When it comes to picking out marijuana stocks to buy, there are a lot of complicated factors to consider. But the goal is simple: find a good value. Like any stock, the aim is to catch a company that’s trading cheap compared to its future value.
That said, finding a cannabis stock that’s worth investing in can be more daunting than searching in other, more traditional industries. As we’ve seen the past few years, the cannabis industry has had as many downs as ups. Despite the spread of legalization across the U.S., there’s still a lot of uncertainty…
- Will the Biden Administration officially decriminalize (or legalize) cannabis on the federal level?
- Will marijuana be removed from the list of Schedule I substances?
- Will a marijuana banking bill be passed into law, allowing pot companies access to banking?
- Will one or any of these actions lead to the Nasdaq or New York Stock Exchange listing U.S. marijuana companies?
If any or all of these things happen, it will open up a lot more opportunities for investors. And it will also make more traditional investment research more useful when looking for marijuana stocks to buy.
But as it stands, it’s difficult to analyze the long-term strength and stability of most marijuana companies. After all, they operated on the fringes just a few years ago. Various levels of legality also make it difficult to identify trends in a cannabis company’s earnings growth.
A company with a lot of cash on hand could be waiting for the right opportunity to expand. Thus, earnings growth might appear static. However, the company might be planning to use that cash to stake a claim in a new area with less competition.
How to Use the Info You’ve Got When Picking Marijuana Stocks to Buy
Two wild card factors that can be very helpful when picking marijuana stocks to buy are:
- Comparative strength of the company and market dominance
- Effective executive leadership
A perfect example of a company that hits both of these marks is Curaleaf Holdings (OTC: CURLF). There’s a lot to like about Curaleaf. One of the ways Curaleaf got on our radar is because it boasts the highest revenue of any cannabis company operating in the U.S. It’s also making moves to expand its operation into Europe. Both of these show that Curaleaf is in a particularly strong position compared to its competition.
On top of its sizable market share, Curaleaf recently promoted new blood to the position of its CEO. New CEO Joseph Bayern has been in the cannabis space for a number of years. But before that, he worked with the likes of Snapple, Dr. Pepper and Author Solutions. He also helped navigate and the super-fancy artesian water company Voss away from the edge of bankruptcy. In the process, he helped the company triple its revenue. So just image what he can do with a company that’s flush with cash…
Joe – as he prefers to be called – has bounced around quite a bit. And that’s helped him develop a bevy of knowledge about marketing and building a brand… not just in the U.S., but around the globe. A few years before landing his new gig at Curaleaf, Joe told his alma matter this in an interview:
I didn’t plan to do any of the things that I did throughout my career. I just came across great opportunities and took them. I think that’s a great lesson: don’t be afraid to take chances.
A savvy, chance-taking CEO with a huge share of the market bodes extremely well for Curaleaf and its investors… Even if it is operating on the margins of legality in a country with contradictory laws regarding what it produces. These are exactly the kinds of things folks want to see when looking for marijuana stocks to buy.
Looking North for Other Opportunities
Even though the market is much smaller in Canada, there’s still plenty of opportunity for investors. And because Canadian marijuana companies are allowed to trade on major exchanges, many have more name recognition.
One of the biggest and most well-known is of course Canopy Growth Corp. (Nasdaq: CGC). Now, Canopy isn’t the largest cannabis company north of the border. That honor goes to the company borne from the merger between Aphria (Nasdaq: APHA) and Tilray (Nasdaq: TLRY).
But Aphria has been underperforming of late. And that’s dragging down Tirlay as well. The fact of the matter is competition in Canada is fierce. But that’s where Canopy has an advantage…
Mexico is poised to be the largest legal marijuana market in the world. This year, Mexico made it legal to produce cannabis for industrial, medical and recreational use. And Canopy has a important ally in Mexico.
Constellation Brands (NYSE: STZ) owns a large minority stake in the Canopy. A couple years ago when Constellation was shelling out major bucks to get in on the marijuana game, it was seen as a mistake by analysts. But today, it’s looking like a stroke of genius.
Unlike the competition that will initially struggle to get a foot in the door in Mexico, Constellation Brands – which makes and distributes Corona beer – will know exactly how to navigate these uncharted waters.
Canopy CEO David Klein was chief financial officer at Constellation Brands before coming to Canopy. And he brings with him a strong portfolio of business development and corporate strategy. He’s a strong leader more than prepared to steer this young venture into bigger and bigger markets while rewarding investors along the way. Again, these are valuable traits to look for when trying to pick out marijuana stocks to buy.
The Bottom Line on Picking Marijuana Stocks to Buy
There’s always some speculation when it comes to investing. To paraphrase Lefty Gomez, it’s better to be lucky than good. But it’s still possible to make an informed decision. And that’s far better than gambling on any old marijuana stock.
If you’re looking for the most up-to-date analysis and even more tips and tricks for finding the perfect marijuana stocks to buy, sign up for the Profit Trends e-letter. Just drop your email address in the box below and you’ll receive all of the latest and greatest evaluations about the best cannabis companies to consider investing in.
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