The cannabis sector is one that’s certainly seen its boom-bust cycle play out in relatively impressive time in recent years. Now firmly in the “bust” category among many growth investors, will a resurgence in this space take hold? And, further, what catalysts could justify a sector-wide surge?
Aside from U.S. federal legalization progress, I’m skeptical of another rally in this sector. Yes, there’s plenty of growth to be had. And, I certainly think many cannabis stocks may warrant another look under future Democrat administrations. But with so much political risk baked into key sectors such as cannabis, investors are clearly positioning themselves in more defensive areas of the market. I think such a strategy makes sense.
So, for investors willing to put a small amount of speculative capital to work in the cannabis space, some companies are better than others. Let’s look at three of my top picks as potential speculative buys, for those with the inclination to dip into this sector.
Trulieve Cannabis Corp (TCNNF)
Trulieve Cannabis Corp. (OTCMKTS:TCNNF) is a rising star among the largest market capitalizations in this space. Notably, the company has been reshuffling its executive deck. Wes Getman was dubbed CFO at it produces Avenue and Modern Flower cannabis products and distributes them through dispensaries across multiple states.
Even though it’s now in overbought territory, Trulieve Cannabis Corp. has a strong outlook among bulls in this sector. The company’s glowing potential for long-term investment (thanks to better-than-expected earnings and positive cash flow) support this view. Plus, even with a teensy revenue decline, CEO Kim Rivers has the company’s long-term focus set. The company searches for market share growth in a probably lucrative space, if federal legalization arrives.
A big macro catalyst is likely going to be needed for TCNNF stock to see a big surge. But, it’s one I’ve got on the radar right now due to its strong current positioning.
Cresco Labs (CRLBF)
Cresco Labs (OTCMKTS:CRLBF) stands tall in the middle of the pack, in terms of U.S. cannabis producers. The company’s business model incorporates production, retail, and cultivation facilities in 10 states. Its vertically-integrated approach and 68 dispensaries support leaner operations, even though it’s going toe-to-toe with financial losses. Importantly, analysts predict better results, with a negative 13 cents EPS for the fiscal year 2024.
Additionally, Cresco Labs opened curtains to a THC-infused wing sauce, shaking hands with The Fifty/50 sports bar. It was sold at Chicagoland dispensaries for the Super Bowl. The product, made at Cresco’s Joliet facility, looked to normalize cannabis.
Even with an automated production process for prerolls, vapes, and gummies, the team chose to handcraft this limited-time, specialty product. The demand exceeded their expectations, and it sold out in just 15 minutes. Thanks to the initial success, the company decided to make more for the Sunnyside dispensaries at $30 per jar.
Although Cresco is still losing money, its revenue recently decreased year over year (YOY). Still, analysts are looking at the bright side, giving it a $3.32 price target and a strong buy rating of 9 out of 13.
Cannabist Company Holdings Inc. (CBSTF)
On March 13, 2024, when the U.S. markets were still making their morning coffee, Cannabist Company Holdings Inc. (OTCMKTS:CBSTF) made their Q4 and full-year 2023 financial results known to the world. An 8:00 a.m EST conference call was held so the management could discuss the results.
CMSTF shook hands with Revelry Herb Co. so New Jersey, Massachusetts, and Pennsylvania could reap the benefits of pre-roll joints. This would mark Revelry’s East Coast debut, and could spell additional collaborations down the line of key lifestyle products like smell-proof backpacks.
Former Chief Commercial Officer Jesse Channon has been dubbed president of the company. Channon brings expertise in transformative technologies and digital marketing platforms in their hands. Thus, for investors betting on a company mixing up its C-Suite and focusing on long-term growth opportunities, this is a speculative stock that may be worth considering at current levels.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
