour Asset Management and portfolio manager of the Amplify Seymour Cannabis ETF (ticker: CNBS), whose top holding is Canopy Growth Corp. (CGC). “The top multistate operators trade at 11-15 times 2021 EBITDA,” Seymour says. “The addressable market will double in two years and will double again in another two.” Here are six marijuana stocks to buy now.
Innovative Industrial Properties (IIPR)
This real estate investment trust, or REIT, focuses on the regulated U.S. cannabis industry and purchasing specialized industrial real estate assets for the regulated medical-use cannabis industry. The company’s strategy is to continue to acquire medical-use cannabis facilities in the U.S. “They are attractive not only for the capital appreciation potential but for their dividend consistency as they have paid consecutive quarterly dividends to common stockholders since the second quarter of 2017,” says Michael Underhill, chief investment officer of Capital Innovations in Pewaukee, Wisconsin. “The financial model combined with the fact that sales of state-regulated cannabis in the U.S. will grow from $12.4 billion in 2019 to nearly $34 billion in 2025 sets the stage for continued growth and income for investors for several years.” The company reported net income of $13 million and revenue of $24.3 million in the second quarter, a 183% increase from the prior year’s second quarter. IIPR paid a quarterly dividend of $1.06 in July, a 77% increase over the second quarter of 2019’s dividend.
Trulieve Cannabis Corp. (TCNNF)
Investors should plan on holding Trulieve for a longer period of time since the company has more than 50% market share in Florida and is expanding rapidly, says Jason Spatafora, co-founder of marijuanastocks.com and head trader at truetradinggroup.com. Trulieve reported revenue of $216.9 million during the first two quarters of 2020 and opened 15 new locations for a total of 60. The company is considering the possibility of adding locations in new markets once cannabis regulations are finalized or through mergers and acquisitions, says CEO Kim Rivers. The rollback of prohibition will continue in other states, she says. “There has been a lot of positive movement both at the state and federal level toward reforming cannabis laws and legislation such as the SAFE Banking Act, the STATES Act and the MORE Act could unlock additional potential in the market.”
Curaleaf Holdings (CURLF)
Curaleaf, a Wakefield, Massachusetts-based vertically integrated cannabis operator, opened dispensaries in Florida at a rapid rate and has “crushed it in generating revenue with medical marijuana,” Spatafora says. The company operates in 23 states with 93 dispensaries, 22 cultivation sites and more than 30 processing sites. In a recent report, Canada-based Beacon Securities analyst Russell Stanley found that the company is trading at a 48% discount compared to the average U.S. operator. Stanley has a “buy” rating and a price target of $55 for CURLF stock. The stock could also benefit from the company’s third-quarter earnings report in November and other updates to the company’s expansion.
Cresco Labs (CRLBF)
Cresco Labs, a Chicago-based multi-state operator, which has a footprint in several states, is also trading at a discount compared to other operators with footprints in several states, Stanley wrote in a September email. The company will likely focus on growth in Michigan, Massachusetts and Ohio since it has about “$50 million in tenant improvements to deploy,” he wrote. Beacon has an $11.50 price target for CRLBF. The company reported second-quarter revenue of $94.3 million, representing 42% quarter-over-quarter growth, along with 30% sequential revenue growth in all of the U.S. markets aside from Massachusetts and record adjusted earnings before interest, taxes, depreciation and amortization of $16.5 million, or a 419% quarter-over-quarter growth. Cresco Labs operates in nine states, has 15 production facilities, 29 retail licenses and 19 dispensaries.
Green Thumb (GTBIF)
Green Thumb, a Vancouver and Chicago-based national cannabis consumer packaged goods company and retailer, reported revenue of $119.6 million in the second quarter, an increase of 167.5% year over year. Demand did not decline despite the pandemic. The company opened six stores in 2020, operates a manufacturing facility in Toledo, Ohio, and now has a total of 48 stores in the U.S. Green Thumb reported assets of $152.6 million with $83 million in cash and total debt outstanding of $95.2 million, with $0.3 million that is due within 12 months. Investors should add Green Thumb to their portfolio because of its strong second-quarter earnings, Spatafora says. The stock is the most expensive of the large multi-state operators, perhaps based on the quality of the assets and the operational excellence the company has shown leading to profitability earlier than others, Seymour says.
TerrAscend Corp. (TRSSF)
TerrAscend, a New York and Toronto-based cannabis operator, is another good addition to a portfolio, Seymour says. Second quarter net sales rose by 169% year over year to $47.2 million Canadian dollars. The operations in the U.S. generated 90% of consolidated net sales. TerrAscend also reported adjusted EBITDA of $11.4 million Canadian dollars, increasing 131% quarter over quarter, and cash equivalents of $75 million as of June 30. The company operates dispensaries in California, a manufacturer and distributor of hemp-derived products, a Pennsylvania medical marijuana cultivator and a manufacturer of cannabis-infused edibles. The company has focused on only a handful of states that are east of the Mississippi, where a limited license framework puts more of a moat around the business, Seymour says. “Limited license states are more profitable and TerrAscend has a focus on being either the dominant or one of the dominant players in the states they operate in,” he says.
The top marijuana stocks to buy in 2020:
— Innovative Industrial Properties (IIPR)
— Trulieve Cannabis Corp. (TCNNF)
— Curaleaf Holdings (CURLF)
— Cresco Labs (CRLBF)
— Green Thumb (GTBIF)
— TerrAscend Corp. (TRSSF)
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Update 10/14/20: This article was published previously and has been updated with new information.
Correction 10/15/20: An earlier version of this story misidentified the ticker symbol for Green Thumb.