• Cara Therapeutics (CARA). How can you ignore a cannabis company posting quarter-over-quarter sales up a whopping 2,384%? No, there’s no decimal missing in that. This biotech company’s goal is better pain management, offering a quality of cannabis and CBD that advocates swear by. Cara has the smallest market cap of the stocks profiled in this article, and it boasts the largest returns. Investors might find a bargain buy here as shares currently trade near a 52-week low in the $12 per share range, down from the April 5, 2021, high of over $28 per share after news came out that one of its leading offerings showed poorer results in testing than expected.
To help you choose the best cannabis investments, we take a closer look at 14 stocks and funds, as well as a few less dank offerings it’s perhaps better to avoid. There are both pure plays—firms that specialize exclusively in bud—and large-cap names that also have some pot industry exposure.
The Best Pure Play Cannabis Stocks
As always, you should ensure any potential investment choice aligns with your personal goals and risk tolerance. And please note, stocks and funds are listed below in alphabetical order only, by category.
• Innovative Industrial Properties Inc. (IIPR). Cannabis has to grow somewhere, and that’s what Innovative Industrial Properties is betting on. This REIT (or real estate investment trust) invests in the industrial side of the cannabis industry: greenhouses and other industrial facilities that support cultivation and distribution. With a dividend yield of 2.93%, it’s attractive from an income perspective and a P/E ratio of 54 says that investors could enjoy dividends in anticipation of growth down the line. For those looking to diversify holdings into real estate, this could be an interesting portfolio addition, especially considering that this REIT has generated a three-year return of over 440%.
• Amplify Seymour Cannabis ETF (CNBS). At the end of Q1 2021, this strictly cannabis ETF posted year-over-year returns of (gasp) 233%, but like most of this sector’s ETFs, it’s short on history—inception date: 2019—which gives investors little to go on for historical performance. However, with a low NAV in the $20 per share range, inventors can get a taste for the industry without risking a positive drug test at the workplace. Like other ETFs in the cannabis sector, the expense ratio is high (0.75%), but it does offer a rare dividend, currently With the growing acceptance of cannabis among American consumers and their elected representatives, this edgy asset class offers your portfolio an excellent source of growth. According to data from Leafly, an online marijuana marketplace, legal U.S. cannabis sales—medicinal and recreational—increased 71% in 2020, to a total of $18.3 billion..101 per share.
Healthcare is a growing industry, and cannabis investors may benefit from getting acquainted with it.
GrowGeneration (NASDAQ:GRWG) is another ancillary provider and the largest specialty retail chain focused on the cannabis market. The booming U.S. cannabis industry has created fast-growing demand for hydroponics supplies, which are used to grow plants in liquid nutrient solutions without soil and for organic gardening.
Scientific advances are opening up new possibilities for the treatment and prevention of diseases.
Scotts Miracle-Gro (NYSE:SMG) is another company benefiting from the same trends that have boosted GrowGeneration’s sales. The company’s Hawthorne Gardening subsidiary ranks as a leading supplier of hydroponic gardening products to the cannabis industry.
U.S. cannabis companies can’t easily secure capital from banks or financial institutions since marijuana remains illegal at the federal level. Innovative Industrial Properties (NYSE:IIPR) helps to solve that cash shortage for growing marijuana companies by buying properties owned by U.S. medical cannabis operators and leasing those same properties back to them. The property sale to IIP provides the cannabis operator with much-needed cash, and the lease agreements create a steady revenue stream for IIP.
But, as in any nascent industry, there are also plenty of investment risks. Whether you're a first-time investor or a seasoned veteran, it pays to understand how this industry works. This guide will get you up to speed quickly and includes our picks for the top marijuana stocks.
However, not all cannabis companies have fared well in the pandemic. Recreational cannabis retailers in tourist destinations such as Las Vegas saw their customer traffic dwindle, causing some of these dispensaries to start focusing on home delivery. In the medical segment, people delayed doctor visits, causing new patient starts to drop. Biotech companies experienced logistical challenges that affected sales and research progress.
Momentum investing is a factor-based investing strategy in which you invest in a stock whose price has risen faster than the market as a whole. Momentum investors believe that stocks which have outperformed the market will often continue to do so, because the factors that caused them to outperform will not suddenly disappear. In addition, other investors, seeking to benefit from the stock’s outperformance, will often purchase the stock, further bidding its price higher and pushing the stock higher still. These are the stocks that had the highest total return over the last 12 months.
Here are the top 5 marijuana stocks with the best value, the fastest growth, and the most momentum.
These are the marijuana stocks with the highest year-over-year (YOY) sales growth for the most recent quarter. Rising sales can help investors identify companies that are able to grow revenue organically or through other means, and find growing companies that have not yet reached profitability. In addition, earnings per share can be significantly influenced by accounting factors that may not reflect the overall strength of the business. However, sales growth can also be potentially misleading about the strength of a business, because growing sales on money-losing businesses can be harmful if the company has no plan to reach profitability.
Fastest Growing Marijuana Stocks
Marijuana stocks, as represented by the ETFMG Alternative Harvest ETF (MJ), have slightly outperformed the broader market. MJ has provided a total return of 36.9% over the past 12 months, above the Russell 1000 index’s total return of 35.0%. These market performance numbers and all statistics in the tables below are as of Aug. 23, 2021.
The marijuana industry is made up of companies that either support or are engaged in the research, development, distribution, and sale of medical and recreational marijuana. Cannabis has begun to gain wider acceptance and has been legalized in a growing number of nations, states, and other jurisdictions for recreational, medicinal, and other uses. Some of the biggest companies in the marijuana industry include Canopy Growth Corp. (CGC), Cronos Group Inc. (CRON), and Tilray Inc. (TLRY). Many big marijuana companies have continued to post sizable net losses as they focus on investing in equipment to speed up revenue growth.
These are the marijuana stocks with the lowest 12-month trailing price-to-sales (P/S) ratio. For companies in the early stages of development or industries suffering from major shocks, this can be substituted as a rough measure of a business’s value. A business with higher sales could eventually produce more profit when it achieves, or returns to, profitability. The P/S ratio shows how much you’re paying for the stock for each dollar of sales generated.
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