The old investing adage is that cheap stocks are often cheap for a reason. But if you can find a valid reason why U.S.-based vertically integrated dispensary operator Trulieve Cannabis (OTC:TCNNF) is trading at less than 12 times next year’s profit projections, feel free to pass that information my way.
Then again, near-term pain could be your long-term gain. There’s probably not a faster-growing segment within the cannabis industry than CBD, which may hit $22 billion in annual sales by 2022 in the U.S., up from just $591 million in 2018. Charlotte’s Web, which extracts CBD from hemp plants, is the market leader in CBD-based topicals, capsules, and oils, in the United States. Between the end of December and the end of March, Charlotte’s Web increased its retail door count from 3,680 to more than 6,000.
KushCo also expects significant growth from its vape business. With Canada set to wave the green flag on derivative products within the next couple of months, and the company no longer eating tariff costs, KushCo’s vape business could be a serious moneymaker in the years to come.
The first quarter probably couldn’t have been any better, with the Horizons Marijuana Life Sciences ETF, which holds more than four dozen pot stocks of various weightings, gaining over 50%. We also witnessed 14 popular pot stocks rise by more than 70% during the first quarter.
Image source: Getty Images.
But the second quarter has been sort of a buzzkill for marijuana stock investors. The aforementioned Horizons Marijuana Life Sciences ETF has declined more than 14% in the second quarter, with a whopping 35 cannabis stocks losing a double-digit percentage in May.
At far less than two times next year’s sales projections, KushCo looks like a major bargain in the cannabis space.
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Between 2014 and 2018, a multitude of cannabis companies went public in Canadian venture exchanges as well as in NYSE and NASDAQ, attracting billions in investments and opening the floodgates to an era of immense growth, media attention and investor excitement often called the “green rush”.
Investing in cannabis is not limited to growers or retailers.
Marijuana Stock Movers
The variety of companies that form the industry mean you have your choice of stocks or ETFs.
420 Investor Alan Brochstein seems to differ on this point. “It’s extremely important not to rely solely upon company press releases, as these are typically positive spins,” he says. “It takes a greater effort to read and comprehend the SEC filings, but the effort is worth it, as these give a more complete perspective of the fundamentals.
In relation to this point, Brochstein says, “I find many people place too much confidence in just 1 or 2 ideas. In a start-up industry, which is what legal cannabis is in many ways, it’s not easy to pick the winners. If you go back to the late 1990s, a lot of the companies that many expected to be winners didn’t even survive three years. My longer-term focused model portfolios typically have a dozen names in them.”