Should I invest in weed stocks? Here’s our top 3 cannabis stock picks

By: Ilija Rankovic
Ilija Rankovic
Ilija is a trader, analyst, writer and consultant with a prolific experience in the finance industry. He focuses on… read more.
on Feb 11, 2021
  • The cannabis market might be an interesting pick, especially after Reddit traders stepping in.
  • The industry has a lot to offer, with numerous companies with strong fundamentals.
  • Analysts speculate that massive long-term gains will happen only if Washington passes the SAFE Banking act.

Should you invest in cannabis stocks, and what are some good stocks to check out?

Current state of the industry

The cannabis industry includes companies that either support or are engaged in the research & development, distribution, or sale of medical and recreational cannabis.

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While the industry performed rather poorly throughout 2020, investors are hoping for a good year as regulators discuss legalization. On top of that, the Reddit group that sparked GameStop Corp’s price growth pushed the cannabis industry up.

Cannabis has started to gain wider acceptance and has been legalized numerous nations, states, and other jurisdictions for recreational, medicinal, as well as other uses. Some of the world’s biggest companies in the industry include Canopy Growth Corp. (NYSE: CGC) and Cronos Group Inc. (NASDAQ: CRON). Many large marijuana companies continued posting sizable net losses as they focus on reinvesting into growth.

Top 3 cannabis stocks

Here is the list of our top marijuana stocks at the moment.

Aphria

Aphria (TSE: APHA) doesn’t seem like a good investment at first – with its $120.6 million loss in its last reported quarter, a year-over-year loss increase of $115.5 million. However, the company actually earned $0.01 per share, up from a $0.19 loss. Its revenues also went up 33% year-over-year.

“Our market-leading adult-use cannabis brands sales stayed strong and our international medical cannabis sales are now off to a solid start,” Aphria’s CEO Irwin Simon stated in the earnings release. This statement helped propel APHA shares 174% in January.

The company is currently Canada’s market share leader, especially in Ontario, where retail sales continues growing rapidly.

Neptune Wellness Solutions

While it specializes in cannabis and industrial hemp extraction, Neptune Wellness Solutions (NASDAQ: NEPT) is considered a diversified health and wellness company. Neptune also offers nutrition products, pet supplements, and other natural hemp-based remedies. Headquartered in Canada, the company operates its extraction and processing facilities in North Carolina and its laboratory and production facilities in Canada.

Neptune boasts a 12-month trailing P/S ratio of 3.7, but also a year-over-year revenue growth of 340.5%. The stock climbed 20.7% on Wednesday after the announcement of the company purchasing a controlling interest in Sprout Foods from Morgan Stanley for $6 million in cash and $12 million in stock. 

Neptune’s wide range of products could be a great asset for the company, as its customers can find everything cannabis-related in one place.

Jushi Holdings

Jushi Holdings (OTC: JUSHF) is a company that increased its price tenfold since March 2020 coronavirus crash. The stock has recently dropped in price, but was on the verge of breaking the $1 billion valuation.

After company’s announcement that it would record between $32 and $33 million in Q4 sales, Jushi is on track to deliver $81 million in 2020 revenue, as well as (company-estimated) $205 to $255 million in current-year sales. If the estimate ends up being correct, Jushi is on track to become the fastest-growing pot stock in 2021.

Jushi Holdings does most of its business in Virginia, Illinois, and Pennsylvania, with Illinois sales breaking the $1 billion mark in 2020.

Summary

Marijuana industry investors are used to waiting for better times, and that time may be this year. Some of the aforementioned stocks could be great investments in the long run, regardless of regulators’ future stance on marijuana.

When talking about massive returns, everything depends on Washington’s decision on whether it will take steps towards passing the SAFE Banking Act. Passing this act would allow legal cannabis businesses to work with various financial institutions, which could be of tremendous help to smaller businesses.

However, when it comes to short-term gains, investors might want to pay attention to traders coming from Reddit.

Where to buy right now

To invest simply and easily, users need a low-fee broker with a track record of reliability. The following brokers are highly rated, recognised worldwide, and safe to use:

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