Fundamentally, it’s difficult to argue against the point that legal cannabis is a transformative economic concept. Previously an illegal and thus untaxable revenue stream, it’s now becoming mainstream in North America, not only providing taxes but also creating new jobs. However, marijuana stocks themselves have had a checkered past.
Yes, recently, cannabis-based investments have generally been performing very well. Mainly, this is due to the administration of President Joe Biden. During the campaign trail, he and now Vice President Kamala Harris pledged to decriminalize cannabis, which naturally supports the case for marijuana stocks. In addition, the Democrats have full control of Congress, giving Biden more capacity to push left-leaning policies.
But will this political tailwind be enough to support marijuana stocks? It could be and that’s because of another positive catalyst: the novel coronavirus pandemic.
Because of the worldwide outbreak, many countries ordered their citizens to lock down for a period of weeks or months. This has caused some folks to get a little stir crazy. Moreover, the stress resultant not only from the health threat but to personal finances and daily routines has given new relevance for medical marijuana stocks.
According to data compiled by Health Europa, studies indicate that cannabis may help address stress, anxiety and depression. You don’t need to be an expert to recognize these symptoms across the wider population. Therefore, if you’re thinking about going green, you may want to consider these medical marijuana stocks.
- Innovative Industrial Properties (NYSE:IIPR)
- Tilray (NASDAQ:TLRY)
- Jazz Pharmaceuticals (NASDAQ:JAZZ)
- Cronos Group (NASDAQ:CRON)
- Green Thumb Industries (OTCMKTS:GTBIF)
- GrowGeneration (NASDAQ:GRWG)
- Trulieve (OTCMKTS:TCNNF)
- Cresco Labs (OTCMKTS:CRLBF)
A quick but important caveat: I’m not suggesting that cannabis is a cure for any disease or condition. Indeed, from all the studies that I’ve seen, the data is inadequate to make such definitive connections. At the same time, people are desperate for any solution, particularly natural organic ones. Thus, the investment narrative for medical marijuana stocks is potentially viable.
Medical Marijuana Stocks: Innovative Industrial Properties (IIPR)
Although not a pure name among medical marijuana stocks, Innovative Industrial Properties nevertheless belongs in your cannabis portfolio if you’re serious about this sector. For one thing, before you run, you must first learn how to walk. And IIPR stock has been the voice of reason.
Lifetime, shares have a return of over 1,000%. Since the beginning of 2018, IIPR stock is up over 600%. Essentially, Innovative Industrial Properties has played the role of safe space in this terribly volatile market segment.
As you might infer from the brand name, Innovative Industrial is a real estate investment trust serving the medical-use cannabis industry. To put it another way, IIPR is about selling tickets to the game, not gambling on one particular team to win.
Theoretically, such business models don’t perform as well because of the mitigation effect both to the downside and up. However, you just don’t know where the sector will go. Therefore, you should consider some portion of your portfolio in IIPR.
Among medical marijuana stocks, Tilray is one of the more complicated. As a great example, its latest earnings report demonstrated encouraging results, especially compared to the year-ago quarter. The company reported a loss of $3 million or 2 cents a share, far better than the $200 million loss a year earlier. Additionally, revenue came in at $56.6 million, up nearly 21%.
Still, investors took a dim view on TLRY stock, sending shares down 14% on the day of the disclosure. When analysts dissected the data, they didn’t care for Tilray’s Manitoba Harvest business, which is the world’s largest hemp foods company. During a time when grocery sales skyrocketed due to pandemic fears and restaurant lockdowns, Manitoba’s revenue fell by double digits year over year.
I’m not a strong advocate of catching a falling knife. However, this may be a great opportunity for speculators to get in. In part, this is because medicinal cannabis isn’t just a domestic need but an increasingly international one. Tilray has a track record in this department, which may help lift up TLRY stock.
Jazz Pharmaceuticals (JAZZ)
Previously, I warned that while medical marijuana stocks offer potential viability, the one hiccup is that research regarding their purported myriad health benefits is very limited. But that’s not to say that cannabis has no proven medicinal value. Far from it, as Jazz Pharmaceuticals’ acquisition GW Pharmaceuticals (NASDAQ:GWPH) demonstrated.
Both I and several of my InvestorPlace colleagues have mentioned GW Pharmaceuticals as one of the better bets among medical marijuana stocks. The company gave the underlying industry a massive credibility boost with the development of Epidiolex, a cannabis-derived drug that treats epilepsy in young children. Naturally, this gives JAZZ stock long-term appeal because of the diversified revenue channels.
To be fair, Jazz Pharmaceuticals isn’t a direct play on the cannabis sector. However, the main challenge for marijuana stocks is that they’re incredibly wild. At least with JAZZ stock, you can bank on other growth avenues if the green stuff doesn’t quite pan out.
Cronos Group (CRON)
As I mentioned earlier, marijuana stocks, no matter what their underlying specialty is, are vulnerable to wild swings in valuation. That’s the case with Cronos Group. On a year-to-date basis, CRON stock has gained over 50%. But since peaking on Feb. 10, shares are down roughly 25%.
This isn’t an easy way to make money in the investment markets. Nevertheless, if you can stomach the risk and have a longer-term perspective, you may want to consider CRON stock at this relative discount.
Primarily, Cronos made aggressive moves into the cannabidiol (CBD) business, which can pay off significantly years down the line. Primarily, this is because CBD doesn’t impose a psychoactive effect. Further, the compound can be integrated with a variety of edible or drinkable products, facilitating a smooth transition to alternative therapies.
Plus, with compelling brands like Lord Jones and Happy Dance featuring universally lovable actress Kristen Bell, Cronos could possibly become a much more widely accepted mainstream entity.
Green Thumb Industries (GTBIF)
One of the multi-state operators (MSOs) amid the ranks of marijuana stocks, Green Thumb Industries specializes in promoting the everyman cannabis lifestyle. If you’re looking for a place to merely get high, Green Thumb isn’t it. Instead, it caters to the average individual who is looking for holistic solutions for health and wellness.
In other words, Green Thumb is approachable — and it has something for everyone. For instance, under the company’s “The Feel Collection” brand, it provides distinct cannabinoid tincture formulations aimed for specific responses, such as sleep aids. As the Washington Post reported, lack of sleep has rapidly become a major problem impacting Americans. In fact, there’s a new term for it – coronasomnia.
For people that don’t want to medicate with pharmaceutical concoctions, Green Thumb offers a theoretically better alternative, bolstering the case for GTBIF stock.
On another point, the company also prides itself in social responsibility, donating proceeds for certain products to various advocacy groups. Of course, this appeals to millennial buyers and investors, which is a secondary reason to consider GTBIF stock.
GrowGeneration is an intriguing case among marijuana stocks, which I’m including on this list so that you can best decide whether you want to wager on it or not. Unlike many other cannabis plays, GrowGeneration focuses on selling hydroponic equipment and gardening supplies required to grow cannabis. Further, it has been making acquisitions to boost its total number of hydroponic garden centers to 46.
So far, management’s business strategy has paid off for GRWG stock, with shares up 43% YTD. Because it doesn’t deal with the cannabis plants directly, GrowGeneration theoretically mitigates some of the volatility associated with the sector.
However, GRWG stock may have more vulnerability to the broader economy than other marijuana stocks. Because hydroponic farming systems are costlier to set up than traditional gardening methods, it’s possible that client corporations utilizing hydroponics may limit their purchases if the recession continues longer than expected.
Therefore, I’d wait for a large discount before betting too heavily on GRWG.
One of the most popular MSOs among marijuana stocks, Trulieve has truly mastered the art of cannabis retail. For those who rely on stereotypes of the industry, you might imagine Trulieve dispensaries as rundown shacks with stoners nearby tripping out on the sidewalk with a bong in one hand and a “40” in the other.
Yeah, so whatever stereotypical visual you have, imagine the opposite. Incorporating modern design aesthetics and an inviting atmosphere, Trulieve dispensaries foster product evangelism. It’s hard to convince those on the fence to consider cannabis-based therapeutics if your business is located in a shabby strip mall on the wrong side of the tracks. Therefore, it’s not surprising that TCNNF stock has performed so well over the years.
Furthermore, Trulieve has a dominant presence in Florida, taking home 52% share of the Sunshine State’s smokable market. Despite the troubles in the consumer economy, people are clamoring for Trulieve. That’s perhaps reason enough to consider TCNNF stock.
Cresco Labs (CRLBF)
A vertically integrated cannabis firm, Cresco Labs features product pipelines suitable for any need, ranging from medicinal marijuana to premium cannabis products for the discerning botanical enthusiast. Like some of the other green companies on this list of marijuana stocks, Cresco seeks to normalize the cannabis industry, giving it a professional and accessible reputation.
Timing wise, the backdrop couldn’t be better for CRLBF stock. I’ve mentioned this multiple times, but it bears repeating. According to the Pew Research Center, two-thirds of Americans supported marijuana legalization in late 2019. I’m almost certain that this figure has increased because of the Covid-19 disaster.
We can argue all day about the politics and criminalization of cannabis, which an increasing number of Americans find unnecessary and counterproductive. But the bottom line is that cannabis creates jobs — tons of them. Therefore, broader acceptance is inevitable in my opinion. And that ultimately bodes well for CRLBF stock.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.