On the campaign trail, President-elect Donald Trump supported a recreational marijuana ballot initiative in Florida and said he supports reforming banking laws for state-legal companies and rescheduling the drug federally.
But marijuana investors have learned to be wary of federal reform. They’ve seen valuations plunge since the initial hype around legal marijuana about a decade ago.
Still, there’s an argument to be made that the industry’s troubles — federal illegality, high taxes, competition from the illegal market, limited access to the banking system — have helped cull some of the weaker companies. That could mean savvy stock pickers might be able to find bargains at current prices.
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Taxes are arguably the biggest headwind facing state-legal cannabis companies in the U.S.
Because they are “trafficking” in a Schedule 1 substance, marijuana companies are prohibited by IRS Code Section 280E from taking certain tax deductions and credits that federally legal businesses enjoy. That means the effective tax rate for marijuana retailers can exceed 70%. A downgrade to Schedule 3 would remove that tax headache and pave the way for more institutional investment and traditional banking services.
The Drug Enforcement Administration is in the process of considering moving cannabis to the less restrictive classification from its current status, which is on par with drugs such as heroin.
“We expect the rescheduling of cannabis to Schedule 3, which will be the first major federal reform for cannabis in 50 years,” says Jordan Tritt, CEO of The Panther Group, a cannabis merchant bank and advisory firm. “This will provide cover to the industry and signal to financial and strategic investors that cannabis is now a viable industry.”
Rescheduling will mean increased cash flow, helping boost valuations and better positioning companies for expansion, Tritt says.
With rescheduling a distinct possibility in 2025, here’s a look at seven top cannabis stocks:
| Stock | Market Cap |
| Tilray Brands Inc. (ticker: TLRY) | $1.1 billion |
| Village Farms International Inc. (VFF) | $88 million |
| Advanced Flower Capital Inc. (AFCG) | $199 million |
| Chicago Atlantic Real Estate Finance Inc. (REFI) | $312 million |
| Green Thumb Industries Inc. (OTC: GTBIF) | $1.8 billion |
| Innovative Industrial Properties Inc. (IIPR) | $2.1 billion |
| Cresco Labs Inc. (OTC: CRLBF) | $318 million |
Tilray Brands Inc. (TLRY)
Because of U.S. federal illegality, American companies that grow, process or sell marijuana domestically can’t list on big U.S. exchanges. That’s not the case for companies based in Canada, where the drug is federally legal, nor for U.S. companies that don’t earn money from plant-touching businesses in the U.S. Tilray falls into the latter category and has secured a coveted Nasdaq listing.
Tritt likes Tilray’s diversified global portfolio of businesses in medical adult-use cannabis, beverages, spirits, wellness products and consumer-connected lifestyle brands.
“The core business of Tilray is cannabis, and it is the No. 1 cannabis business in Canada, the leading medical cannabis business across Europe and the top branded hemp business in North America,” Tritt says. “The company has lately been very active in acquiring other industry players to expand its presence, and the strategy seems to be paying off.”
Village Farms International Inc. (VFF)
This company also benefits from its focus on the international cannabis market, Tritt says.
Village Farms targets nascent, legal cannabis and CBD opportunities internationally that it thinks have potential.
It exports medical cannabis from Canada to Germany, the U.K., Israel and Australia and has export contracts to new countries and customers in the Asia-Pacific and European regions.
The company’s Canadian subsidiary is one of the biggest cannabis operations globally, a low-cost greenhouse producer and a top-selling brand in Canada.
Village Farms’ international medicinal cannabis sales more than doubled in the third quarter.
Advanced Flower Capital Inc. (AFCG)
This financial services company specializes in loans to state-licensed cannabis operators.
Its direct and bridge loans, ranging from $10 million to $100 million, are “crucial for an industry growing quickly but facing severe banking and financing issues,” Tritt says.
The company says it is the first Nasdaq-listed commercial mortgage real estate investment trust, or mREIT, that provides institutional loans to state-compliant cannabis operators in the U.S.
Its portfolio includes 14 cannabis loans across 15 states and is diversified across operators, geographies and asset types, the company says.
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Chicago Atlantic Real Estate Finance Inc. (REFI)
Here’s another commercial mREIT involved with state-licensed cannabis operators in in the U.S.
Because it is a REIT, the company distributes at least 90% of its taxable income to stockholders, making it a great option for investors looking for a regular income, Tritt says. Its forward dividend yield was 11.9% as of press time.
“Demand for financing in the cannabis market is expected to continue to rise due to recent and future state legalization of cannabis for medical and adult use as well as increased consumer adoption, with both trends requiring significant capital expenditures by operators,” the company says on its website.
Green Thumb Industries Inc. (OTC: GTBIF)
Large marijuana companies that operate in more than one U.S. state where the drug is legal are known as multistate operators, or MSOs.
Green Thumb Industries is an MSO that has more than 100 dispensaries and operations in 14 U.S. markets. The company is one of the few cannabis stocks that has been consistently profitable.
Vertical integration means that Green Thumb sells marijuana products that it cultivates, processes and manufactures itself, rather than buying weed wholesale to mark up and sell in dispensaries.
As with other vertically integrated companies on this list, the business model gives Green Thumb more control over how its products are grown and made, and that means it doesn’t have to pay a premium to buy marijuana from others. It also creates operational efficiencies.
When you look at adjusted operating income for the most recent quarter, the company comes in on top of a New Cannabis Ventures tracker, with $42.6 million. Its sales weren’t too shabby either, at $286.9 million, representing 4% annual growth.
Innovative Industrial Properties Inc. (IIPR)
Adjusted operating income is a metric that can be helpful when comparing cannabis companies. This method adjusts reported income for changes in the fair value of biological assets and often excludes one-time items.
This real estate investment trust, or REIT, comes in at No. 2 on the New Cannabis Ventures ranking, with adjusted operating income of $42 million, slightly behind Green Thumb.
Innovative Industrial Properties says it is the first publicly traded company on the New York Stock Exchange to provide real estate capital to the regulated cannabis industry.
The company acquires cannabis real estate locations and then leases them back to cannabis operators. That offers operators an alternative to specialty cannabis industry loans, which can be expensive.
Cresco Labs Inc. (OTC: CRLBF)
This vertically integrated marijuana company has a presence in eight states. It ranks third in adjusted operating income in the New Cannabis Ventures ranking, posting $26.3 million in its most recent quarter.
Its strategy depends on consumer brands and retail operations through its Sunnyside dispensaries. The company has also been investing in core growth states and exploring merger and acquisition possibilities.
The increased cash flow that could come from marijuana rescheduling could increase acquisition activity in the general industry, Tritt says.
“M&A will increase significantly over 2024, with the improved cash flow of top performers looking to acquire smaller single-state operators with positive cash flow or distressed assets at major discounts,” he says.
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7 Best Marijuana Stocks to Buy in 2025 originally appeared on usnews.com
Update 12/20/24: This story was previously published at an earlier date and has been updated with new information.
