You don’t have to look too far to recognize the devastation that has occurred among marijuana stocks. Due to generally disappointing financial performances, the sector has been awash in red ink. Unfortunately, investors are losing patience with this chronically losing market, which has — unsurprisingly — affected marijuana penny stocks disproportionately.
Naturally, I understand if someone is hesitant to dive into this sector, irrespective of the discount. We can talk all day about the transformative potential of legal cannabis, and I’ve done exactly that. But Wall Street has nervously eyeballed financial viability. Without any of the major players stepping up to the plate, cannabis investments, especially marijuana penny stocks, have incurred volatility.
But if you’re willing to absorb the bruises inherent in “botanical” companies, you may want to reconsider marijuana stocks. First, several green competitors rebounded on Tuesday on the announcement of a proposed Congressional bill to remove “criminal prohibitions against marijuana at the federal level.”
If successful, this would represent a huge lift for both the major cannabis players and marijuana penny stocks. Currently, the Agriculture Improvement Act of 2018, colloquially known as the farm bill, federally legalizes industrial hemp and hemp-derived products. Specifically, this means that hemp or hemp-derived cannabis products like cannabidiol (CBD) cannot contain more than 0.3% tetrahydrocannabinol (THC) content.
A second upshot for marijuana stocks is that Americans have a growing distrust for the medical system. That’s not surprising, considering major pharmaceutical firms’ involvement in the raging opioid crisis. People are looking for true, naturally sourced therapies and cannabis offers a viable pathway.
With that, let’s take a look at seven compelling marijuana penny stocks:
Before I get into it, I should caveat that cbdMD (NYSEAMERICAN:YCBD) isn’t a name most folks would consider belonging among key marijuana penny stocks to buy. Furthermore, cbdMD does not specialize in marijuana products. Instead, they focus on broad spectrum CBD — products that contain CBD, other cannabinoids and essential oils (terpenes), but zero THC.
This last point is especially important for YCBD stock because cbdMD has endorsement deals with several pro-athletes. Arguably, the most well known is two-times Masters champion Bubba Watson. As Watson relayed in an interview, he needed a product that would help with the aging process. He also required a product that would allow him to compete professionally without pinging positive for a drug test.
Another reason why YCBD stock deserves a top billing is that cbdMD is headquartered in the U.S. And the American market is wide open for a company to establish a CBD brand, according to cbdMD CEO Marty Sumichrast. Thanks to a comprehensive and effective product portfolio along with key endorsements, YCBD stock is a name you shouldn’t ignore.
Among the worst hit marijuana stocks, Hexo (NYSE:HEXO) was trading within the respectable $4 price range in late summer of this year. However, a rash of poor fiscal performances in the sector substantially hurt HEXO stock. And specific to the underlying company, the growing losses in net income have worried investors.
As a result, HEXO is now counted among the worst hit marijuana penny stocks. Still, if you’ve got an iron stomach, I believe this embattled firm has serious upside potential.
For one thing, management has earned respect for its forthrightness regarding its unlicensed cannabis production incident. Due to an oversight, Hexo mistakenly produced cannabis in an unlicensed area. However, unlike CannTrust (NYSE:CTST), management reported the incident to governing agency Health Canada. Optically, despite an unfortunate error, I think it is a good look for HEXO stock because of the honesty involved.
Second, Hexo has a joint venture with Molson Coors Brewing (NYSE:TAP) to produce CBD-infused beverages. Experts peg this market to hit over $1 billion by 2022, presenting an opportunity for HEXO stock.
CV Sciences (CVSI)
Under the best of circumstances, equity shares of small pharmaceutical companies are subject to extreme volatility. Logically, then, marijuana penny stocks that focus on cannabis-based drugs are just as unpredictable, if not more so. And that’s the case with CV Sciences (OTCMKTS:CVSI) and CVSI stock.
Back when the weed market was still fresh, companies like CV Sciences experienced dramatic surges in valuation. However, with the Street demanding hard results and not merely tantalizing narratives, the cannabis investment sector crumbled.
Still, CVSI stock makes a compelling case for itself if you’re willing to accept the wildness in its pricing dynamic. One of the company’s drugs is a synthetic CBD formulation designed to curb smokeless tobacco use and addiction. With the vaping crisis becoming one of the hot topics earlier this year, CV Sciences’ products have incredible relevancy.
Cannabis Sativa (CBDS)
Like many marijuana penny stocks, Cannabis Sativa (OTCMKTS:CBDS) started off with great promise thanks to its multi-varied brands and businesses. For instance, the company opened up its first “hi Brand International” dispensary in Portland, Oregon. It’s also seeking opportunities for expansion into green-friendly states.
That said, one of the more intriguing businesses connected to CBDS stock is the skincare market. According to retail cannabis market experts, the CBD skincare market will likely reach $1.7 billion by 2025. That might not sound like a groundbreaking number. However, considering that Cannabis Sativa only made half-a-million dollars last year, this could be a huge prospect for CBDS stock.
Moreover, speculators should consider the broader implications. Major marijuana stocks, such as Cronos Group (NASDAQ:CRON), are entering the U.S. CBD market via acquisitions like the Lord Jones deal. Of course, Lord Jones is a big CBD skincare brand. Thus, CBDS stock is at least fundamentally moving in the right direction.
If there’s one phrase to describe marijuana stocks, it’s that this industry represents the perpetual clash between theory and reality. In theory, legal cannabis opened up the door to previously untappable revenue streams. But in reality, the industry suffered from unexpected supply chain issues, stymieing an otherwise unprecedented breakthrough.
However, this theory-versus-reality conflict also benefits MariMed (OCTMKTS:MRMD) and MRMD stock. Primarily, MariMed operates as an administrative and operational advisor for the burgeoning cannabis industry. While legalization in North America has brought initial enthusiasm, cannabis-based enterprises are incredibly tough to get up and running. Here, MariMed plays the role of expert consultant, navigating clients away from common pitfalls toward higher probabilities of success.
Despite the obvious need for the company’s services, that hasn’t stopped MRMD stock from turning volatile. In fact, today, it’s firmly in the territory of marijuana penny stocks. Still, shares appeared to have stabilized since mid-October, tempting the contrarian approach.
MedMen Enterprises (MMNFF)
It’s almost tragic what happened to MedMen Enterprises (OTCMKTS:MMNFF) recently. Just days ago, MMNFF stock was trading above the all-too-critical $1 threshold. But with the ugly realization that the underlying company could face bankruptcy, shares tumbled below that threshold. Now, it’s on this list of very speculative marijuana penny stocks.
But can it eventually join the ranks of “regular” marijuana stocks? I’m going to be blunt: MMNFF stock is now one of the riskiest names in the cannabis markets. On the flipside, it does have tremendous upside potential because of this overwhelming risk.
In my interview with cbdMD’s CEO Marty Sumichrast, he articulated the concept of cannabis branding. When it comes to the retail space, I can’t think of a cleaner and more professional brand than MedMen Enterprises. It doesn’t try to be an over-the-top weed distributor. Instead, they’re focused on quality products and excellent customer service.
Will this be enough to save MMNFF stock? Undoubtedly, this is a gamble, but an interesting one.
Diego Pellicer Worldwide (DPWW)
If you’re looking for the “ultimate” in marijuana penny stocks, then treat yourself to Diego Pellicer Worldwide (OTCMKTS:DPWW). Funny, but true story: I didn’t even know about this company’s existence until an InvestorPlace reader named Anthony reached out to me and asked me about it. Curious, I researched DPWW stock and I must say it’s an intriguing concept.
Generally speaking, legal cannabis retailers fall under two camps: those that emphasize the “street image” of the cannabis plant and businesses that cater to therapeutic use. However, Diego Pellicer introduces a third option: premium, luxury-themed cannabis products.
Under ideal circumstances, DPWW stock might work out. Making cannabis isn’t exactly rocket science. Thus, with supply rising, industry players need a distinguishing brand. Diego Pellicer has that in droves.
What it doesn’t have, though, is market credibility. DPWW stock currently trades at less than 2 cents. You’ve been warned.
As of this writing, Josh Enomoto is long YCBD, HEXO, and MRMD.