Buying Marijuana Stocks

Many investors are looking to make money as the marijuana market is predicted to develop at a compound annual growth rate of at least 25% until 2030. As more states and countries decriminalize or legalize cannabis and/or its parts, there are more opportunities for new businesses and businesses that have been around for a while.

But there are also a lot of investment hazards in the sector, just as in any emerging sector. It pays to know how this sector functions, whether you're a novice investor or a seasoned pro. This quick-start guide covers our selections for the best marijuana stocks and will quickly bring you up to speed.

Buying Marijuana Stocks

Top cannabis stocks to watch in 2022

  • Green Thumb Industries, Inc.

One of the biggest multistate cannabis operators in the United States is Green Thumb Industries. It runs 17 manufacturing facilities and owns 77 retail cannabis businesses spread over 15 states in the United States. Green Thumb is licensed to operate in almost twice as many stores.

Since the start of 2020, when Illinois's legal recreational marijuana market went into operation, the company has profited from rapid expansion in its home state. Given the expansion of the cannabis market in other significant states, such as New Jersey and New York, Green Thumb should have a lot of room for growth.

  • Cresco Labs

Like Green Thumb, Cresco Labs is based in Illinois. In 10 states, including six of the ten states with the highest population densities in the nation, it runs retail cannabis businesses. In the United States, Cresco is the leading wholesaler of branded cannabis products.

By making acquisitions and developing additional retail locations, the company is expanding quickly. Cresco will become the largest multistate operator in terms of revenue if it completes its impending acquisition of Columbia Care (OTC:CCHWF). Following the transaction's completion, Cresco will operate in 18 U.S. markets, including 12 states where the yearly cannabis market is worth more than $1 billion.

  • Innovative Industrial Properties

Since marijuana is still illegal on a federal level, American cannabis businesses find it difficult to obtain financing from banks or other financial organizations. Innovative Industrial Properties (IIP) assists expanding marijuana businesses by addressing their cash flow issues. It purchases real estate from American medicinal cannabis business owners and leases it back to them. The cannabis operator receives much-needed cash from the land sale to IIP, and IIP receives a consistent income stream from the leasing agreements.

With recent expansion, Innovative Industrial Properties now has properties in 19 different states. The company's revenue and earnings growth is still very high. Innovative Industrial Properties (IIP) distributes at least 90% of its taxable revenue to shareholders because IIP is set up as a real estate investment trust (REIT).

  • GrowGeneration

Another auxiliary supplier is GrowGeneration, the biggest cannabis-specific specialty retail chain. The rapidly expanding demand for hydroponic supplies—used to grow plants in liquid nutrient solutions without soil and for organic gardening—has been fueled by the developing U.S. cannabis sector.

Due to an overabundance of cannabis, the hydroponics industry has been weak. GrowGeneration has faced obstacles as a result of this. Long-term growth prospects for the business are still positive, though.

  • Scotts Miracle-Gro

The market dynamics GrowGeneration is dealing with also apply to ScottsMiracle-Gro. A top provider of hydroponic farming supplies to the cannabis market is the firm's Hawthorne Gardening division. Despite some short-term difficulties, Hawthorne should have a substantial development potential over the long term.

Despite being a key growth driver for Scotts, Hawthorne Gardening still accounts for the majority of the company's total sales. Margin pressure from rising commodity prices is currently affecting this company. The business's consumer lawn and garden products provide a somewhat stable counterpoint to its cannabis supply unit, nevertheless.

  • Jazz Pharmaceuticals 

Ireland-based In May 2021, Jazz Pharmaceuticals purchased the cannabis-focused biotech firm GW Pharmaceuticals. The US Food and Treatment Administration has authorized GW's drug Epidiolex as the first cannabis-based medication (FDA). With sales of $658.3 million in 2021, the drug Epidiolex, which treats two uncommon types of pediatric epilepsy and tuberous sclerosis complex, a rare illness in which benign tumors develop on organs, has been a huge financial success.

Jazz is also looking into nabiximols, a different cannabis option, in late-stage clinical tests to treat spasticity brought on by multiple sclerosis. The business also sells medications for cancer and sleep disorders in addition to cannabis products.

An overview of the marijuana market in a nutshell

Let's go through some of the fundamentals you should be aware of before buying marijuana stocks.

  • Three major divisions may be made in the marijuana industry: Cannabis goods are grown, packaged, and sold to customers by marijuana shops and growers. Pharmaceuticals made from cannabis are created and marketed by biotechnology businesses. Cannabis businesses can get goods and services from companies that don't touch the plant at all.
  • Cannabis is both a medical and a recreational drug. Patients who use cannabis or cannabis extracts for medical purposes receive recommendations or prescriptions for cannabis from their doctors. When they buy marijuana or cannabis extracts, people who use cannabis for fun must be at least 18 years old and live in a state where it is legal to do so.
  • Medical marijuana is legal in a much larger number of countries than recreational marijuana. Cannabis is still prohibited at the federal level in the United States. Nevertheless, an increasing number of states have legalized cannabis for either medical or recreational use. Marijuana businesses in Canada, where the plant is now fully legal on a national level, are growing more slowly than those in the United States, where the cannabis market is booming quickly. Canada is one of the legal international markets for cannabis where the supply is more than the demand, causing prices to go down.

COVID-19's effect on marijuana stock prices

Nearly every sector of the world economy was impacted by the COVID-19 epidemic, including the cannabis sector. Cannabis dispensaries are classified as essential industries in many American states. During the first several months of the coronavirus outbreak, cannabis sales soared in some states, fueled in part by more time spent at home and elevated anxiety. Growers, distributors, and sellers of marijuana benefited, as did ancillary suppliers that sell these businesses things like gardening tools and other tchotchkes.

Not all cannabis businesses, nevertheless, fared well during the pandemic. Retailers of recreational cannabis in popular tourist areas like Las Vegas noticed a decline in client traffic, which prompted some of these outlets to begin concentrating on home delivery. People postponed doctor visits, which decreased the number of new patient starts in the medical sector. The biotech industry's logistical challenges hampered sales and research progress.

The worst of COVID-19's effects on the cannabis market seems to be behind us, although certain consequences are still being felt.

Are marijuana stocks a good investment for you?

You don't necessarily need to invest in a fashionable new industry just because it has a lot of media attention and room for expansion. If you invest in broad-based index funds, you are protected no matter which stock market sectors perform well. Marijuana stocks are probably best avoided by conservative investors who desire reduced risk.

Marijuana stocks likely have a lot to appeal to aggressive investors with high risk thresholds. The cannabis business has immense potential, especially as more U.S. states legalize it as the industry is still in its infancy. Stock investing is a high-risk but perhaps high-reward endeavor.


 Three Investments That Will Ensure Financial Independence