The marijuana industry is one of the fastest-growing industries worldwide, projected to double its figures by 2025. Many investors are now seeking to profit from this realization. The industry is diverse, with various companies supporting or engaging in research, distribution, development, and medical or recreational marijuana sales.
The decriminalization or legalization of cannabis has gained wider acceptance in many nations, states, and jurisdictions for medicinal, recreational, and other uses. It creates more opportunities for entrepreneurs and existing companies to enter the markets and succeed.
Some of the top companies in the current marijuana industry include Cronos Group Inc. (CRON), Canopy Growth Corp. (CGC), and Tilray Inc. (TLRY). The big marijuana companies are growing exponentially, with more investments in equipment to help speed up their revenue growth.
However, cannabis also has many investment risks, like in any nascent industry. It pays to understand how the industry works as a first-time investor or a seasoned veteran. This post covers the top marijuana stocks to look out for in 2022 and valuable details to enable you to make proper investment decisions.
Overview of the Marijuana Industry
Let’s cover the basics you need to know when investing in marijuana stocks.
- The marijuana industry has three broad categories: Several companies make up the cannabis industry. First, the growers and retailers buy seeds, cultivate, and package the cannabis products before selling to consumers. They are in direct contact with people who use the products for medicinal or recreational purposes.
The second significant companies are biotechnology companies. They take part in developing cannabis-based pharmaceutical drugs. They take part in research to study how marijuana can effectively treat certain diseases such as anxiety disorders.
The last is the ancillary marijuana business offering products and services to the cannabis companies without ever contacting the plant.
- Cannabis use can be medical or recreational: Over the years, research has confirmed the use of medical cannabis or cannabis extracts in treating various health conditions. However, patients must first seek recommendations from physicians to ensure they get the proper medical cannabis for treating their conditions.
On the other hand, recreational cannabis is for pure enjoyment. Users can purchase marijuana or cannabis extracts in jurisdictions where it is legal and use them. Also, they must be 18 years or older.
- Geography matters: Medical cannabis is more legal in many countries than recreational cannabis. In the US, cannabis is still illegal, according to federal law. However, several states have legalized the use of medical and recreational cannabis.
The US cannabis market has grown drastically, translating to growth by U.S.-based cannabis companies. In Canada, cannabis is legal nationwide, giving most companies more growth opportunities. Currently, the Canadian cannabis market is among the top global legal markets where supply outpaces demand, leading to a fall in cannabis prices.
Impact of COVID-19 on Marijuana Stocks
The COVID-19 pandemic affected all global economic areas, including the cannabis sector. Most US states designate several cannabis dispensaries as essential businesses. During this time, cannabis sales boomed in most of these states over the first few months of the pandemic outbreak.
The boom came in part because of the time people spend indoors and the need for medical cannabis to alleviate the increased anxiety disorders with lockdowns.
Equally importantly, marijuana growers, retailers, and ancillary providers offering gardening supplies benefited largely from the increased sales.
However, not all cannabis companies fared well in the pandemic. The use of recreational cannabis in a tourist destination like Las Vegas has come to a standstill. Most companies transit to this by making home deliveries.
In the medical segment, patients delayed their doctor visits and had access to medical cannabis online. We offer reliable Las Vegas dispensary deliveries by creating an exceptional logistics process to reach our customers seamlessly.
Generally, most US cannabis companies performed better in the wake of the COVID-19 pandemic. On the other hand, several marijuana companies in Canada suffer headwinds due to the continued restriction on cannabis stores.
Should I Buy Marijuana Stocks?
Savvy investors always look at the reason for investing before making decisions. In short, just because there is a trendy sector with lots of growth opportunities will not mean you need to invest in it. Buying broad-based index funds will cover you regardless of the stock market sectors that do well. Conservative investors prefer lowering risks to avoid losing after investing in marijuana stocks.
When you are an aggressive investor with high-risk tolerances, you can find a lot to like about marijuana stocks. The cannabis industry is still developing, and the market opportunities are enormous, especially in various US states that continue to legalize cannabis. You face high risks when investing in pot stocks but with a potentially high reward proposition.
The Risks of Investing In the Marijuana Industry
Every investor understands that every type of asset has a degree of risk. When you invest in marijuana stocks, you will face additional specific risks that you can clearly understand, such as:
Legal and Political Risks
Selling marijuana is still illegal at the federal level in most US states. The US federal law places several restrictions on banks that deal with marijuana-related businesses. It is difficult for most US cannabis businesses to access several essential financial services. The political support has increased drastically to enable every state to legalize marijuana. However, there are no guarantees of this taking action any time soon.
Over-The-Counter (OTC) Stock Risks
Many cannabis businesses trade their products over the counter, meaning they don’t have to file financial statements regularly. It is important for any investors looking to assess the risk of stocks. The business will not have to maintain minimum market capitalizations by trading OTC, resulting in low liquidity, making cannabis stocks challenging to trade.
Supply And Demand Imbalances
Marijuana growing is prone to various irregularities in supply and demand. For example, Canadian marijuana growers experience a significant expansion to boost their production capacity to meet the high demand for recreational marijuana. However, companies will need to cut back on production a supply in Canada outstrips demand, causing prices to fall and revenue to suffer.
Financial Constraints
Cannabis industries can be unprofitable as they usually face the prospect of running out of cash. These companies have to raise capital by issuing new shares to dilute the value of existing shares. The dilution may not help financially constrained companies to obtain enough capital for successful operations.
Best Marijuana Stocks In 2022
According to Inyo Las Vegas Dispensary, these are the top marijuana stocks to look out for and buy as of 2022.
1. GrowGeneration Corp.
GrowGeneration is one of the largest distributors of agricultural products and a renowned hydroponics supplier. They mainly operate with organic specialty gardening retail and hydroponic retail. Even though they are not a pure-play cannabis company, some of its products are used for cannabis cultivation.
The company sells thousands of plant nutrients, advanced lighting technology, farming soils, and hydroponic and aquaponic equipment. It currently owns and operates about 672 retail and distribution centers.
GrowGeneration recently acquired $9.4 million of Mobile Media Inc. and MMI Agriculture. These are effective mobile shelving manufacturing and warehouse facilities. With the retirement of COO Tony Sullivan in Mid-December last year, the company has not yet announced any plans to fill that position. Their main reason is that the company has a sufficient operational team to expand in 2022 and beyond.
2. Hydrofarm Holdings Group Inc.
Hydrofarm Holdings Group is another renowned company that distributes hydroponic products to its customers throughout the US, Canada, and Europe using subsidiaries. They have hundreds of brands that are popular with many marijuana growers. The company has nine distribution centers offering over 5000 product lines of items.
In early November, the company announced they had acquired Innovative Growers Equipment Inc. This is a top-rated manufacturer of horticulture benches, LED lighting systems, and racking.
3. Village Farms International Inc.
Village Farms International is a Canadian-based company with an integrated greenhouse for the effective growth of marijuana. The company offers cannabis by growing, producing, and distributing fresh marijuana to national grocers in North America.
The brands offered by Village Farms International are diverse, ranging from producers to distributors. They include:
- Pure Sunfarms; cannabis producer
- Balanced Health Botanicals; CBD brand with an e-commerce platform
- ROSE LifeScience; cannabis producer and distributor
- Village Farms Fresh; vertically integrated greenhouse grower
- Village Fields Hemp; hemp grower
- VF Clean Energy; a subsidiary converting landfill gas to clean energy.
The company acquired 70% of ROSE LifeScience in mid-November. This vertically-integrated branded cannabis producer holds $37.0 million in Village Farms and cash shares.
4. Cresco Labs Inc.
Cresco Labs is another versatile company. They grow, manufacture, package, and distribute cannabis products. The company is active in 10 states where they set up dispensaries and production facilities. Its top brands are Reserve, Cresco, Wonder Wellness Co., Remedi, Mindy’s, High Supply, FloraCal Farms, Good News, and Sunnyside.
You can also find Cresco Labs’ stock over the counter in the US. The company is optimizing its distribution process and pushed them to terminate an agreement to purchase Blair Wellness LLC, a Maryland-based company. The company is a Maryland-based medical cannabis dispensary but did not meet the closing conditions required by Cresco Labs.
5. Ayr Wellness Inc.
Ayr Wellness Company cultivates, manufacture, and distributes cannabis and cannabis-derived products. Its product portfolio consists of seltzers, tinctures, and flowers. They also have various edibles and vape products under Origyn, Stix Preroll Co., Kynd, Cannapunch, Road Tripper, Levia, Wicked, Entourage, and Haze.
You can find most of the products over the counter in the US. Recently, Ayr Wellness Company agreed to acquire Gentle Ventures LLC. In Chicago, the company operates two licensed retail dispensaries under “Dispensary 33”. The deal involves Ayr Wellness paying $55 million upfront.
6. Jushi Holdings Inc.
Jushi Holdings brands hemp and cannabis-based assets. They are actively engaged in the retail, distribution, processing, and cultivation operations. The company works with various brands such as:
- The Bank focused on plant genetics and cultivation.
- The Lab; specializing in vape products and concentrates
- Nira; maker of hemp-based CBD products that are physician formulated
- Nira+; producer of medicinal THC products
- Sèche; offers various branded ground and flower cannabis products
- Tasteology; provider of THC-infused products.
Jushi also trades in its products over the counter in the US. The company plans to acquire NuLeaf Inc., as announced in November 2021. It’s a Nevada-based, vertically-integrated operator, going for about $62.5 million. The acquisitions may close over the first half of 2022.
7. Verano Holdings Corp.
The company is a vertically integrated and multistate cannabis operator. They have a range of medical and recreational cannabis products and sell through various brands. The top brands you can find in its distributed retails are Encore, MÜV, Avexia, and Verano.
Verano Holdings now has 12 cultivation and manufacturing facilities and 93 locations spread in several states in the US. It has some of its stocks over the counter in the US. They recently changed their management after replacing their financial chef officer Brian Ward with Brett Summerer; – Summerer has more than 21 years of financial management experience and has worked at Kraft Heinz Co., General Motors Co., and Corning Inc.
8. Arena Pharmaceuticals Inc.
Arena Pharmaceuticals is a popular clinical-stage biopharmaceutical company. They have a developing portfolio of major therapeutic candidates in dermatology, cardiology, and gastroenterology. It still has no medicines or products approved by the local regulators. However, they are developing a drug with cannabinoids for treating pain related to gastrointestinal disorders known as Olorinab.
The country announced they have already started consultation for sale to Pfizer Inc. for approximately $6.7 billion. The proposition is still pending approval and is expected to close over the first half of 2022.
Wrapping Up
Generally, investors should always take a long-term view when buying stocks. However, the dynamics of marijuana stocks keep changing. The criteria you use today can dramatically change after a few months.
It is essential to regularly regulate the marijuana stocks or ETFs in their portfolios to make the appropriate decisions. Any changes, such as if the US federal law relaxes its marijuana laws, can be beneficial, but the changes can be devastating to stocks.
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