For the past few years, the cannabis sector has been mostly in a bear market. Lately, though, things have been picking up. The supply-demand dynamics have gotten better in Canada and the political situation is turning more favorable in the United States. There are also encouraging developments in healthcare applications for cannabis. In fact, there are some very interesting medical marijuana stocks available right now.
One reason for this is that the academic research surrounding marijuana continues to show promise. It looks like cannabis has a wide range of applications, from treating diseases to helping with pain management.
Next, the medical sector is also less prone to competitive pressures, especially when compared to the consumer market. That’s because the regulations are a barrier to entry. Likewise, the considerable time spent researching new treatments makes it hard for competitors to break into the industry.
So, what are some of the best medical marijuana stocks to consider right now? Well, let’s take a look:
- GW Pharmaceuticals (NASDAQ:GWPH)
- Charlotte’s Web (OTCMKTS:CWBHF)
- AbbVie (NYSE:ABBV)
- Aurora Cannabis (NYSE:ACB)
- Cronos Group (NASDAQ:CRON)
- Harvest Health & Recreation (OTCMKTS:HRVSF)
- Aleafia Health (OTCMKTS:ALEAF)
Medical Marijuana Stocks to Buy: GW Pharmaceuticals (GWPH)
When it comes to medical marijuana stocks, GW Pharmaceuticals is one of the pioneers of the industry. The company got its start back in 1998. Since then, it has been a major innovator.
However, when the company went public in 2013, there was not much interest. But this was temporary. Soon enough, GWPH stock become red hot.
As of now, the company’s lead cannabinoid product is Epidiolex, which targets seizures caused by Lennox-Gastaut syndrome, Dravet syndrome and other conditions. The drug hit the markets in late 2018. GWPH has since been seeking regulatory approval for other indications like Rett syndrome, although these efforts have been put on hold due to Covid-19.
In the latest quarter, revenues shot up by 51% to $137 million, up from $91 million the previous year. Additionally, net loss was $12.2 million, compared to $13.8 million in 2019. The company also announced its pivotal Phase 3 program for nabiximols, which is being developed for multiple sclerosis (MS). If approved, this will certainly be a nice driver for growth in the coming years.
Charlotte’s Web (CWBHF)
Next on my list of medical marijuana stocks is Charlotte’s Web, a company that develops wellness products with CBD oil (cannabidiol) derived from hemp. CWBHF is vertically integrated so as to provide better control over the quality. As for manufacturing, it is FDA-registered and received NCF International’s “Good Manufacturing Practices” mark of approval.
The company also has wide distribution. There are about 22,000 retail locations that carry its products, including Harmony Hemp and CBD Clinic.
Even though the pandemic has weighed on growth, Charlotte’s Web has been offsetting some of this with aggressive investments in ecommerce and direct-to-consumer selling. This business jumped by nearly 28% year-over-year (YOY) in the latest quarter.
Finally, with the election of Joe Biden, CWBHF stock might get a boost on the regulatory front as well. That is, there may be more opportunity to sell CBD products because of the new administration.
Many of the medical marijuana stocks out there are relatively small. That often means that the volatility can be severe.
So, if you are looking for a more stable way to get exposure to the burgeoning cannabis market, you should consider AbbVie. Of course, ABBV is a traditional pharma company with treatments that span oncology, immunology, neuroscience and so on. But the company also has Marinol.
Marinol is an FDA-approved drug that uses a dronabinol, a synthetic substitute for THC (tetrahydrocannabinol). THC is a natural part of the marijuana plant which has proven effective to treat vomiting from chemotherapy as well as loss of appetite in AIDS patients.
Now, this drug is not a big part of ABBV stock’s business. But then again, the experience with this type of medical innovation could lead to others, especially as restrictions lift.
Aurora Cannabis (ACB)
Aurora Cannabis has a substantial medical business, with close to 90,000 patients. The company also maintains a solid global presence, such as in countries like Germany.
Not long ago, though, the prospects for ACB stock looked bleak. The company was running low on cash and the overall business was lagging.
Yet, with the recent bull move in medical marijuana stocks, Aurora got aggressive with its fundraising. Soon enough, it was able to raise a cool $150 million.
The underlying business is also showing signs of improvement. In fact, in the recent U.S. election, there were various states that passed favorable cannabis laws. This should help increase sales next year.
Additionally, Miguel Martin — the company’s new CEO — is a proven leader in the consumer products space. Martin’s focus on discipline should help propel Aurora to profitability. In the latest earnings call, he noted, “We intend to demonstrate that Aurora can be a profitable, growth-oriented leader in the global cannabinoid market.”
Cronos is one of the best-capitalized medical marijuana stocks out there right now. As it stands, the company has roughly $1.1 billion in cash and equivalents in the bank. And when you exclude this from the market capitalization, the value of the remaining equity is only about $1.8 billion. That actually makes CRON stock one of the more interesting value plays in the cannabis sector.
Admittedly, a large part of the business does come from the consumer segment. Note that the company’s largest equity holder is Altria (NYSE:MO), which has been a key strategic partner.
But Cronos’ medical business is also important. The company has a line of wellness and health products under its PeaceNaturals brand. It also has a variety of CBD topicals and injectables, like Lord Jones.
Finally, Cronos has been ramping up its partnerships in the medical area. For instance, the company made a notable deal with Gingko Bioworks, an innovator in biological manufacturing of cannabis strains. Many of the products that come out of this partnership will prove quite effective for medical use.
Harvest Health & Recreation (HRVSF)
Harvest Health & Recreation is a vertically integrated cannabis company, with 38 retail locations and 11 cultivation and processing facilities. It is also one of the largest operators in Arizona, one of the larger markets for medical cannabis. In other words, Harvest Health & Recreation has extensive experience selling medical marijuana and dealing with state regulations.
What’s more, Arizona voters just passed a ballot measure to legalize recreational marijuana during the recent election. As such, the growth prospects look good for HRVSF stock.
In the meantime, though, the company’s management has been focused on building a solid organization. Harvest Health & Recreation is adjusted EBITDA positive and is on track to generate over $225 million in revenues this year (Page 19).
Finally, this pick of the medical marijuana stocks has a growing presence in states like Florida, Maryland and Pennsylvania — all of which have positive trends for the cannabis market.
Aleafia Health (ALEAF)
Last on my list of medical marijuana stocks is Aleafia Health, a nationwide network of medical clinics across Canada. In addition to its clinical reach, the company also an extensive cultivation system, supply chain, R&D capabilities and distribution facilities.
One of the keys to this company’s success has been its low-cost model. Last year, the production cost from its outdoor facilities — which meet strict regulatory requirements — was about 10 cents per gram.
Another advantage for ALEAF stock is its strong financial position. The company possesses about $43 million in the bank and has maintained positive adjusted EBITDA for three of the past four quarters.
Moreover, the company is gearing up for a pick up in growth. For example, it has completed major facility buildouts — like the expansion of its outdoor site — which will greatly increase capacity.
On the date of publication, Tom Taulli did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Tom Taulli (@ttaulli) is the author of various books on investing and technology, including Artificial Intelligence Basics, High-Profit IPO Strategies and All About Short Selling. He is also the founder of WebIPO, which was one of the first platforms for public offerings during the 1990s.
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