Top Marijuana Stocks to Watch
BY MRINALINI KRISHNA Updated Jan 14, 2019
Global spending on legal cannabis is expected to grow 230% to $32 billion in 2022 as compared to $9.5 in 2017, according to Arcview Market Research and BDS Analytics. The research projects a majority of that, nearly $23.4 billion will come from the United States. In context of more states voting in favor of marijuana use legalization and business interest sparking across the board, that definitely would make sense.
In the year through January 11, 2019, the United States Marijuana Index, fell 20.7%, as compared to about 6.5% loss seen by the S&P 500. Given that is not exactly an apples to apples comparison, but it does make a case to at least investigate investments in marijuana stocks.
But before you open your wallet to get a piece of the action, here are a few things that could help you.
(See also: Waiting to Exhale: The Case for Cannabis Investing)
Marijuana Regulation & Why It Matters
While our northern neighbors legalized marijuana as of October 17, 2018, it remains illegal and classified as a Schedule I drug under Controlled Substances Act at the federal level in the United States. However, with more and more states voting to make cannabis usage lawful in some form, marijuana regulation essentially is a hot mess.
In the November midterm elections, the following states voted in favor of marijuana legalization for either recreational or medicinal purposes, or both:
Michigan: Voters approved Proposal One, which legalizes marijuana use and cultivation for people over the age of 21 in addition to authorizing the commercial sale of marijuana through state-licensed retailers.
Missouri: Voters approved Amendment 2, which permits the use of marijuana for medical purposes and allows patients to cultivate plants at home. Marijuana was not approved for recreational use.
Utah: Voters approved Propostion Two, which allows some use of marijuana for medical purposes, only.
On June 26, 2018 Oklahoma voted to in favor of legalizing marijuana for medical use, becoming the 30th state in the country to do so. But validity of these state laws depends on the stance of the federal government that has not quite landed firmly on one side.
In January of 2018, former Attorney General Jeff Sessions, a vocal opponent of marijuana legalization, rescinded an Obama-era rule that gave states a greater role in marijuana law enforcement though it conceded that states could not come in the way of any federal enforcement action. The 2013 guidance issued by the Attorney General James Cole, came to be known as the ‘Cole Memo’.
President Trump himself has changed his stance a few times, going from calling recreational marijuana ‘bad’ back in 2015 as a candidate to committing to Colorado Senator Cory Gardner in April this year to support a federalism-based legislative solution to fix this states’ rights issue once and for all.
The state of regulation will, needless to say, determine the fate of this industry. As the legal boundaries exist today, many companies are witnessing exponential growth on the back of surging demand and interest. This momentum could continue till there is more clarity on regulations.
Where Are Marijuana Stocks Listed
Canada Listed vs U.S. Listed:
This uncertainty in the regulatory framework has not only impacted business operations for companies in the sector but has also seen fewer listings in the United States. In fact, there have been cases where American companies have gone north in search of more welcoming environment for their stock market debut. California-based MedMen is an example, as reported by CNBC.
OTC Markets vs NYSE/NASDAQ:
Both major American stock exchanges the NYSE and Nasdaq saw their first purely cannabis companies list in 2018. The Cronos Group became the first to make its trading debut on Nasdaq in February, while Canopy Growth Corp. became NYSE’s first pot listing in May.
Even as the bigger exchanges open up to companies in this space, a large number of companies remain penny stocks being traded primarily in the OTC Markets, increasing both skepticism as well as risk perception of any investment.
What to Watch Out For
As with any other investment, investors must do their homework before they place their bets. That can be hard, since a lot of these companies trade in the OTC Markets with less stringent filing and disclosure requirements compared to the larger exchanges. It can also be difficult to understand business models and source information about investments since the industry is still young and still not mainstream.
"Just because a cannabis company is trading on the OTC Markets Group, that doesn’t mean that they’re a sketchy stock, it just only means that it’s the only place that they could go. So there are some good names in the OTC Markets group, so don’t let that scare you away. And having said that, there are some less than stellar names in the New York Stock Exchange trading there," said Debra Borchardt, Founder and Editor-in-chief of Green Market Report. (See also: Investopedia Webinar on Cannabis Investing with Debra Borchardt)
Let's take for example Insys Therapeutics (INSYS), an Arizona-based Nasdaq-listed pharmaceutical company that was betting big on cannabinoid oil based drug to treat loss of appetite in people suffering from AIDS and nausea and vomiting caused by chemotherapy and anti-cancer medicine. The company received the FDA approval for its drug Syndros in 2016. However, its stock took a beating from its 2015 highs of $44/sh to near $4.00/sh in October 2017 when company executives were charged with offering kickbacks to doctors to prescribe its fetanyl-based drug Subsys. (See also: Insys Owner, Pharma Billionaire Arrested For Opioid Racket)
Borchardt also gives an example of The Green Organic Dutchman Holdings Ltd. (TGODF), the Ontario, Canada-based company that listed on Toronto stock Exchange on May 2, 2018 that has seen its shares fall 21.4% since then. The interesting thing is that he company has no revenue. Investors would need to factor that in before making a decision of investing in the company.
Types of Marijuana Stocks
If you want you could choose to invest in a ‘plant-touching’ company or a company that is strictly in the business of medical marijuana. You could also ride the wave by investing in the companies that benefit but don’t necessarily engage in the pot business directly. Here’s a look at some of these stocks. All financial and market capitalization figures, unless specified, are from Yahoo Finance as of June 29, 2018.
Plant Touching/Cultivation Operations:
Canopy Growth Corp. (CGC): Market Cap: $13.1B
The first Canadian marijuana unicorn, Canopy Growth Corp. listed on the NYSE in May, becoming the world's largest publicly traded weed company. The company owns and operates many brands, producing and marketing both medical and recreational strains. 'Tweed' is one of the company's most popular brands on account of its association with rapper turned marijuana entrepreneur Snoop Dogg. For the fiscal year ended March 31. 2018, the company reported revenue of CAD 77.9 million or nearly $60 million. In October 2017, Constellation Brands, beverage giant and maker of Corona beer, bought 9.9% stake in Canopy Growth. The deal opens up both companies to new product lines such as cannabis-infused beverages.
Average Volume: 10,325,804
Market Cap: $13.1B
P/E Ratio (TTM): N/A
EPS (TTM): -$1.79
Aurora Cannabis Inc. (ACB): Market Cap $6.37B
Another big Canadian pot company, Aurora Cannabis became even bigger in March by acquiring rival MedReleaf in a $.25 billion all stock deal, touted as the largest marijuana deal in the world. Consolidating operations will help the new entity cut costs and gain efficiency. According to a press release, Aurora and MedReleaf together expect to produce over 570,000 kilograms per year of cannabis through nine facilities in Canada and two in Denmark. Aurora debuted on the Canadian venture stock exchange (TSX) in October 2016 and trades in the US in the NYSE.
Average Volume: 15,100,703
Market Cap: $6.37B
P/E Ratio (TTM): N/A
EPS (TTM): $0.22
Cronos Group Inc. (CRON): Market Cap $2.44B
Nasdaq's first pot stock Cronos Group is a Toronto-based cultivator of medical marijuana. In addition to Canada, Cronos serves an international market. It ships its products to Germany, is building a facility in Israel and has a license through a joint venture in Australia. While it does not have a presence in the United States due to the uncertainty in regulations, as of the fiscal year ending March 31, 2018 the company generated $2.2 million in revenue.
Average Volume: 10,780,493
Market Cap: $2.44B
P/E Ratio (TTM): N/A
EPS (TTM): -$0.03
Terra Tech Corp (TRTC): Market Cap $83.14M
Incorporated almost a decade ago, Terra Tech is diversified agricultural company that has operations in production and dispensing medical marijuana as well as hydroponic equipment for other agricultural products. Its own medical marijuana brand is IVXX, while its cultivation takes place under the brand name Edible Gardens. The company also operates retail distribution of medical marijuana under the name Blum. The OTC Markets listed company, has operations in the U.S. including a State of California Temporary Authorization to cultivate, manufacture, distribute and retail cannabis to the adult-use market. It has Blum dispensaries in Nevada and has two large cultivation facilities in the stae where production will commence after necessary State approvals. In its latest earnings report, the company declared revenues of $8.6 million for the quarter ending March 31, 2018.
Average Volume: 1,029,804
Market Cap: $83.14M
P/E Ratio (TTM): N/A
EPS (TTM): -$0.74
Pharma/Biotech
AbbVie (ABBV): Market Cap $132.9B
AbbVie is a pharmaceutical company but with a synthetic cannabis-based drug on the market. The FDA approved Marinol, which helps alleviate nausea or vomiting for chemotherapy patients. The drug also helps AIDS patients who have lost their desire to eat. It is important to note that Marinol is not AbbVie's flagship drug. In fact, it is not even the company's biggest seller. That makes investing in this company,is a way to play the marijuana trend without incurring 100% exposure to the plant.
Average Volume: 5,318,114
Market Cap: $132.9B
P/E Ratio (TTM): 18.44
EPS (TTM): $4.79
Dividend and Yield: $4.28 (4.85%)
GW Pharmaceuticals (GWPH): Market Cap $4.06B
A big win for U.K.-based GW Pharmaceuticals came on June 25, 2018 when the FDA approved the first of its kind drug derived from an active marijuana ingredient as opposed to synthetically derived cannbinol compounds. The drug, Epidiolex, has been approved for treatment of seizures associated with two rare and severe forms of epilepsy, Lennox-Gastaut syndrome and Dravet syndrome. The company is listed on Nasdaq as an American Depository Receipt (ADR).
Average Volume: 463,151
Market Cap: $4.06B
P/E Ratio (TTM): N/A
EPS (TTM): -$10.61
Cara Therapeutics (CARA): Market Cap $624.4M
This clinical-stage biotechnology company develops drugs for treatment of Pruritus and acute and chronic pain. Its product pipeline include both opioid as well as cannabinoid drugs. However, the CB agonist CR701 that makes it eligible for this list is still in its pre-clinical trial phase and a lot rides on the outcome of the trials before the stock could get a high from pot.
Average Volume: 598,427
Market Cap: $624.4M
P/E Ratio (TTM): N/A
EPS (TTM): -$1.98
Axim Biotechnologies (OTC:AXIM): Market Cap $80.4M
This biotech company is working on at least 16 drugs in varying stages of pre-clinical and Phase I & II of clinical trials. These drugs are aimed are treatments for a number of different ailments ranging from dry eyes, inflammatory bowel disease, opioid addiction and even smoking cessation.
Average Volume: 87,061
Market Cap: $80.4M
P/E Ratio (TTM): N/A
EPS (TTM): -$0.129
Ancillary Businesses:
The Scotts Miracle-Gro Company (SMG): Market Cap $3.76B
Two years ago, Jim Hagedorn, the CEO of the lawn care and garden supplies company decided to make a huge push into pot through hydroponics. In a Forbes profile titled 'Cannabis Capitalist', he said he wanted to invest half a billion dollars into hydroponics and he didn't disappoint. In fact, earlier this year the company acquired hydroponic equipment maker Sunlight Supply Inc. in a deal valued at $450 million.
Average Volume: 579,075
Market Cap: $3.76B
P/E Ratio (TTM): 61.1
EPS (TTM): $1.11
Dividend and Yield: $2.20 (3.26%)
KushCo Holdings (OTC:KSHB): Market Cap $569.4M
Founded in 2010, Kush Bottles provides packaging solutions and supplies, vaporizers as well as branding services to cannabis producers. The company operates across 12 facilities in the U.S. and as of Q2 2018(recorded in February 2018) reported revenues of $10.6 million.
Average Volume: 612,696
Market Cap: $569.4M
P/E Ratio (TTM): N/A
EPS (TTM): -$0.26
GrowGeneration Corp (OTC:GRWG): Market Cap $74.6M
This agriculture solutions company, owns and operates specialty hydroponic and organic gardening supplies stores in 17 locations across six states. These stores sell nutrients, soil, lighting and hydroponic solutions. The company that generated $14.2 million in revenue last year, in its investor presentation aims to turn profitable by Q2 2018 and its targeting $84.6 million in revenue by 2020.
Average Volume: 108,965
Market Cap: $74.6M
P/E Ratio (TTM): N/A
EPS (TTM): -$0.20
Marijuana-Business Related Services:
General Cannabis Corp (OTC:CANN): Market Cap $83.3M
The company provides a whole host of ancillary services to producers and businesses in the marijuana industry, ranging from real estate, consulting, business development and even security. The Denver, Colorado-based company even owns a specialty cannabis lifestyle apparel under the brand Chiefton Supply Co.
Average Volume: 298,173
Market Cap: $83.3M
P/E Ratio (TTM): N/A
EPS (TTM): -$0.46
Innovative Industrial Properties Inc.(IIPR): Market Cap $506.2M
This is a medical marijuana focused Real Estate Investment Trust (REIT). As of December 31, 2017, it owned five properties located in New York, Maryland, Arizona and Minnesota, totaling approximately 617,000 rentable square feet. Its investment at the end of last year stood at $68.3 million.
Average Volume: 235,526
Market Cap: $506.2M
P/E Ratio (TTM): 86.2
EPS (TTM): $0.60
Dividend and Yield: $1.40 (2.72%)
mCig Inc. (OTC:MCIG): Market Cap $102.62M
This diversified holding company operates in wide ranging areas of the marijuana industry. Its portfolio spans technology and consulting, products including vaporizers, media assets, growers and cultivators and even dispensaries.
Average Volume: 1,052,701
Market Cap: $102.62M
P/E Ratio (TTM): N/A
EPS (TTM): $0.0040
Sin Stocks Riding Cannabis Wave:
With pot's growing popularity and increasing number of states moving towards legalizing it in some form, traditional vice companies like big tobacco and alcohol began to worry about its impact on their sales. Since they couldn't beat the marijuana wave, they decided to join it. In May this year, a Moody's report said that alcohol and tobacco sales could suffer with growing pot sales but also identified that as a potential opportunity for these companies to create new product lines.
"As marijuana is legalized, it could replace alcoholic beverages on some drinking occasions, but also be used to formulate new beverages. At a time when cigarette smoking is on the decline, we expect that US tobacco companies will enter the US marijuana market, but only if marijuana becomes federally legal," said the report.
These companies have already begun to do just that.
Constellation Brands (STZ): Market Cap $30.2B
Not only did the maker of Modelo beer and Svedka invest $190 million to buy nearly 10% stake in Canopy Growth, work has actively begun towards realizing cannabis-infused non-alcoholic beverages. Canopy's CEO Bruce Linton in the earnings call in June 2018, spoke about the company contemplating packaging solutions for beverages and is confident of being ready for the market by next year. "I think we're on track to be very ready for all of the formats in 2019," he said.
Average Volume: 2,513,064
Market Cap: $30.2B
P/E Ratio (TTM): 10.03
EPS (TTM): $15.87
Dividend and Yield: $2.96 (1.96%)
Heineken N.V. (OTC:HEINY): Market Cap $50.6B
The European beverage giant's latest offering in the pot-infused product market is the Lagunitas' IPA-inspired and THC and CBD infused sparkling water called Hi-Fi Hops. Heineken completed the Lagunitas acquisition in 2017, after initially taking a 50% stake in the company. Lagunitas has tied up with medicinal marijuana company CannaCraft to add the THC/CBD ingredients to the product that will be distributed initially through dispensaries in California.
Average Volume: 79,113
Market Cap: $50.6B
P/E Ratio (TTM): 21.64
EPS (TTM): 2.06
Dividend and Yield: $0.68 (1.54%)
Molson Coors Brewing Company (TAP): Market Cap $13.7B
Molson Coors has been pretty vocal about the impact of legal pot on its business. Earlier this year, the company in its SEC filing listed legal marijuana as a risk factor to its business stating, "although the ultimate impact is currently unknown, the emergence of legal cannabis in certain U.S. states and Canada may result in a shift of discretionary income away from our products or a change in consumer preferences away from beer."
According to a June 2018 BNN Bloomberg report the company is in talks with four cannabis companies including Aurora Cannabis and Aphria Inc. (OTC: APHQF) to develop cannabis-infused beverages.
Average Volume: 2,091,835
Market Cap: $13.7B
P/E Ratio (TTM): 8.43
EPS (TTM): $7.52
Dividend and Yield: 1.64 (2.61%)
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