The cannabis space has been buzzing of late, which makes it ideal to consider exposure to the best cannabis stocks.
Germany recently hopped aboard the cannabis legalization train, joining a growing list of countries that embraced both the use and sale of cannabis. Moreover, the U.S. recently made headlines again with its plans to reclassify cannabis from a Schedule I to a Schedule III drug, pointing to a softer stance on its usage.
Roughly 88% of Americans currently advocate for legalization, and potentially encouraging news is expected as we inch closer to Election Day. Hopefully, these positive developments will likely remove the impediments weighing down the sector, providing fertile ground for savvy investors.
That said, it’s imperative to tread carefully when dealing with cannabis stocks due to their erratic performances. Despite this, here are three of the best cannabis stocks to buy that stand out from their peers. They currently boast robust operations while promising significant potential gains in the event of legalization.
Innovative Industrial Properties (IIPR)
Given the well-documented volatility in the cannabis space, picking a stock that’s an outright buy is tough. However, perhaps a stock that best fits the bill is the Innovative Industrial Properties (NYSE:IIPR) ETF.
As the top REIT in its niche, IIPR offers sale-leaseback programs for cannabis companies eager to cultivate without substantial financial burdens. This strategic positioning enables them to lease back their properties effectively, unlocking capital for operations and expansion. It boasts 108 properties across 19 states in its portfolio, which helped cement its role as a front-runner in the niche.
Another major advantage for IIPR over its peers is that its yield is backed by a robust portfolio, 95% of which is under triple-net lease arrangements. These terms effectively ensure that the tenants must bear the costs of taxes, maintenance and insurance. Another sweetener is its attractive dividend yield of 7%, while its 5-year growth rate stands at an impressive 33.2%.
Cronos Group (CRON)
Cronos Group (NASDAQ:CRON) is a top cannabis player known for its prudent fiscal management and savvy investments. Having built a robust foundation in Canada, Cronos has spread its tentacles across new regions to expand its market share. Moreover, it has the impetus to continue pursuing its lofty plans, boasting a massive cash north of $850 million. Also, through its calculated approach, it maintains a balance sheet of long-term debt while positioning it for long-term expansion.
Recent operating results have been encouraging despite the headwinds. Its first-quarter (Q1) report showed $25.3 million in sales, representing a 30% year-over-year (YOY) increase. Moreover, it anticipates a positive net change in cash for the year, underscoring its financial resilience.
Furthermore, with its strong footprint in high-value medicinal markets such as Germany and the U.K., Cronos is looking to enter new markets, including Australia and the United Kingdom. This marks Cronos as a potentially lucrative option for investors seeking exposure in the evolving cannabis space.
Green Thumb Industries (GTBIF)
Green Thumb Industries (OTCMKTS:GTBIF) is another attractive cannabis pick with its superb operational management. This is shown by its impressive profitability profile, which is head-and-shoulders above its competition. To put things in perspective, its 3-year EBITDA and net income growth stand at an extraordinary 16.2% and 25.3%, respectively.
Furthermore, its recent financials continue to reflect a promising trajectory despite operating in an unconducive environment. Revenues surged 11% YOY to $276 million, while its EPS of 13 cents beat estimates by 8 cents. Consequently, its powerful cash buffer of $224 million will continue fueling its aggressive market expansion, including opening multiple new dispensaries across the U.S., complementing its notable presence in Florida.
Additionally, a potential DEA rescheduling of cannabis could catalyze further growth. This shift would substantially alleviate the punishing 280E tax burdens, enhancing net income for U.S. cannabis firms like Green Thumb.
On the date of publication, Muslim Farooque 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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
