What Are the Best Cannabis Stocks for Investment?
The green rush has elevated investors looking for the best cannabis stocks to invest in. But which ones should we be watching in 2021?
Here’s our list of the best cannabis stocks to consider if you’re a marijuana investor:
Scotts Miracle-Gro (NYSE: SMG)
Scotts Miracle-Gro (NYSE: SMG) is one of the best cannabis stocks around. The company doesn’t produce cannabis, so there’s no need to worry about compliance-related issues or other variables that could impact its earnings results. Since Scotts is a gardening business that has shifted towards the cannabis market with its Hawthorne segment, it has become somewhat of a must-buy. This acquisition still drives a lot of growth for the company.
Hawthorne is the Scotts segment that provides hydroponic gardening equipment to the cannabis sector. This type of grow system incorporates pipes and pumps while taking up just a small fraction of the space a garden or greenhouses needs, making it an excellent option for cannabis enthusiasts. Hydroponics also doesn’t demand soil, facilitating home grow setups and allowing people to set up their own grows in their homes. These features have made Hawthorne’s products in demand for consumers looking to cultivate their own cannabis and businesses interested in incorporating efficiency to their operations.
To provide a bit of background insight as to why this is one of the best cannabis stocks for investing, the company released its year-end results for the period that ended September 30. Impressively, the revenue of $4.1 billion was up 31% from a year ago because it profited from an increase in its key segments. The company’s U.S. consumer segment featuring conventional gardening products grew a massive 90% during the fourth quarter and was up 24% for the full fiscal year.
One of the main reasons it experienced this spike is that people have spent so much time at home amidst the pandemic. Gardening activities have become increasingly popular.
All the while, the Hawthorne business also generated impressive numbers. This segment was up over 61% throughout the entire year and 68% in the fourth quarter. In all, Scotts reported profits of $388.6 million during fiscal 2020, 16% less than in 2019. However, the company claims this was the result of non-operating income.
While everyone is hoping the pandemic will end shortly with vaccines for COVID-19 becoming available, this slow-down isn’t expected for several months. As lockdowns continue throughout the country and the number of COVID-19 cases rise, we expect people to remain at home for much of 2021. With this being the case, this could mean the demand for gardening tools and equipment will stay strong. Since four new states have recently passed legislation to legalize recreational cannabis use, we can expect the demand for cannabis cultivation equipment to rise this year, making Scotts one of the best cannabis stocks to invest in at the moment.
Scotts Miracle-Gro has a cheap valuation, is profitable, and has plenty of growth potential, making it a top cannabis stock to buy in 2021.
Village Farms International (NASDAQ: VFF)
Village Farms International (NASDAQ: VFF) is also one of the best cannabis stocks available now. This British Columbia-based company has reported $122.7 million in sales over the last nine months, which experienced 10% growth from the same period the previous year. The company has generated $4.6 million in profit during that time, and while this is down from $9.5 million last year, we can expect the company’s numbers to improve in 2021.
On Nov. 2, Village Farms International announced its acquisition of Pure Sunfarms. While it had a majority stake at 58.7%, it purchased Emerald Health’s ownership for $60 million. Now that Village Farms owns 100% of the low-cost greenhouse operation, we can expect the company to benefit from Pure Sunfarms’ profits in its totality. Pure Sunfarms has turned a profit for seven successive periods, and we can expect this trend to continue now that Village Farms owns it wholly.
Even though the company’s gross margins fell from 75% to 40% over the last year, Pure Sunfarms still generated $9.4 million in profit over the nine-month period ending September 30. While that’s down 61% from the $24.1 million profit the company generated last year, we still expect it to increase Village Farms’ bottom line.
Since this acquisition, Village Farms has become more competitive, making it one of the best affordable cannabis stocks to purchase in 2021.
Green Thumb Industries (OTC: GTBIF)
Green Thumb Industries (OTC: GTBIF) is a vertically integrated multistate operator too. With 50 operational dispensaries in hand, the company holds 96 licenses across a dozen states. Thus, this company is now one of the top three publicly traded MSOs, based on licenses held.
The selectivity and product mix Green Thumb provides makes it attractive. It has placed much of its attention on states offering billion-dollar annual sales potential by mid-decade, showing its focus is on scalability. The company has bought its way into Illinois and Nevada markets. Since Illinois is a limited license state, Green Thumb has a massive opportunity to get its fair share of the market. In Nevada, the industry relies on tourism. However, this state is expected to become the top spot for per-capita cannabis spending by 2024.
Green Thumb dispensaries focus on selling derivatives of cannabis. This category includes vapes, concentrates, topics, infused beverages, and edibles. The fact that dried cannabis flower is easy to oversupply and commoditize has caused the company to work hard at generating two-thirds of its revenue from derivatives. These efforts have increased Green Thumb’s margins and skyrocketed it toward recurring profitability, bypassing its competitors with ease.
We feel that with all of this working for Green Thumb, there’s no reason why it shouldn’t be considered one of the best cannabis stocks for investing. Between its current practices and its surpassing $1 billion in annual sales, we expect this company to achieve recurring profitability this year.
If you’re looking for the best marijuana stock to invest in, you can’t underestimate Jushi Holdings (OTC: JUSHF). With 13 operational dispensaries and licenses to open over two dozen locations in around a half-dozen states, Jushi could be a solid investment.
Jushi’s plans include building its presence in limited license states. These states limit the total number of retail licenses they’re willing to issue or assign licenses based on the territory or county. Most of Jushi’s potential 2021 revenue should come from Illinois, Virginia, and Pennsylvania, all of which are limited license states. With this focus on placement, Jushi should have no trouble bypassing competition as it continues to grow its brand.
Another unique factor to consider is how Jushi’s insiders and executives invested their own money to build the business. A recent investor presentation highlights that $45 million of the nearly $250 million in capital raised since Jushi’s inception came from insiders and executives. With so much skin in the game, this is usually a positive sign for investors.
Jushi is expected to generate positive earnings before interest, taxes, amortization, and depreciation as it seeks to triple its year-over-year sales. Thus, it’s no wonder why we believe this is one of the best marijuana stocks on the market today with plenty of potential for earnings.
GrowGeneration (NASDAQ: GRWG)
Savvy investors looking for the best cannabis stocks to invest in need not look further than GrowGeneration (NASDAQ: GRWG). Even though it had a huge run-up in 2020, this hydroponic and organic gardening solutions retail chain will likely have another incredible year.
With state-level legalizations continuing across the country, we expect legal cannabis revenues to keep skyrocketing. More producers will make their way into the industry, looking for a piece of what some believe will become a $75 billion annual market in the U.S. alone by 2030. GrowGeneration supplies all of the equipment large and small cultivators use to improve their yield and protect their crops from a wide assortment of threats. GrowGen, as some people call the company, has 36 stores operating in 11 states as of mid-November. The company plans to continue increasing its retail operations to reach 50 stores in 15 states by the end of 2021.
GrowGen’s year-over-year sales growth has ranged from 123% to 199% over the last seven quarters. What’s more is how its online sales are growing by low triple-digit percentages, with same-store sales growth from its locations open in Q3 2019 rising by 73% this last quarter. But the growth isn’t based on acquisitions; instead, GrowGen is observing this rise in sales from its new acquisitions and existing locations.
However, the company’s acquisitions have contributed to GrowGen’s expansion. Since 2014, it has made around a dozen purchases, with the newest adding five new West Coast locations.
So for those interested in investing in a fast-growing company focused on increasing its profits, GrowGen is one of the best marijuana stocks on the market.
Cresco Labs (OTC: CRLBF)
Let’s not forget about all that Cresco Labs (OTC: CRLBF) has been doing to ensure it’s one of the top cannabis stocks in 2021. This company is on a fast-track for growth, focusing on two catalysts propelling it ahead of the competition.
Cresco’s presence in nine states and holdings of 29 dispensaries make it extremely competitive. Right now, it has 19 operational locations, with around half of them operating in Illinois. Since this is a limited license state, Cresco has had little trouble dominating its share of the market and is on track to reach over $1 billion in annual sales either by or before 2024.
Another significant catalyst is the company’s wholesale segment. During January 2020, Cresco’s all-stock acquisition of Origin House was closed upon. As one of the few companies holding a cannabis distribution license in the Cali market, this deal lets Cresco Labs place its cannabis products in more than 575 dispensaries. Even as Cali continues opening more dispensaries, Cresco’s wholesale opportunity expands.
Similar to Green Thumb, Cresco Labs should reach recurring profitability in 2021. We believe it has the potential to reach $1 billion in annual sales by 2022, making it one of the best marijuana stocks investors can purchase at this point.
Perhaps you have one we might have missed? What are the best cannabis stocks you’ve been following? List them in the comments below!