When it comes to placing a wager on the legal, regulated sale of cannabis for medicinal and recreational purposes, investors have many options. Yet while there are many choices out there, you may be curious to know which cannabis stocks are in the “Green Zone.”
TradeSmith offers investors valuable tools for determining which stocks to watch. A good example is its Health Indicator feature. This comprehensive indicator provides an overall rating of a stock’s current health.
Using this metric, you can quickly find potential opportunities to explore. Broken down into three “zones” (green, yellow, and red), you’ll have a general idea about whether it’s best to be bullish, bearish, or neutral on a particular stock.
As you may have guessed, stocks in the “Green Zone” are performing well, with little indication that the trend is on the verge of shifting.
A stock in the “Yellow Zone” has corrected by more than 50% of its volatility quotient (VQ), a proprietary TradeSmith metric that helps measure a stock’s risk. When a stock in your portfolio goes from green to yellow, it may be a good time to reassess whether to maintain the position.
Stocks entering the “Red Zone” have corrected by more than their calculated volatility quotient. VQ can be useful when adding stop losses to your positions. View any move into the “Red Zone” as a warning sign to exit your position for now.
With this, let’s take a look at three cannabis stocks, each of which is currently in the “Green Zone.”
Anheuser-Busch InBev (BUD)
Anhueser-Busch InBev (NYSE:BUD) has been in the “Green Zone” for over two months. The global brewing giant’s shares have bounced back as investors look past its Bud Light controversy and focus on its potential in faster-growing markets.
The company is currently not active in the cannabis business, but as you may recall, it did sell several of its beverage brands to Tilray (NASDAQ:TLRY) back in late 2023. More importantly, depending on when or if the U.S. government reforms federal marijuana laws, BUD stock could become a pot stock. Once cannabis is fully legal, Anheuser-Busch could then decide to bet big on the space.
A big bet could entail the acquisition of a cannabis company. Or, Anheuser-Busch may eventually get into the cannabis-infused beverage business. It already has a relationship with Tilray, which helps. TradeSmith’s volatility quotient for BUD is 19.65%, which makes it a medium-risk stock.
Molson Coors (TAP)
Molson Coors (NYSE:TAP) has been in the “Green Zone” for over one month. This brewer of popular beers like Miller and Coors was previously in the cannabis-infused beverage business, but has since sold its stake in this venture.
Still, just like with BUD, TAP stock could again become a pot play down the road, depending on whether U.S. federal cannabis laws eventually change. In the meantime, count on catalysts more pertinent to Molson Coors’ legacy business to drive the stock higher.
Although still stuck in low-growth mode for now, any indication of a resurgence could result in multiple expansion for TAP, which currently trades for 11.4 times earnings. The stock could re-rate to 15 times earnings and still be far cheaper than peers, which sport earnings multiples in the low-20 range. TradeSmith’s volatility quotient for TAP is 20%, which makes it a medium-risk stock.
Scotts Miracle-Gro (SMG)
Scotts Miracle-Gro (NYSE:SMG) has been in the “Green Zone” for over two weeks. This lawncare products company has so far bet billions on cannabis, through the building up of its Hawthorne Gardening hydroponics subsidiary.
Cannabis-related diversification at one point helped to gin up excitement about SMG stock, but a lack of U.S. legalization progress, plus Hawthorne’s deteriorating fiscal performance, have resulted in shares coughing back all of their pot stock-related gains.
However, don’t rule out the potential for SMG to become one of the top cannabis stocks once again. Management is looking to merge Hawthorne into another cannabis company. Such a move could assuage investor concerns, while at the same time leave SMG exposed to the cannabis growth trend. TradeSmith’s volatility quotient for SMG is 38.95%, which makes it a high-risk stock.
The TradeSmith Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
