Most of the time, stocks move in the same direction as the broad market … a troubling reality considering the market’s recent lack of traction. There are occasional, story-driven exceptions to that rule of thumb though. Marijuana stocks, fueled by what may well be the biggest legal and medical revolution in years, have already proven they’re blazing their own trail.
Stepping into the right pot stocks at the right time can translate to incredible gains, whether or not that outfit is profitable. (And, most aren’t.)
To that end, here’s a rundown of the market’s top pot stocks for the foreseeable future. They may each require different trading treatment. Some are long-term positions, while others are nothing more than hype-driven trades.
In all cases, though, there’s explosive potential on the table — the legal marijuana industry’s story has just gotten that compelling, as more states seek to legalize it while regulators finally start to see its legitimate medical benefits.
In no certain order…
[Editor’s note: This story was originally published in September 2018. It has since been updated and republished to reflect changes in the marijuana stock market.]
Canopy Growth (CGC)
Of all the marijuana stocks worth a look right now, Canopy Growth (NYSE:CGC) has garnered the most attention of late. Spirits and liquor giant Constellation Brands (NYSE:STZ) upped its stake in the company from 10% to 38%, lending a great deal of credibility to the up-and-coming company. All told, Constellation committed almost another $4 billion to Canopy Growth.
The deal-making didn’t stop there though. Canada’s Centric Health announced just a few days later it had entered a multiyear supply and service agreement with Canopy Growth … a deal that makes Canopy a supplier of medical cannabis to the specialty pharmacy.
There’s a reason other outfits are choosing to work with, and invest in, Canopy.
Cara Therapeutics (CARA)
At first glance Cara Therapeutics (NASDAQ:CARA) looks like any other pharmaceutical company. It’s got a pipeline largely based on a unique molecular science and serves up regular updates on its R&D.
A closer look at Cara’s pipeline though — and specifically, the science behind it — reveals it is indeed a cannabis play. The drug designated as CR701, in preclinical development, leverages the pain-fighting properties of cannabis as a way of combatting neuropathic pain. Ultimately it may serve as an alternative to highly addictive opioids as a means of treating pain, including chronic and post-operation pains.
It’s certainly not a “pure play.” Cara stock has got five drug trials underway, none of which are cannabis-based. An opioid alternative is a huge opportunity though.
GW Pharmaceuticals (GWPH)
GW Pharmaceuticals (NASDAQ:GWPH) is another traditional-looking biopharmaceutical developer. Although it’s also not a pure cannabis play, it’s certainly more focused on the use of cannabis than Cara Therapeutics is.
GW Pharmaceuticals’ claim to fame is Epidiolex … an epilepsy treatment that was the first cannabidiol (CBD) based drug approved by the FDA for that indication. It could launch any day now.
It won’t be cheap. The annual cost of the treatment will run about $32,500 per year, pointing not just to the effectiveness of the Epidiolex, but also to the rarity of the kinds of epilepsy it’s approved to treat; it’s limited to those patients with Dravet Syndrome and Lennox-Gastaut Syndrome. Regardless, Cowen believes annual sales of the drug could exceed $1 billion by 2022.
The first one is always the hardest win. Now that the FDA has given the green light to its first cannabidiol therapy, other cannabis-based drugs in its pipeline have at least slightly-lower hurdle to clear.
Cannabis Sativa (CBDS)
Don’t let the OTC-listing fool you. Cannabis Sativa (OTCMKTS:CBDS) has a stronger foundation and faces a brighter future than many of its exchange-listed peers and rivals.
Cannabis Sativa, in simplest terms, sells a variety of hemp-based products. Its lineup includes several CBD and THC infused goods, sold through a variety of different venues. Presto Doctor, Wild Earth Naturals, White Rabbit and hi Dispensaries are just some of the names operating under the Cannabis Sativa umbrella.
That being said, don’t misread what Cannabis Sativa is. It’s still booking heavy losses, and would only qualify as a speculative-grade play. Its best shot at long-term viability is a sweeping change in North America’s views on, and laws restricting, the use of marijuana. That change may be underway, but it remains to be seen if it’s moving fast enough.
Tilray (NASDAQ:TLRY) is another one of the names that’s been in the spotlight of late, and for good reason. The company’s fiscal Q2 report posted last month — its first-ever quarterly report as a publicly traded company — indicated revenues had nearly doubled year-over-year.
The company is still losing money, to be clear. In fact, the net loss grew from $2.4 million in the second quarter of last year to a loss of $12.8 million last quarter. Investors weren’t deterred though, knowing the company is a work-in-progress.
They’re not wrong to be optimistic about future growth. Tilray Canada, a subsidiary of Tilray, was recently chosen by Nova Scotia Liquor Corporation to be a supplier of the adult-use cannabis products it began selling on Oct. 17, and just last week the Canadian company announced that Prince Edward Island Cannabis Management Corp. had also tapped Tilray for adult-use cannabis products. It’s quickly becoming a go-to supplier.
Insys Therapeutics (INSY)
Insys Therapeutics (NASDAQ:INSY) is yet another pharmaceutical developer aiming to harness the medical benefits of marijuana. It has already got two of them on the market. Sybsys is a sublingual spray approved for the treatment of pain in cancer patients, and Syndros is an oral solution that treats people suffering an HIV-related loss of appetites or nausea and vomiting often resulting from anti-cancer medications. Several more are in the works.
Perhaps just as important is the fact that Insys is attracting its fair share of developmental partners, too. The company announced a week ago that it would be expanding its collaboration with UC San Diego’s Center for Medicinal Cannabis Research to explore the use of cannabidiol as a treatment for psychosis.
22nd Century Group (XXII)
That’s not all 22nd Century Group is, though. Investors who look closely will see that this company controls several patents related to cannabis plants, which in turn gives the company a hand in the cannabinoid business. Akin to its low-nicotine tobacco plant, it’s been working on the development of a no-THC cannabis plant.
It has not done a great deal with that technology yet. But, with years of work on low-nicotine tobacco about to bear fruit (mandates for low-nicotine tobacco are now being discussed), 22nd Century Group may soon be able to put more focus on its next big evolution.
ETFMG Alternative Harvest ETF (MJ)
Can’t decide which of these marijuana stocks to buy? You don’t have to. Own a piece of all of them via the ETFMG Alternative Harvest ETF (NYSEARCA:MJ). Four of its top five holdings earned a spot on the list you’re reading right now, collectively comprising about one-third of the fund’s portfolio alone.
Where the ETFMG Alternative Harvest ETF really stands out, however, is its capacity to offer U.S. investors exposure to several Canadian cannabis stocks that may be difficult to purchase outside of that country.
It matters. Although the United States is increasingly open-minded and educated about the use marijuana, Canada has proven far more liberal and progressive. It’s easier for small start-ups to do well there. MJ allows non-Canadians an opportunity to invest in that more-fostered growth.
Cronos Group (CRON)
Last but not least, add Cronos Group (NASDAQ:CRON) to your list of marijuana stocks to mull. Cronos is a little of everything. Not unlike the ETFMG Alternative Harvest ETF, Cronos Group owns a stake — in some cases a 100% stake — in a handful of cannabis-related organizations.
Unlike the ETFMG Alternative Harvest ETF, Cronos isn’t a mere passive holder. It’s also an incubator of sorts, and will leverage its properties to create new growth opportunities.
Case in point: Last month the company inked deals that make it a supplier to several Canadian retail distributors of recreational cannabis. Shortly before that, Cura also tapped Cronos as a supplier.
The company has been on the receiving end of some tough criticisms of late and is now being targeted by attorneys hoping to build a class-action investors lawsuit. Those claims are often non-starters though. While they may push and pull the stock in the short run, often times news-prompted tumbles turn into opportunities.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter, at @jbrumley.