Momentum investing is a factor-based investing strategy in which you invest in a stock whose price has risen faster than the market has as a whole. Momentum investors believe that stocks that have outperformed the market will often continue to do so because the factors that caused them to outperform will not suddenly disappear. In addition, other investors, seeking to benefit from the stock’s outperformance, will often purchase the stock, further bidding its price higher and pushing the stock higher still. These are the stocks that had the highest total return over the past 12 months.
These are the marijuana stocks with the highest year-over-year (YOY) sales growth for the most recent quarter. Rising sales can help investors identify companies that are able to grow revenue organically or through other means, and find growing companies that have not yet reached profitability. In addition, earnings per share can be significantly influenced by accounting factors that may not reflect the overall strength of the business. However, sales growth can also be potentially misleading about the strength of a business, because growing sales on money-losing businesses can be harmful if the company has no plan to reach profitability.
Marijuana stocks, as represented by the ETFMG Alternative Harvest ETF (MJ), have dramatically underperformed the broader market. MJ has provided a total return of -28.6% over the past 12 months, well below the Russell 1000’s total return of 25.2%. These market performance numbers and all statistics in the tables below are as of Jan. 6, 2022.
The marijuana industry is made up of companies that either support or are engaged in the research, development, distribution, and sale of medical and recreational marijuana. Cannabis has begun to gain wider acceptance and has been legalized in a growing number of nations, states, and other jurisdictions for recreational, medicinal, and other uses. Some of the biggest companies in the marijuana industry include Canopy Growth Corp. (CGC), Cronos Group Inc. (CRON), and Tilray Inc. (TLRY). Many big marijuana companies have continued to post sizable net losses as they focus on investing in equipment to speed up revenue growth.
Fastest Growing Marijuana Stocks
Below we look at the top five marijuana stocks with the best value, the fastest growth, and the most momentum.
These are the marijuana stocks with the lowest 12-month trailing price-to-sales (P/S) ratio. For companies in the early stages of development or industries suffering from major shocks, this can be substituted as a rough measure of a business’s value. A business with higher sales could eventually produce more profit when it achieves (or returns to) profitability. The P/S ratio shows how much you’re paying for the stock for each dollar of sales generated.
The comments, opinions, and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or to adopt any investment strategy. Though we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described in our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy.
Best Value Marijuana Stocks
• ETFMG Alternative Harvest ETF (MJ). Providing a YTD return of 34% as of early September 2021, this ETF that tracks the Alternative Harvest Index is no slouch. With an at-present highly accessible cost-per-share 0f around $16, investors wanting to try the cannabis industry on for size can do so at a low price of entry. Shares come with a steep expense ratio for a passively managed ETF, though: 0.75%.
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• Scotts Miracle-Gro Co. (SMG). Where does a company best known for plant fertilizers come into the cannabis mix? If you can make backyard plants grow, odds are you can make cannabis grow. For investors looking for the proven track record of a large cap stock with a leg in the growing cannabis industry, Scotts could be a fit. It’s acquired multiple cannabis-adjacent and pure cannabis companies and even built a brand new 50,000 square foot facility for R&D to explore how their fertilizer products impact cannabis growth. With a P/E ratio around 15.7 and a 1.7% dividend yield, Scotts stands as a respectable choice for investors exploring cannabis in their portfolios.
The Best Large-Cap Stocks with Cannabis Exposure
As always, you should ensure any potential investment choice aligns with your personal goals and risk tolerance. And please note, stocks and funds are listed below in alphabetical order only, by category.
• Innovative Industrial Properties Inc. (IIPR). Cannabis has to grow somewhere, and that’s what Innovative Industrial Properties is betting on. This real estate investment trust (REIT) invests in the industrial side of the cannabis industry: greenhouses and other industrial facilities that support cultivation and distribution. With a dividend yield of 2.33%, it’s attractive from an income perspective and a P/E ratio of 62 says that investors could enjoy dividends in anticipation of growth down the line. For those looking to diversify holdings into real estate, this could be an interesting portfolio addition, especially considering that this REIT has generated a three-year return of over 550%.
• Amplify Seymour Cannabis ETF (CNBS). Like most of this sector’s ETFs, CNBS is short on history—inception date: 2019—which gives investors little to go on for historical performance. However, with a low NAV in the $20 per share range, inventors can get a taste for the industry without risking a positive drug test at the workplace. Shares of CNBS are up more than 72% year over year, although the ETF is well off its it February 2021 highs near $40, making now a great time to jump in. Like other ETFs in the cannabis sector, the expense ratio is high at 0.75%.
The Best Pure Play Cannabis Stocks
• Constellation Brands, Inc. Class A (STZ). Spirits are Constellation’s main game, but like Altria, this company is diversifying into cannabis via investment in Canopy Growth (CGC), a Canadian cannabis producer. Holding a 38.6% share of the company, Constellation saw a substantial return on investment in 2020. While not a pure cannabis play, this analyst-favorite stock is having a heyday with a one-year return of almost 15% and a dividend yield of 1.5%.
• Curaleaf Holdings Inc (CURA). This Massachusetts-headquartered firm trades on the Canadian Securities Exchange. Curaleaf runs dispensaries and production facilities across 23 states, and with a CAD$10.3 billion market cap it’s one of the biggest industry players in North America. Shares are well off their February 2021 highs of CAD$23, even as the firm’s year-over-year revenue continues to gain by leaps and bounds—up more than 165% year over year in the most recent quarter.