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Investing in Marijuana Stocks

Updated: March 23, 2022, 11:06 a.m.

The marijuana industry is expected to double in value past 2025, and many investors are seeking to turn a profit. As states and entire countries decriminalize or legalize cannabis and/or its components, there are growing opportunities for entrepreneurs and existing companies.

But, as in whatsoever nascent industry, in that location are also plenty of investment risks. Whether you're a first-time investor or a seasoned veteran, it pays to understand how this industry works. This guide volition become you up to speed quickly and includes our picks for the top marijuana stocks.

Best marijuana stocks in 2022

Visitor	Description
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)	Coincident provider
Scotts Miracle-Gro (NYSE:SMG)	Ancillary provider
Jazz Pharmaceuticals (NASDAQ:JAZZ)	Biotech

Source: Business Wire

i. Green Pollex Industries

Dark-green Pollex Industries (OTC:GTBIF)owns retail cannabis stores in 12 states across the U.South. and operates 13 manufacturing facilities. Green Thumb holds licenses for 96 retail cannabis locations just has opened simply a little over half that many stores.

With the legal recreational marijuana market in Illinois opening for business organization at the beginning of 2020, this company is benefiting from tremendous growth in its home state. Forth with the opportunity to expand into additional states such equally New York and New Bailiwick of jersey, the company has pregnant growth potential.

2. Trulieve Cannabis

Trulieve Cannabis (OTC:TCNNF) is a cannabis grower and retailer that focuses primarily on the Florida medical marijuana market place. The company dominates in the Sunshine Country by accounting for near 50% of total cannabis sales and has been consistently assisting since 2017 -- an achievement few other marijuana companies can claim. Its sales and earnings also continue to soar.

Trulieve plans to acquire Harvest Wellness & Recreation (OTC:HRVSF) in a deal that volition boost its presence in several other states and make it the almost profitable multi-land marijuana concern in the country.

3. Innovative Industrial Backdrop

U.S. cannabis companies tin can't easily secure upper-case letter from banks or financial institutions since marijuana remains illegal at the federal level. Innovative Industrial Properties (NYSE:IIPR) helps to solve that cash shortage for growing marijuana companies by buying properties owned by U.Due south. medical cannabis operators and leasing those same properties back to them. The holding sale to IIP provides the cannabis operator with much-needed cash, and the lease agreements create a steady revenue stream for IIP.

The COVID-19 pandemic disrupted IIP's business somewhat, with three tenants receiving temporary rent deferrals. The coincident company has still grown phenomenally during the pandemic and is highly profitable. Because the company is organized equally a real estate investment trust (REIT), IIP returns at least xc% of its taxable income to shareholders.

4. GrowGeneration

GrowGeneration (NASDAQ:GRWG) is another ancillary provider and the largest specialty retail chain focused on the cannabis market. The booming U.Southward. cannabis industry has created fast-growing demand for hydroponics supplies, which are used to grow plants in liquid food solutions without soil and for organic gardening.

While much of GrowGeneration's business caters to cannabis growers, the company also sells to other types of gardeners. GrowGeneration has benefitted from the COVID-xix pandemic due to the surge in customers pursuing organic gardening at home.

5. Scotts Phenomenon-Gro

Scotts Miracle-Gro (NYSE:SMG) is another visitor benefiting from the same trends that have additional GrowGeneration'south sales. The company's Hawthorne Gardening subsidiary ranks as a leading supplier of hydroponic gardening products to the cannabis manufacture.

Although Hawthorne is the master growth driver for Scotts, the visitor yet makes well over one-half of its total acquirement from sales of its consumer lawn and garden products. This business has also benefited from the COVID-19 pandemic.

half dozen. Jazz Pharmaceuticals

Jazz Pharmaceuticals (NASDAQ:JAZZ) acquired the cannabis-focused biotech company GW Pharmaceuticals in May 2021. GW'due south drug Epidiolex is the beginning cannabis-based medicine to be approved by the U.Due south. Food and Drug Administration (FDA). Epidiolex, which treats two rare forms of babyhood epilepsy, is generating sales that are routinely surpassing expectations. While new patient starts for Epidiolex slowed slightly with the COVID-19 pandemic, the company has continued to evangelize strong revenue growth.

The FDA besides approved Epidiolex in August 2020 to treat tuberous sclerosis complex (TSC), a rare organ affliction. This approval opens up a significant new market for Epidiolex since around 50,000 people in the U.South. and roughly one one thousand thousand people worldwide accept the disease.

A brief overview of the marijuana industry

Offset, allow'due south cover some of the nuts you need to know before investing in marijuana stocks:

The marijuana manufacture is divided into iii broad categories: Marijuana growers and retailers cultivate and package cannabis products and sell them to consumers. Biotechnology companies develop and market place cannabis-based pharmaceutical drugs. Ancillary marijuana businesses provide products and services to cannabis companies without touching the plant.
Cannabis can be medical or recreational: Medical cannabis patients employ cannabis or cannabis extracts to treat health conditions and have recommendations or cannabis prescriptions from physicians. Recreational cannabis users purchase marijuana or cannabis extracts purely for enjoyment and must be age 18 and older and living in a jurisdiction where recreational use of the establish is legal.
Geography matters: Medical cannabis is legal in many more countries than recreational cannabis. In the U.S., cannabis remains illegal at the federal level. However, a growing number of states have legalized medical and/or recreational cannabis. The rapid growth of the U.Southward. cannabis market is translating into impressive growth by U.S.-based cannabis companies, while marijuana companies in Canada -- where the institute is already fully legal nationwide -- are expanding more slowly. Canada is i of the global legal markets where supply is outpacing demand and leading to falling cannabis prices.

Marijuana Stocks include growers and retailers, biotechnology companies, and ancillary marijuana businesses, like those that sell soil and fertilizers necessary for marijuana to grow.

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Touch of COVID-19 on marijuana stocks

The COVID-19 pandemic has affected nearly every office of the global economy, including the cannabis industry. In many U.Southward. states, cannabis dispensaries were designated every bit essential businesses. Cannabis sales boomed in some states during the first few months of the coronavirus outbreak, driven in function by more than fourth dimension spent at home and increased feet. Marijuana growers and retailers benefited, as did ancillary providers selling gardening supplies and other products to these companies.

Still, not all cannabis companies accept fared well in the pandemic. Recreational cannabis retailers in tourist destinations such as Las Vegas saw their customer traffic dwindle, causing some of these dispensaries to start focusing on home delivery. In the medical segment, people delayed medico visits, causing new patient starts to drop. Biotech companies experienced logistical challenges that afflicted sales and research progress.

Many U.South. cannabis companies appear to be performing well in the wake of the COVID-19 pandemic. However, several Canadian marijuana companies continue to face headwinds, with restrictions on retail cannabis stores however in place.

Simply, Really, Should I Buy Marijuana Stocks?

Just because there'due south a trendy new sector with lots of press and potential growth doesn't hateful you demand to invest in it. If you lot buy broad-based index funds, y'all're covered no affair which sectors of the stock market do well. Bourgeois investors who adopt lower risk are likely improve off fugitive investing in marijuana stocks.

But ambitious investors with high adventure tolerances will probably find a lot to like most marijuana stocks. The cannabis industry is notwithstanding in its early stages, and the marketplace opportunities are enormous, especially every bit more U.S. states legalize cannabis. Investing in pot stocks is a high-hazard simply potentially loftier-reward proposition.