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Cannabis Investor
Profit from the Best Cannabis Stocks

May 13, 2020

As coronavirus matters continue to dominate the headlines and the world works toward slowly reopening, the action of marijuana stocks continues to impress—and with good reason.


As coronavirus matters continue to dominate the headlines and the world works toward slowly reopening, the action of marijuana stocks continues to impress—and with good reason. The stocks remain cheap by historic measures and the best-run companies in the industry continue to expand at blazing speed.

In fact, the average company in our portfolio saw revenues grow 148% in the last quarter relative to the year-ago quarter—and down below, you’ll see detail on the quarterly reports of several of our stocks.

So there’s no question that this remains a sector full of high potential—the potential to launch leading consumer brands like Budweiser and Marlboro. The only questions, really, are what stocks to own and when to buy them.

My Marijuana Portfolio currently owns a well-diversified portfolio of eleven stocks but is still roughly 32% in cash as we work to get back in following the March bottom. I’d like to put some more of that to work, because the broad market as a whole and the marijuana stocks in particular are showing increased strength.

However, the strength is not evenly distributed. The Canadian stocks in particular are weak, while the U.S. stocks are strong, and thus the portfolio will now become more U.S.-centric than ever (two years ago it was heavily Canadian).

What To Do Now

Continuing to work to get back toward full investment (but only in the best stocks), the portfolio will now sell half its position in Cronos (CRON), which is going the wrong way, and then use half our cash (the CRON proceeds plus existing cash) to buy equal portions of Curaleaf (CURLF), Green Thumb Industries (GTBIF), Grow Generation (GRWG) and Trulieve (TCNNF). Also, Innovative Industrial Properties (IIPR) is upgraded to Buy. Details below.

cmi table

Note: The table reflects the state of the portfolio holdings before acting on any new recommendations.

Aphria (APHA) Aphria is the leading marijuana seller in Canada, with revenues of $237 million last year, up 542% from the year before, and the future is bright. The stock has softened a bit since we got back into it two weeks ago, but there’s good support at 2.75, so if you don’t own any, you can buy now. BUY.

Canopy Growth (CGC) While Canopy ran a close second to Aphria in Canada last year by revenues, it still occupies first place in mindshare, thanks in part to the fact that a major investor is alcohol giant Constellation Brands (STZ). CGC has been diligent about cutting costs as revenue shortfalls became apparent (the result of the flawed Canadian national rollout) so even though revenue growth was relatively slow in the latest quarter (“just” 56% from the year before), CGC has the greatest institutional sponsorship. The chart looks a lot like APHA; there’s support at 13. BUY.

Cresco Labs (CRLBF) Chicago-based Cresco is one of the top five marijuana companies in the U.S., and analysts are looking for EPS of $0.05 this year and $0.28 next year. Our buy two weeks ago on the heels of the quarterly report selloff was a bit premature; the stock continued lower for another week. But the sellers are done and I think it’s a great buy here. BUY.

Cronos Group (CRON) Back in Canada, Cronos is one of the smaller Canadian marijuana providers—and its earnings report last week did not impress investors. Revenues were $8.4 million, up 181% from the year before (the result of both continued growth in the legal Canada market and the launch of its line of vaporizers) while gross profit (loss) of ($6.5) million decreased by $8.0 million primarily due to write-downs of $8.0 million on dried cannabis and cannabis extracts (the continued pain of the Canadian oversupply problem). Even worse, the company projected further write-downs, due to “pricing pressures in the marketplace.” With analysts now projecting losses for both 2020 and 2021 and the stock turning even weaker, I’m now going to sell half of our long-term holding, making this the smallest position in the portfolio. SELL HALF.

Curaleaf Holdings (CURLF) Massachusetts-based Curaleaf, which has 57 dispensaries, 15 cultivation sites and 24 processing sites in 17 states, is a leading contender to be the Philip Morris of the industry as it continues to grow by acquisition. This year the company plans to invest heavily in its current markets, adding more capacity in Florida, New Jersey, Massachusetts, Maine, Connecticut, Arizona and Nevada; it plans to integrate the Select acquisition, which brought a strong portfolio of properties in California, Oregon, Arizona and Nevada; and it continues to move forward toward completion of the Grassroots transaction, which will give Curaleaf access to Midwestern markets like Illinois, Ohio, Arkansas and North Dakota. (Interestingly, here in Massachusetts, adult-use marijuana outlets have been closed since March 26 due to the coronavirus, and as a result, many users have switched to medical marijuana outlets, where April sales were up by roughly 25% from March.) CURLF hit a recovery high on Tuesday (on good volume) and has pulled back minimally since. CURLF is already the portfolio’s largest holding and now we’ll buy a little more. BUY.

Green Thumb Industries (GTBIF) Headquartered in Chicago, Green Thumb has 13 manufacturing facilities, licenses for 96 retail locations and operations across 12 U.S. markets (California, Colorado, Florida, Illinois, Maryland, Massachusetts, Nevada and Pennsylvania), so it’s also a contender for national leadership going forward. The stock has been strong since the March bottom, and has been building a base between 7 and 7.5 over the past two weeks. The portfolio will buy a little more. BUY.

GrowGeneration (GRWG) GrowGeneration operates the largest and fastest-growing chain of hydroponic and organic garden centers in North America, all catering to commercial growers of cannabis. Its business is totally legal nationwide, and its chart looks a lot like GTBIF’s—strong off the bottom and then basing over the past two weeks. I like it in the portfolio for diversification from the “plant-touching” companies (along with IIPR and TPB). The portfolio will buy a little more now. BUY.

Innovative Industrial Properties (IIPR) IIPR is the only publicly traded REIT in the U.S. that caters to the cannabis industry. First quarter results, released last week, saw revenues of $21.1 million, up 210% from the year before, and adjusted funds from operations (AFFO) of $1.12 per share, up 107% from the year before. Unfortunately, Wall Street was looking for a little more (the effect of coronavirus on tenants and deals hurt a bit). In the quarter, the company acquired nine properties, located in Colorado, Florida, Illinois, Massachusetts, Michigan, Ohio and Virginia, establishing a new tenant relationship with Parallel (the corporate parent company of Surterra Wellness), while expanding existing tenant relationships with Ascend Wellness Holdings, Cresco Labs, Green Leaf Medical, Green Thumb Industries and LivWell Holdings. A couple of weeks ago, I mentioned that the stock might be an under-performer for a while, given that it was so strong up to the June 2019 peak. But in today’s issue of Cabot Dividend Investor, Tom Hutchinson, who knows more about dividend-paying stocks than me, upgraded it to a buy, writing, “This is a stock with better than 100% earnings growth that should continue and selling nearly 50% below the 52-week high with a 5.3% yield and a rapidly growing payout. This is a REIT with huge growth and the latest weakness presents a buying opportunity. With solid technical support at the 70 level and on the heels of a dumb selloff, the rating is increased to BUY.” I’ll follow his lead! Note: Analysts are looking for FFO of $5.24 in 2020 (up 65%) and then $6.66 in 2021, up “just” 27%. BUY.

Tilray (TLRY) Based in British Columbia, Tilray was one of the earliest marijuana companies to expand globally; the company now has customers in 15 countries on five continents, so long-term prospects are good. First quarter results, released last week, saw revenues of $52.1 million, up 126% from the year before (beating estimates of $50.6 million) and a loss of $1.73 per share (compared to a loss of $0.31 per share a year ago). The company has cut costs and the chart shows support here, though a dip to 6 is possible as the Canadian names look for support. BUY.

Trulieve (TCNNF) Trulieve is not only the market leader in Florida, with 45 medical dispensaries and over 50% market share, it’s also a contender for biggest seller of marijuana in the entire U.S., with revenues of $253 million last year. Going forward, analysts are expecting EPS of $0.53 in 2020 and $0.72 in 2021, which translates to a forward P/E ratio of 21, pretty good for a company growing this fast. As for the stock, it not only rallied off the bottom as well as any of its peers, it also broke out to new recovery highs this week, a great sign of growing sponsorship and a sign that increasing numbers of investors believe Trulieve will be the Marlboro of the industry. Also, the price being above 10 is a plus. The portfolio will buy a little more. BUY.

Turning Point Brands (TPB) TPB is the oldest company in the portfolio (by far), having built a solid business in the smokeless tobacco industry before diversifying into the vaping and CBD markets. Its business is legal nationwide, and it even pays a dividend! Analysts are looking for EPS to fall 5% in 2020 (which is already built into the stock) and then to rise 9% in 2021—though admittedly it’s hard to look that far ahead in a business that that has been so active in reinventing itself. The stock pulled back today, and I think this present a decent entry point if you want a lower-risk stock that pays a dividend. BUY.