Where To Buy Cannabis Stocks 2021
Even though the cannabis industry is growing, there are only a few dozen publicly-traded players. And because Canada legalized recreational marijuana in 2017, many pot stocks are headquartered there. In general, cannabis companies are broken down into the following categories:
where to buy cannabis stocks
Because of the inherent risks related to investing in individual stocks, some investors may prefer to invest in exchange-traded funds (ETFs). There are nine ETFs that invest across those three aforementioned categories of companies and are traded on the U.S. stock market:
You may already be investing in marijuana stocks without realizing it, particularly if your portfolio includes any index funds that track small-cap stocks. For example, Scotts Miracle-Gro is included in more than 150 ETFs, while Tilray is a member of nearly 20, according to ETF.com.
Finally, the cannabis industry is evolving, so you must be comfortable with volatile price action in stocks and the possibility of companies going out of business. Some companies in this industry have drawn the interest of day traders on sites like Reddit, which has caused even more volatility. And the SEC warns investors about potential fraud related to microcap stocks more generally, and cannabis stocks specifically.
Cannabis stocks jumped in early October, after President Joe Biden took the United States closer to federal marijuana legalization. But these stocks have since lost ground as Biden's pronouncement does little in the short term to change the industry.
Biden said he would pardon people convicted of the federal crime of simple marijuana possession, called on governors to make similar moves for convictions under state laws and ordered a review of the way marijuana is federally scheduled as a controlled substance. But that is a far cry from full legalization that would lead to a sustained rally in marijuana stocks.
Like many other companies, cannabis stocks have been under pressure because of inflation, higher interest rates and the general negative market sentiment as investors worry about a potential recession.
But these companies were already in a downtrend before the broader market took a turn for the worse. Cannabis stocks were underperforming after Democratic political gains in 2020 and 2021 failed to produce meaningful legislative reform, leaving companies to face a host of issues traditional businesses don't.
Cannabis companies headquartered in the United States, or anywhere that marijuana isn't legal, can't raise money in the stock market by listing on the New York Stock Exchange or Nasdaq if they grow, process or sell marijuana, a Schedule I drug alongside heroin and LSD. (Many publicly traded cannabis companies are headquartered in Canada, where the drug is federally legal, or trade over-the-counter.)
Biden's announcement in early October doesn't change any of this immediately. But it may eventually help unlock reform from Congress, where a cannabis banking bill has been stalled by those who want wider-reaching legalization and social justice changes.
Biden's announcement "is significant because it signals a first step by the Biden administration to change existing federal cannabis law," says Matt Karnes, founder of consultancy GreenWave Advisors. "Nonetheless, uncertainty remains with respect to the nature, extent and timing of specific changes to federal policy."
Still, there are plenty of positives for the U.S. marijuana industry, which has already taken great strides even while operating under federal prohibition. That means these marijuana stocks are primed to move significantly higher if meaningful federal reform does end up taking place.
"I anticipate that most cannabis stocks will skyrocket once we truly legalize cannabis on the federal level," says Andrew Bowden, CEO of dispensary franchisor Item 9 Labs Corp. (ticker: INLB). Until that happens "we will continue seeing these small wins along the way that will positively impact cannabis stocks," he says.
A potential catalyst short of full federal legalization is potential passage of the SAFE Banking Act, which would greatly increase cannabis companies' access to the federally regulated financial system.
When it comes to investing in individual marijuana stocks, Cresco Labs Inc. (CRLBF), Trulieve Cannabis Corp. (TCNNF), Green Thumb Industries Inc. (GTBIF) and Curaleaf Holdings Inc. (CURLF) are on Czarkowski's list of blue-chips.
The AdvisorShares Pure US Cannabis ETF (MSOS) is a popular option that doesn't hold stocks directly but opts for synthetic exposure via total return swaps. The ETFMG Alternative Harvest ETF (MJ) is a passively managed fund that tracks an index of globally listed cannabis companies that could benefit from medicinal and recreational marijuana legalization initiatives. A new option is the Roundhill Cannabis ETF (WEED), which came online in April.
Whether you pick individual stocks, ETFs or a mix of both, remember that Biden's announcement is important, but there is likely a long way to go before significant hurdles are removed from the U.S. marijuana industry.
"This is a huge deal," says cannabis industry consultant Kris Krane, who was president of multi-state operator 4Front Ventures Corp. (FFNTF) for more than a decade. "Never before has the office of president issued such a statement in support of cannabis reform. What was missing was a direct call to action for congressional reform, to challenge leaders to do more."
In the U.S. today, 46 states have adopted partial or total legalization of cannabis or related products. Increasing acceptance of marijuana among American consumers and their elected representatives could make this edgy asset class a potential source of growth for your portfolio.
Cresco Labs is a U.S. cannabis MSO that is the largest U.S. wholesaler of branded cannabis. Cresco recently opened three new Florida dispensaries and now has a network of 19 locations in Florida and 53 total locations nationwide.
Unlike the U.S. and Canadian stocks on this list, Clever Leaves is a large global cannabis producer headquartered in Colombia with cultivation and extraction operations in Colombia, cultivation facilities in Portugal and a distribution network in Europe.
Market capitalization, enterprise value-to-sales ratio, and net debt or cash-to-sales ratio come from Cantor Fitzgerald estimates. Many of the Canadian cannabis LPs have stock listings in both the Canadian and the U.S. markets. For this story, we converted all Cantor Fitzgerald price targets given in Canadian dollars to U.S. dollars.
The stocks highlighted on this list are sourced from industry analysts, but they may not be a perfect fit for your portfolio. Before you decide to purchase any of these stocks, do plenty of research to ensure they are aligned with your financial goals and risk tolerance.
However, the first wave of U.S.-listed cannabis stocks has been something of a disappointment. Shares of high-growth, multi-state operators (MSOs) have slumped in 2023 as cannabis producers face pricing pressures in a fiercely competitive U.S. market.
In U.S. states with mature marijuana markets, like California and Colorado, prices have fallen significantly. The price of most cannabis categories are near record lows in Colorado, with the price of flower down 50% and the price of trim down 41% year-over-year.
While U.S. producers have benefited from ongoing state-by-state cannabis legalization, there has been little meaningful progress on national cannabis reform. Even with Democrats in control of the White House and both houses of Congress, the Marijuana Opportunity, Reinvestment, and Expungement (MORE) Act and the Secure and Fair Enforcement (SAFE) Act have stalled in the Senate.
Wayne Duggan is a Forbes Advisor contributor. He is also a staff writer at Benzinga, where he has reported on breaking financial market news and analyst commentary related to popular stocks since 2014. Mr. Duggan is also the author of the book "Beating Wall Street With Common Sense" and has contributed news and analysis to U.S. News & World Report, Seeking Alpha, InvestorPlace.com and The Motley Fool. Mr. Duggan is a graduate of the Massachusetts Institute of Technology and resides in Biloxi, Mississippi.
But while 2023 might not be a year to buy in expectation of rapid gains, this could be a great entry point for purchasing some solid cannabis stocks at a discount and holding them in anticipation of eventual federal legalization in the U.S., the world's biggest pot market.
Like many firms in other industries, cannabis companies have been struggling with high inflation adding to their costs. But marijuana companies also face a host of headwinds unique to them, including competition from the illegal market and falling prices for marijuana because of competition and oversupply.
In Canada, despite federal legality, the industry has been weighed down by high taxes. In the U.S., where the drug remains federally illegal, taxes are also high, and the industry faces onerous hurdles to financing from banks. Because of federal illegality in the U.S., plant-touching companies can't list on major exchanges, and many institutional investors don't want to buy shares of companies trading over the counter, limiting marijuana firms' ability to raise money.
"In the U.S., the industry continues the challenge of operating under the shadows of federal law, and uncertainty as to the nature, extent and timing of federal reform continues to weigh on investor sentiment," said Matt Karnes, founder of consultancy GreenWave Advisors LLC, adding that some cannabis companies pay upward of 70% of their operating cash in taxes.
A silver lining for operators in mature markets facing slowing sales growth is that falling marijuana prices because of competition and oversupply should help the legal market compete with the illicit one, according to Jason Wilson, cannabis research and banking expert at ETF Managers Group. While that might not move the needle for share prices in 2023, it should be beneficial in the longer term, he said. 041b061a72