Marijuana stocks are enjoying a bit of a renaissance these days. With Joe Biden in the White House and Democrats taking the Senate, bullish investors are hopeful that greener days are ahead. That’s why immediately after Joe Biden’s victory, we saw marijuana stocks gaining a lot of ground.
Nevertheless, some are wondering is whether this is another false dawn. When Canada legalized cannabis on a federal level, many believed it was a watershed moment for the Cannabis industry. Consequently, several investors rushed in, leading to outsized valuations.
After some essential bubble-bursting, companies are now attractively valued. The post-election momentum caused a momentary blip, and more attractive valuations will return soon.
But I digress. Picking quality stocks is never an easy task, especially when you are focusing on a sector that is under the hammer. That’s why you need to separate the wheat from the chaff.
On this list, we include companies that have a strong track record of growth. Stocks will always ebb and flow, depending on the news. However, the companies with excellent performance metrics will continue to do well, regardless of the wider industry’s external circumstances.
So, without further ado, here are three marijuana stocks that will push your returns higher:
Marijuana Stocks To Buy: GW Pharmaceuticals (GWPH)
GWPH stock soared 46% after Jazz Pharmaceuticals (NASDAQ:JAZZ) agreed to a $7.2 billion acquisition of the CBD biopharma in a cash-and-stock deal expected to close in the second quarter.
GW Pharmaceuticals is a biopharmaceutical company developing and commercializing novel therapeutics from its proprietary cannabinoid product platform, Epidiolex, in a broad range of disease areas.
Epidiolex is a liquid formulation of pure plant-derived cannabidiol used to treat several rare childhood-onset epilepsy disorders. The company also develops and markets Sativex, an oromucosal spray for spasticity treatment due to multiple sclerosis.
GWPH is a very consistent performer, having exceeded analyst expectations in the past six quarters consecutively. It will boost profits of its new parent with double-digit revenue growth of 41% next year.
Valuation is also a plus for this one. Recently, many pure-plays in the cannabis space have skyrocketed on the back of positive news. Valuations are now outsized. However, GWPH stock trades at 13.5 times price-to-sales. Not too bad, considering the recent blockbuster merger.
Aphria does not have exposure to the U.S. CBD or THC markets due to federal prohibition constraints. Nonetheless, now that the Democrats are in power, we can see headway on that end.
Aphria operates through retail and wholesale channels in Canada and internationally. It has operations in over 10 countries outside of Canada and is the main distributor of medical cannabis to Germany.
Although not having a U.S. presence is its main Achilles heel, it does have some exposure in the form of SweetWater, a craft brewery. Aphria closed the acquisition last year.
CEO and Chairman Irwin Simon said the purchase would allow the Canadian licensed producer to build brand awareness in the U.S. ahead of federal legalization.
In the past five years, sales have grown 179.6% on average. Looking ahead, it’s expected that the company will increase sales by 31.5% next year. For all this, if you get shares for just 9.8 times P/S, I’d say it’s a steal.
Marijuana Stocks To Buy: OrganiGram Holdings (OGI)
OrganiGram Holdings focuses on producing indoor-growth cannabis for patients and adult recreational consumers and developing overseas business partnerships.
Its brand portfolio includes Edison Reserve, Edison Cannabis Co, ANKR Organics, and Trailblazer.
OrganiGram has disappointed investors with its sluggish revenue growth and cash burn. But analysts are expecting the next year to bring some relief. Sales and EPS are expected to grow 64.1% and 320.0%, leading to a bullish reading. OGI stock is up 77.4% in the last month. But shares are still trading at 11.2 times price-to-earnings.
OGI has outperformed the S&P 500 by 185.1% and its sector by 198.2% in the past five years. That kind of performance is rare, but investors will ideally want some improvement in fundamentals to accompany this. All the data points to the company turning the corner soon. Until then, the general euphoria regarding the sector will continue to drive shares higher.
On the date of publication, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.