[Editor’s Note: This story was previously published in February 2019. It has since been updated and republished.]
The 2018 midterm elections made clear that Americans preferred legalization over the continued prohibition of pot, which should bolster the case for the top marijuana penny stocks.
When residents in California voted for full recreational weed, it boded well not just for marijuana penny stocks, but for electoral momentum in other states and the midterms emphatically proved this point.
In conservative Utah and Missouri, voters approved medical cannabis. But Michigan stood above the rest, becoming the tenth state to legalize recreational marijuana. Significantly, it’s also the first Midwestern state to approve such an initiative.
Previously embattled marijuana stocks like Cronos Group (NASDAQ:CRON), Aurora Cannabis (NYSE:ACB) and Canopy Growth (NYSE:CGC) received a much-needed boost in the markets and really have capitalized on it.
It’s not difficult to understand why many investors believe in weed. Not only does legal marijuana open doors to a previously inaccessible sector, it has proven economic benefits. The commonly cited case study is Colorado. In 2015, one year after green lighting cannabis businesses, the botanical industry nearly hit $1 billion in revenue. In 2016, it breached the threshold, and growth remains strong. Considering that so many states suffer from budget shortfalls, a little green could go a long way.
Plus, the sharp war of words and tariffs in U.S.-China trade relations amps up the case for marijuana penny stocks. Multiple industries, especially agriculture, are hurting. Full legalization provides an easy catalyst for economic activity and growth.
Under this backdrop, gambling on top marijuana penny stocks is more compelling than jumping on any other speculative venture. While risks abound, these four sector players offer considerable upside possibilities.
Auxly Cannabis Group (CBWTF)
A common difficulty in forecasting future price movements for top marijuana penny stocks is separating hype from reality. While almost every sector player advertises significant upside potential, most undercapitalized firms fail to deliver the goods.
I had high hopes for Auxly Cannabis (OTCMKTS:CBWTF) last year due to its unique business structure. Auxly earned bragging rights for becoming the first cannabis streaming company.
Energy and mining companies typically deploy the streaming model to gain full access to an industry’s supply chain without incurring unnecessary risk. In theory, streaming is the way to go for marijuana-related organizations. Even with Canada’s legalization initiative and U.S. electoral momentum, several legal and administrative hurdles exist. Streaming facilitates exposure to a lucrative industry, but with “stop gaps” should things go awry.
Unfortunately, the markets have not been kind to Auxly stock. Since its January opener, shares have lost more than half their equity value.
Nevertheless, I’m still hopeful that Auxly can pull it together. One of the major challenges for the company is that its streaming partners still encounter arguably unreasonable non-cannabis related obstacles. The biggest on the list is securing traditional financing, which stymies expansion efforts.
However, the cannabis industry is making steady steps toward mainstream institutional acceptance. And especially with the U.S.-China trade war heating up, even conservative administrations can’t afford overlooking a key revenue-maker.
MPX Bioceutical (MPXEF)
A common stereotype about legal-cannabis advocates is that they have ulterior motives for their product evangelism. Although that could be the case, one thing is undeniable: many, if not most top marijuana penny stocks focus on botany’s medicinal aspect.
The former two divisions specialize in medical-grade cannabis, while the latter caters to the green lifestyle. Salus is particularly intriguing as it represents a joint venture with Israeli pharmaceutical Panaxia to develop proprietary, smokeless cannabis products.
Another compelling driver for MPXOF stock is its recent partnership with South Africa’s First Growth Holdings. Primarily, this is an attractive deal because South Africa provides ample land and inexpensive labor. Moreover, the country recently legalized weed, so it provides MPX with global revenue synergies. Granted, management must make investments to ensure the higher-quality inventory which western connoisseurs desire. Nevertheless, the cost outlay should be very reasonable compared to other locales.
That’s not to say you should jump on MPXOF stock without worries. The company isn’t what you would consider fundamentally sound. Still, with relatively stable market performance and an impressive growth rate, speculators will want to keep close tabs on MPX.
Supreme Cannabis Company (SPRWF)
When Canada became the first G7 nation to approve recreational weed in October 2018, it actually forged the path forward for marijuana startups. As a result, the lion’s share of marijuana penny stocks is based in Canada.
Eventually, 7ACRES grew to become a gold-standard cannabis facility, offering distinct, high-quality strains.
What makes SPRWF stand out compared to other top marijuana penny stocks is that management is focused on a business-to-business (B2B) strategy. This enables the company to fine-tune its craft, rather than dilute its effectiveness through disparate supply-chain segments.
Over the long run, I think this higher-end focus will distinguish SPRWF stock from the competition. For example, several mainstream retail stores, including Neiman Marcus and Vitamin Shoppe (NYSE:VSI), have pushed for cannabidiol, or CBD, products.
Obviously, that’s a big plus for the broader marijuana industry. But just selling bottom-shelf weed at large volume isn’t going to cut it. Consumers want differentiation, which is what Supreme Cannabis offers. Therefore, SPRWF stock has a chance to positively surprise.
That said, this is a very volatile market. SPRWF stock is a high-risk, high-reward venture, but a very tempting one due to positive industry-related developments.
Cannabis Science (CBIS)
Cannabis Science (OTCMKTS:CBIS) is easily one of the most speculative among top marijuana penny stocks. Immediately, you can tell that through either its ridiculously low share price, or its sub-$100 million market capitalization.
Another giveaway is Cannabis Science’s bold declaration to provide innovative therapies for unmet medical needs, including cancer. As the old saying goes, extraordinary claims require extraordinary evidence.
But this is also where CBIS stock becomes interesting. Management claims that cannabis use dates back thousands of years, making it one of the most tried-and-true medicines. Plus, traditional pharmaceutical companies have become more a marketing machine than a therapy provider. Therefore, the medical-cannabis industry deserves at least some credibility.
Also, I think it’s fair to point out that the opioid crisis has caused mainstream pharmaceuticals to lose credibility. Despite best intentions, the pharmaceutical industry has left a wave of problems in its wake. This could negatively impact generations of Americans. Thus, marijuana penny stocks related to medical cannabis could benefit.
That’s the good news for CBIS stock. The not so great news is that shares continue to struggle.
Conservative investors should probably stay away from Cannabis Science and marijuana penny stocks in general. But if you’re a speculator, CBIS stock appears to have bottomed after a recent bout of volatility. It’s no guarantee of upside, but it might be worth a shot with gambling money.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.