With the potential for further legalization, here are seven leading stocks to consider
- ETFMG Alternative Harvest (MJ): Diversification among top cannabis stocks, low cost.
- The Cannabis ETF (WEED): Even more diversification with low expenses.
- AFC Gamma (AFCG): AFC Gamma has a dividend yield of 18.64%.
- Continue reading for the complete list of cannabis stocks!
Cannabis stocks could see higher highs with several key catalysts. For one, just last year, President Biden lit a massive fuse for the cannabis industry. In fact, he took executive action to change U.S. policy on the drug, pardoning all prior federal offenses of simple cannabis possession. Biden also asked federal officials to start a review process of how marijuana is “scheduled” or classified under federal law.
Two, more U.S. states legalized its use. Three, according to Pew Research, nearly 91% of Americans want to see legalization. Even better, according to Tilray CEO Irwin Simon, as quoted by Yahoo Finance: “The US is $100 billion opportunity in cannabis. If you look at cannabis today in the US, 93% of Americans want medical cannabis legalized and about 63%, 65% want adult use. Today, it’s legal in about 33 states, plus DC. So, it’s out there that everybody– well, not everybody, but a majority of people want cannabis legally.”
Four, we’re starting to see legalization or potential legalization worldwide, including in Mexico, Canada, and Germany, which could ignite a legalization boom throughout Europe. For those reasons alone, some of the top stocks to consider include:
Data last updated: March 23, 2023 8:40 PM EDT
|MJ||ETFMG Alternative Harvest ETF||$3.49|
|WEED||The Cannabis ETF||$5.05|
|AFCG||Afc Gamma Inc||$12.00|
|NLCP||Newlake Capital Partners Inc||$12.17|
|IIPR||Innovative Industrial Properties||$73.55|
|SMG||Scotts Miracle-Gro Company||$67.62|
|CGC||Canopy Growth Corp||$1.90|
Cannabis Stocks: ETFMG Alternative Harvest (MJ)
Starting off this list of hot cannabis stocks is an ETF. With any hot investment opportunity, ETFs are some of the best ways to diversify at low cost. With an expense ratio of 0.75%, the ETFMG Alternative Harvest (NYSEARCA:MJ) tracks the Prime Alternative Harvest, which measures the performance of global medicinal and recreational cannabis stocks. Some of its top holdings include Tilray Brands (NASDAQ:TLRY), Canopy Growth (NASDAQ:CGC), Cronos Group (NASDAQ:CRON), AFC Gamma (NASDAQ:AFCG), and Organigram Holdings (NASDAQ:OGI), to name a few.
Cannabis Stocks: The Cannabis ETF (WEED)
Another ETF to consider is The Cannabis ETF (BATS:WEED). With an expense ratio of 0.75%, WEED invests in cannabis producers and distributors, related technology companies, and cannabis-related ancillary businesses. All in an effort to take advantage of a potential $61 billion global cannabis market by 2026, according to Roundhill Investments. Its top five holdings include Curaleaf (OTCMKTS:CURLF), Trulieve (OTCMKTS:TCNNF), Verano (OTCMKTS:VRNOF), Cresco Labs (OTCMKTS:CRLBF), and Green Thumb Industries (OTCMKTS:GTBIF).
Cannabis Stocks: AFC Gamma (AFCG)
Or, you can always get paid to wait for the cannabis recovery with AFC Gamma. With a dividend yield of 18.64%, AFC Gamma is a commercial mortgage real estate investment trust that provides financing to the cannabis industry through loans. AFC Gamma is not a landlord. Instead, the company offers financing, such as mortgage and construction loans, to help cannabis companies. After all, thanks to federal laws, companies can’t get regular financing from banks.
The company also just posted earnings. Its GAAP net income came in at $2.9 million, or 14 cents per share, with distributable earnings of $12.6 million, or 62 cents per share. For the full year, the company reported a GAAP net income of $35.9 million or $1.80 per share and distributable earnings of $49.9 million or $2.51 per share.
NewLake Capital Partners (NLCP)
Or, look at NewLake Capital Partners (OTCMKTS:NLCP). With a yield of 11.43%, the company provides real estate capital to state-licensed cannabis operators. NewLake has “a portfolio of 32 cultivation facilities and dispensaries that are leased to single tenants on a triple-net basis,” which means tenants are responsible for paying monthly base rent, as well as insurance, maintenance, taxes, and utilities associated with leased properties.
Most recently, NLCP posted fourth-quarter and full-year earnings. For the quarter, revenue jumped 35.7% to $12.2 million year-over-year. Net income jumped to $6.7 million from $4.3 million. Meanwhile, funds from operations diluted were up 51% to $10.5 million. For the full-year, revenue jumped about 60% to $44.8 million YOY. Net income nearly doubled to 22 million from $11.2 million. FFO was up 79.1%.
Innovative Industrial Properties (IIPR)
Another cannabis REIT to consider is Innovative Industrial Properties (NYSE:IIPR). With a yield of about 9%, IIPR is a real estate investment trust with 110 properties and approximately 8.7 million rentable square feet that it leases to state-licensed cannabis operators.
Earnings have been solid. The company saw total revenues of about $276.4 million, net income attributable to common stockholders of approximately $153.0 million, and adjusted funds from operations of about $233.7 million, representing increases of 35%, 36%, and 34% over 2021, respectively. For its fourth quarter, the company saw total revenues of approximately $70.5 million in the quarter, representing a 20% increase YOY.
Scotts Miracle-Gro (SMG)
Dirt cheap, Scotts Miracle-Gro (NYSE:SMG) may be one of the best cannabis-related stocks. Manufacturing and selling consumer lawn, garden, and pest control products, including hydroponics equipment and cultivation lights for the indoor growing of customers, the company is also greatly exposed to the cannabis industry with its subsidiary Hawthorne.
Not only does it pay out a yield of 3.61%, but it’s also been actively acquiring other companies for greater exposure to cannabis. In fact, it acquired Sunlight Supply Inc., the largest distributor of hydroponic products in the U.S., for $450 million. It also acquired Luxx Lighting Co. for $215 million and Liberty Bags for $10 million.
Canopy Growth (CGC)
While recent earnings haven’t been much to write home about, don’t write Canopy Growth off. With global expansion efforts, a potential $50 billion opportunity in the U.S., and the potential for further state and hopeful federal legalization, CGC could be a solid long-term bet.
Over the last few months, the company announced it closed its fourth quarter with $789 million in cash and equivalents, giving it flexibility with organic and inorganic growth. Plus, the company may be able to post lower EBITDA losses in 2023, with plans to cut costs by $140 million to $160 million.
Also, according to CEO David Klein, “Canopy must reach profitability to achieve our ambition of long-term North American cannabis market leadership. We are transforming our Canadian business to an asset-light model and significantly reducing the overall size of our organization. These changes are difficult but necessary to drive our business to profitability and growth.”
This post originally appeared at InvestorPlace.
On the date of publication, Ian Cooper did not have (either directly or indirectly) any positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.