How To Buy Marijuana Stocks For Dummies
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:
how to buy marijuana stocks for dummies
Growers: These are the companies that grow and sell the plant, and are most directly linked to products ultimately sold at dispensaries. Examples of such products include: medical marijuana, recreational marijuana, and items that include CBD (cannabidiol).
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.
In addition, other types of cannabis products fall under the umbrella of the marijuana market. Some of the most common medical marijuana products include cannabidiol (CBD) or tetrahydrocannabinol (THC).
Both CBD and THC are naturally occurring compounds, and they are usually used to treat illnesses such as chemotherapy-induced anorexia, nausea, or vomiting. Recreational marijuana, on the other hand, is usually ingested either through smoking the cannabis plant or by consuming cannabis edibles.
The marijuana industry is growing rapidly, as more and more states legalize the drug on both a medicinal and recreational level. Just like any other burgeoning industry, the marijuana market is attracting plenty of investors.
Marijuana stocks have given cannabis investors nothing but false starts over the past few years. Most recently, there were a plethora of issues facing the industry throughout 2022, including inflation, overproduction, lack of capital, job losses and cratering stock prices.
The long-term prognosis for the cannabis industry is good. Ultimately, the following nine picks look like the best marijuana stocks (and funds) to benefit from this ongoing growth and maturation.
On the consumer side of cannabis, it has a $150 million six-year convertible note in RIV Capital (CNPOF (opens in new tab)), which represents a 42% stake. In March 2022, RIV Capital acquired Etain Health (opens in new tab), one of New York state's original medical marijuana producers, for $247 million. Etain has one of 10 vertically integrated licenses from the state.
Still, IIPR remains one the best REITs on Wall Street, as well as one of the best marijuana stocks, according to analysts. Piper Sandler analyst Alexander Goldfarb has an Overweight rating (the equivalent of Buy) on IIPR, with a $140 target price, some 55% higher than current levels.
If you're looking for a pure-play cannabis company in the U.S., Massachusetts-based Curaleaf Holdings (CURLF (opens in new tab), $3.82) is one way to go. The firm got its start in New Jersey in 2010, developing one of the first vaporizers to administer a single measured medical marijuana dose.
A total of 39 states, as well as Washington, D.C., have legalized medical marijuana. Twenty-one states and D.C. have legalized adult-use cannabis. As more states legalize recreational weed, Curaleaf should be able to continue to grow its business organically and through acquisitions.
Cresco is one of Wall Street's favorite marijuana stocks. Of the 19 analysts following the stock, 13 give it a Strong Buy, three say it's a Buy, and three have it at Hold. Plus, the average target price of $6.88 implies the stock will more than triple over the next 12 months or so.
Not forgetting that this is an article about the best marijuana stocks, British American Tobacco invested an additional $5.1 million last March in Canadian cannabis producer OrganiGram Holdings (OGI (opens in new tab)), bringing its stake in the company to 19.5%. The two continue to collaborate on new cannabis-related products.
By comparison, the MJ ETF follows the performance of the Prime Alternative Harvest Index, which in addition to tracking cannabis stocks, also includes cigarette manufacturers such as Altria (MO (opens in new tab)) and a 20.1% weighting in the ETFMG U.S. Alternative Harvest ETF (MJUS (opens in new tab)). As a result of the ETF weighting, the Canadian content in MJ is slightly less than 42%.
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.
Aurora Cannabis is a Canadian LP with the top share of the Canadian medical marijuana market. Aurora management has said the company should finally be profitable on an earnings before interest, taxes, depreciation and amortization (EBITDA) basis as it exits the December quarter.
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.
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.
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.
The industry is composed of cultivators and packagers of cannabis plants, dispensaries for medical and recreational marijuana, plus companies that use cannabis byproducts called CBDs, which are non-psychoactive derivatives of cannabis and can be used for a variety of purposes such as inflammation, chronic pain, and depression.
Marijuana-related securities have arrived in the form of over-the-counter or penny stocks and special funds for accredited or high-net-worth investors. Some investors have been playing this market for several years already.
Marijuana Investment Co., also open only to accredited investors, focuses on providing investment access to an ETF-like portfolio of marijuana-related assets, says Alan Brochstein, a financial adviser who runs the newsletter 420 Investor and designs marijuana-based model-portfolios for his subscribers. The company says it is planning to file for an initial public offering, and has invested in the Marijuana Index, which tracks listed companies in the sector. The index launched by tracking six stocks just two years ago, but now tracks 200 with a combined market value of $6.9 billion.
Legal sales of marijuana are expected to quintuple to as much as $8 billion in 2019 from $1.6 billion in 2013, according to forecasts from trade publication Marijuana Business Daily. Founding editor Chris Walsh says his publication predicts that more stocks will move to major exchanges, where disclosure and company liquidity is more regulated, in the next two years.
With the recent trend of products containing cannabidiol, or CBD oil, as well as the growth of marijuana businesses, the 633rd Air Base Wing Staff Judge Advocate has provided guidance to help U.S. service members navigate their questions.
Although some states have legalized aspects of the industry, the manufacture, distribution, possession and use of marijuana remains illegal under both federal and military law. Owning stock in these companies helps promote these activities; therefore, service members are strongly advised not to buy it.
Studies have shown that products made with hemp seed and hemp seed oil may contain varying levels of THC, an active ingredient of marijuana, which is detectable under the Air Force Drug Testing Program. In order to ensure military readiness, the ingestion of products containing or products derived from hemp seed or hemp seed oil is prohibited. Failure to comply with the mandatory provisions of this paragraph by military personnel is a violation of Article 92, UCMJ. Violations may result in administrative disciplinary action without regard to otherwise applicable criminal or civil sanctions for violations of related laws.
Canadian marijuana stocks rallied Thursday, then gave up those gains on Friday, following a Bloomberg report that U.S. Senate Democrats plan to introduce a federal cannabis decriminalization bill this month. So are Canadian marijuana stocks buys now? 041b061a72