The marijuana industry's value is expected to double by 2025, and many investors are looking to capitalize. As states and entire countries decriminalize or legalize cannabis and/or its components, opportunities for entrepreneurs and existing businesses expand.
But, as in any nascent industry, there are also plenty of investment risks. It pays to understand how this industry works, whether you're a first-time investor or a seasoned veteran. This guide will quickly get you up to speed and includes our top marijuana stock picks.
Best marijuana stocks in 2022
Green Thumb Industries (OTC:GTBIF) Marijuana grower and retailer
Trulieve Cannabis (OTC:TCNNF) Marijuana grower and retailer
Innovative Industrial Properties (NYSE:IIPR) Ancillary provider
GrowGeneration (NASDAQ:GRWG) Ancillary provider
Scotts Miracle-Gro (NYSE:SMG) Ancillary provider
Jazz Pharmaceuticals (NASDAQ:JAZZ) Biotech
Cannabis can be medical or recreational: Medical cannabis patients use cannabis or cannabis extracts to treat health conditions and have recommendations or cannabis prescriptions from physicians.
1.Green Thumb Industries
Green Thumb Industries (OTC:GTBIF) owns retail cannabis stores in 12 states and operates 13 manufacturing facilities. Green Thumb has licenses for 96 retail cannabis locations but has only opened slightly more than half of that number.
With the legal recreational marijuana market in Illinois set to open in early 2020, this company stands to benefit from tremendous growth in its home state. The company has significant growth potential, as well as the opportunity to expand into additional states such as New York and New Jersey.
2.Green Thumb Industries
Trulieve Cannabis (OTC:TCNNF) is a cannabis grower and retailer based in Florida that primarily serves the medical marijuana market. The company dominates in Florida, accounting for nearly half of total cannabis sales, and has been consistently profitable since 2017 – an accomplishment few other marijuana companies can boast. Its sales and earnings are also increasing.
Trulieve intends to acquire Harvest Health & Recreation (OTC:HRVSF) in a transaction that will expand its presence in several other states and make it the most profitable multi-state marijuana company in the country.
3.Green Thumb Industries
Marijuana remains illegal at the federal level, making it difficult for cannabis companies in the United States to obtain capital from banks or financial institutions. Innovative Industrial Properties (NYSE:IIPR) assists growing marijuana companies in overcoming cash shortages by purchasing properties owned by US medical cannabis operators and leasing them back to them. The property sale to IIP provides much-needed cash to the cannabis operator, while the lease agreements provide IIP with a consistent revenue stream.
The COVID-19 pandemic caused some disruption in IIP's business, with three tenants receiving temporary rent deferrals. Despite the pandemic, the ancillary company has grown exponentially and is highly profitable. Because IIP is structured as a real estate investment trust (REIT), it must return at least 90% of its taxable income to shareholders.
4.Green Thumb Industries
GrowGeneration (NASDAQ:GRWG) is another ancillary provider and the largest cannabis-focused specialty retail chain. The thriving cannabis industry in the United States has resulted in a surge in demand for hydroponics supplies, which are used to grow plants in liquid nutrient solutions without soil and for organic gardening.
While cannabis growers account for the majority of GrowGeneration's business, the company also sells to other types of gardeners. GrowGeneration has benefited from the COVID-19 pandemic as a result of an increase in customers interested in organic gardening at home.
5.Green Thumb Industries
Scotts Miracle-Gro (NYSE:SMG) is another company benefiting from the same trends that have increased sales at GrowGeneration. Hawthorne Gardening, a subsidiary of the company, is a leading supplier of hydroponic gardening products to the cannabis industry.
Despite the fact that Hawthorne is Scotts' primary growth driver, the company still generates well over half of its total revenue from consumer lawn and garden products. The COVID-19 pandemic has also benefited this industry.
6.Green Thumb Industries
In May 2021, Jazz Pharmaceuticals (NASDAQ:JAZZ) acquired GW Pharmaceuticals, a cannabis-focused biotech company. Epidiolex, manufactured by GW Pharmaceuticals, is the first cannabis-based medicine to be approved by the US Food and Drug Administration (FDA). Epidiolex, which treats two rare types of childhood epilepsy, is consistently outselling expectations. While the COVID-19 pandemic slowed new patient starts for Epidiolex, the company has maintained strong revenue growth.
In August 2020, the FDA approved Epidiolex to treat tuberous sclerosis complex (TSC), a rare organ disease. This approval opens up a significant new market for Epidiolex, as the disease affects approximately 50,000 people in the United States and approximately 1 million people worldwide.
But, Really, Should I Buy Marijuana Stocks?
Just because a trendy new sector is getting a lot of press and has a lot of potential growth doesn't mean you should invest in it. If you invest in broad-based index funds, you are protected regardless of which sectors of the stock market perform well. Conservative investors who prefer lower risk should probably avoid investing in marijuana stocks.
Marijuana stocks, on the other hand, are likely to appeal to aggressive investors with high risk tolerances. The cannabis industry is still in its early stages, but the market opportunities are enormous, especially as more U.S. states legalize cannabis. Investing in marijuana stocks is a high-risk, high-reward proposition.
Getting started with investing is easy. If you learn about the basic types of investments and find the right Stock Advisor, you can begin making more informed financial choices for the future.