The cannabis realm has piqued investor interest and is well on its way to carving an indelible spot in the investment landscape. As the industry flourishes, the best cannabis stocks to buy have emerged not by chasing mere profits but by committing to sustainable trajectories.
Moreover, while the much-anticipated crescendo of federal-level legalization is still on many an investor’s wishlist, the sector hasn’t missed a beat and showcases powerful growth prospects regardless. True, valuations went wild during the Canadian legalization frenzy five years back, but it’s a new dawn. A refreshed wave of interest has become evident, with many eyeballing the must-buy cannabis stocks and anticipating the sector’s next surge. Here are the three budding opportunities in a market ripe with potential.
Trulieve Cannabis (TCNNF)
A titan in the U.S. cannabis realm, Trulieve Cannabis (OTCMKTS:TCNNF) casts a large shadow with its impressive roster of 184 retail dispensaries and a massive footprint of over 4 million square feet dedicated to cultivation and processing across 11 different states in the U.S. This vast network firmly positions Trulieve as one of America’s leading cannabis retailers, primed to capitalize on the burgeoning medical marijuana market.
However, it hasn’t been entirely smooth sailing. The company results have been weighed down by a sector-wide slowdown in sales along with other macro factors. Yet, the overarching narrative remains largely upbeat. Boasting a projection of $100 million in operating cash flow this year and positive free cash flow, Trulieve’s resilience continues to shine. Moreover, its recent second-quarter figures outpaced earnings expectations by 10 cents and sales of $282 million that slightly edged out predictions. Notably, the 4/20 holiday was a landmark for the company, recording an uptick in traffic, customers, and units sold year over year.
Innovative Investment Properties (IIPR)
In the real estate investment trusts (REITs) world, Innovative Investment Properties (NYSE:IIPR) stands out from the crowd as a trailblazer. As the first REIT to own, manage, and lease properties mainly designed for the medical marijuana industry, it has created a unique niche. It boasts an enviable portfolio of 108 properties across 19 states, encompassing around 8.9 million rentable square feet. Impressively, it struts a current distribution offering a compelling yield of 8.8% at $7.20 per share for the year — a figure that investors would be hard-pressed to ignore.
With steady distribution growth and long-term leases averaging 15 years, IIPR has carved out a stable profit pathway. Its 3-year average funds-from-operations growth is at a stellar 37%, almost 1,860% higher than the sector median. Hence, it’s more than just an investment; it’s one of the best cannabis stocks that could be the golden leaf in your financial portfolio.
Constellation Brands (STZ)
The illustrious Corona beer usually comes to mind when you think of Constellation Brands (NYSE:STZ). However, the firm’s venture into the cannabis realm in 2017, with a whopping $4 billion investment in Canopy Growth, certainly ruffled some feathers. The tide of enthusiasm receded when CEO Bill Newlands candidly dubbed the move as a “horrible investment.” Additionally, the missteps in Canada’s marijuana legalization and other business-specific problems weighed down Canopy Growth, causing its stock to lose a staggering 99% of its value since the 2021 highs.
However, the setback hasn’t deterred Constellation. It continues to hold onto its stake in Canopy Growth, displaying faith in the cannabis industry’s potential revival. Certainly, it will be interesting to see how the partnership progresses.
Investing in STZ is arguably a low-risk way to play the cannabis space, especially with its core business firing. On top of that, investing in it comes with a 1.3% annualized dividend with seven consecutive years of payout expansion.
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
