My Favorite Four Marijuana Stocks
The good news is that the marijuana industry is growing rapidly, with the leading companies continuing with their programs of store openings and acquisitions.
The bad news is that the stocks of these leading companies remain in correction mode, as they have been since February. And I know that it’s beginning to get frustrating for many of you. But that’s exactly how the market works. The market peaks when spirits are high, and then it turns down, and it doesn’t bottom until the last person has sold in frustration—and that’s when buyers take control again.
Hopefully (a word I don’t like to use when it comes to investing, but there it is), the buying will begin to outweigh the selling when third-quarter reports are released in early November. I do expect great news, including more companies reporting positive earnings. But between now and then we still have to get through the remainder of October, a month that has often been challenging for the market.
In the meantime, today I thought I’d point to a few of the stocks likely to lead the way higher, based on four important metrics.
With its recent acquisition of Harvest Health & Recreation complete, Trulieve (TCNNF) is now the biggest, with annual revenue passing the $1 billion mark. Size matters.
With second-quarter revenue up 166% from the year before, Curaleaf (CURLF) is the speed champion. Fast growth can overcome a lot of problems (though it can bring other challenges).
The Strongest Chart
There’s no question here. It’s the REIT, Innovative Industrial Properties (IIPR), which not only pays a nice dividend (very attractive in these days of low yields) but is also growing fast (revenues up 101% in the second quarter). IIPR was recently recommended in Mike Cintolo’s momentum-focused Cabot Top Ten Trader.
The Best Value
Value is not normally a factor I consider much when investing in fast-growth industries, but value is pretty much all Bruce Kaser of Cabot Undervalued Stocks Advisor thinks about when considering stocks—and Bruce recently highlighted Cresco Labs (CRLBF) as an attractive stock in this beaten-down sector.
All four of these should be high on your watch list if you don’t own them yet.
Moving on to the news:
Cresco Labs (CRLBF), which has focused on being the wholesale king of the industry, recently announced a decision to exit most of the agreements under which it sold third-party branded products in California, the better to focus on selling its own products, which have higher profit margins. This is bad news for those little brands that relied on Cresco’s distribution, and bad for consumers who appreciated choice, but it’s a natural in the industry, as we look to see what will become the “Marlboro” of cannabis. Short term, the decision will impact fourth-quarter revenues negatively to a small degree, but long term, I like the move.
Curaleaf (CURLF) recently completed the previously announced acquisition of Los Sueños Farms in Colorado, gaining three Pueblo, Colorado outdoor cannabis grow facilities, including 66 acres of cultivation capacity, an 1,800-plant indoor grow and two retail cannabis dispensary locations serving adult use customers.
GrowGeneration (GRWG) last week announced a distribution agreement to offer DYNOMYCO, a brand of highly concentrated mycorrhizal inoculants specifically formulated for cannabis, to hydroponic and organic growers across the U.S. DYNOMYCO has exhibited strong efficacy in cannabis, with yield increases of 10%-45%, as well as increased cannabinoid content. It also reduces dependency on phosphorus fertilizer, improves nutrient uptake and reduces transplantation shock. And just today, the company announced the acquisition of All Seasons Gardening, the largest hydroponic retailer in New Mexico.
Green Thumb (GTBIF) last week announced the reopening of its newly expanded retail store, Rise Mundelein, on October 16. The Mundelein store was Illinois’ first medical dispensary in 2015; on January 1, 2020, it was one of the first stores in the state to serve adult-use consumers, and it was the first store in Illinois to offer roll-through car service for medical cannabis patients to pick-up orders.
Innovative Industrial Properties (IIPR) recapped its fundamental progress of the past quarter, which included four acquisitions of properties in Illinois, Maryland, Missouri and New York, and three lease amendments to provide additional improvements at properties in Illinois, Maryland and Michigan.
Trulieve (TCNNF) this week announced the reopening of a dispensary in Longwood, Florida that was formerly branded as Harvest House of Cannabis but is now under the Trulieve brand. This is the company’s 94th dispensary in Florida, where it has long had leading market share, and with the recent acquisition of Harvest Health & Recreation, Trulieve now has leading market positions in Arizona and Pennsylvania as well.
Last but not least, still on our watch list is Ayr Wellness (AYRWF), which last week announced it had closed on the purchase of PA Natural Medicine, an operator of three licensed retail dispensaries, deepening Ayr’s presence in the rapidly growing medical market in Pennsylvania. If all is well, Ayr will be added to our portfolio (which currently is 35% in cash) when we begin buying again.