Top Marijuana Stocks for February 2021
NEPT.TO, JUSH.CX, and GRWG are top for value, growth, and momentum, respectively
The marijuana industry is made up of companies that either support or are engaged in the research, development, distribution, and sale of medical and recreational marijuana. Cannabis has begun to gain wider acceptance and has been legalized in a growing number of nations, states, and other jurisdictions for recreational, medicinal, and other uses. Some of the biggest companies in the marijuana industry include Canopy Growth Corp. (CGC), Cronos Group Inc. (CRON), and Tilray Inc. (TLRY). Many big marijuana companies have continued to post sizable net losses as they focus on investing in equipment to speed up revenue growth, which remains strong despite the pandemic-spurred economic downturn.
On November 3, 2020, voters in New Jersey, Arizona, and Montana approved ballot measures to legalize recreational marijuana, and Mississippi has voted to legalize medical marijuana use. South Dakota approved ballot measures to approve both.
Marijuana stocks, as represented by the ETFMG Alternative Harvest ETF (MJ), have underperformed the broader market. MJ has provided a total return of 12.1% over the past 12 months, below the Russell 1000’s total return of 20.6%, as of January 22, 2021. All statistics in the tables below are as of January 22.
Here are the top 5 marijuana stocks with the best value, the fastest growth, and the most momentum.
Best Value Marijuana Stocks
These are the marijuana stocks with the lowest 12-month trailing price-to-sales (P/S) ratio. For young companies that have not reached profitability, this can provide an idea of how much business you’re getting for each dollar invested.
- Neptune Wellness Solutions Inc.: Neptune Wellness Solutions is a diversified and fully integrated health and wellness company. The company specializes in cannabis and industrial hemp extraction, various nutrition products and pet supplements, and other natural and hemp-based remedies. Neptune, headquartered in Canada, operates a production facility and laboratory in Canada as well as an extraction and processing facility in North Carolina.
- Village Farms International Inc.: Village Farms International is a Canada-based agricultural producer. In addition to growing standard vegetables like tomatoes, bell peppers, and cucumbers, the company also produces cannabis. The company distributes fresh produce from its over nine million square feet of Controlled Environment Agriculture (CEA) greenhouses in Canada and the U.S., as well as from partner greenhouses in Canada and Mexico.
- NIC Inc.: NIC offers solutions and services to help governments use the Internet in providing various services to citizens and businesses. It provides digital government services, sites, and secure payment processing. One of its technology platforms is designed to help governments regulate the marijuana industry. The company has helped approximately 5,500 federal, state, and local government agency partners provide digital services throughout the U.S.
- OrganiGram Holdings Inc.: OrganiGram Holdings is a Canada-based licensed producer of medical and recreational marijuana. The company offers dried cannabis and cannabis oil through its various subsidiaries. Its portfolio includes medical brand OrganiGram, and adult recreational brands Edison Cannabis Co., Trail Blazer, and ANKR Organics.
- AYR Strategies Inc.: AYR Strategies is a vertically integrated, multi-state cannabis operator. It cultivates and manufactures branded cannabis products to be distributed through its network of retail outlets and through third-party stores. The company produces 17,000 pounds of cannabis flower a year. AYR Strategies announced in late December that it had completed its acquisition of CannTech PA for $57.4 million. CannTech is a licensed cannabis operator. The acquisition includes a 143,000 square foot cultivation and processing facility.
Fastest Growing Marijuana Stocks
These are the marijuana stocks with the highest year-over-year (YOY) sales growth for the most recent quarter. Rising sales show that a company’s business is growing. This is often used to measure growth of young companies that have not yet reached profitability.
- Jushi Holdings Inc.: Jushi Holdings is a holding company focused on building a portfolio of branded cannabis and hemp-based assets engaged in retail, distribution, cultivation, and processing operations. Its brands include: The Bank, focused on plant genetics and cultivation; The Lab, specializing in vape products and concentrates; Nira, maker of hemp-based CBD products that are physician formulated; Nira+, producer of medicinal THC products; and Tasteology, a provider of THC-infused products. Jushi announced in early December that it had completed its acquisition of the remaining 21% equity interest in Dalitso LLC, a pharmaceutical processor permit holder based in Virginia. Dalito’s permit allows it to cultivate, process, dispense, and deliver medical cannabis to registered patients in Virginia.
- Neptune Wellness Solutions Inc.: See above for company description.
- Cresco Labs Inc.: Cresco Labs is a consumer-packaged cannabis products company involved in growing, manufacturing, and distribution. The company currently operates in nine states, and owns a large number of production facilities and dispensaries, and holds 29 retail licenses. Its brands include Cresco, Reserve, Remedi, Mindy’s, Good News, High Supply, Wonder Wellness Co., and FloraCal Farms. Cresco Labs announced recently that it has hired Ty Gent to serve as the company’s new chief operating officer (COO). Gent has more than 35 years of consumer packaged goods (CPG) and supply chain leadership experience and most recently served as the chief supply chain officer at U.S. Foods Holding Corp. (USFD).
- Curaleaf Holdings Inc.: Curaleaf Holdings operates as a holding company that, through its subsidiaries, engages in the production and distribution of cannabis products. The company has a presence in 23 states, and owns and operates dozens of dispensaries, cultivation sites, and processing sites. Its brands include Curaleaf, Curaleaf Hemp, Select Cannabis, and UKU Cannabis. Curaleaf announced recently that it had launched adult-use marijuana operations in Arizona. It has begun to serve consumers through its dispensaries across the state.
- Innovative Industrial Properties Inc.: Innovative Industrial Properties is a real estate investment trust (REIT) that engages in the acquisition, disposition, development, and management of industrial facilities leased to tenants in the regulated medical cannabis industry. The company’s portfolio consists of specialized industrial and greenhouse buildings leased to state-licensed medical-use cannabis cultivators across the U.S.
Marijuana Stocks with the Most Momentum
These are the marijuana stocks that had the highest total return over the last 12 months.
- GrowGeneration Corp.: GrowGeneration is a distributor of agricultural products. The company operates retail hydroponic and organic specialty gardening retail outlets. It offers thousands of products, including plant nutrition, farming soils, crops, advanced lighting technology, hydroponic and aquaponic equipment, and more. As one of the largest hydroponics suppliers in the country, it owns and operates 39 retail and distribution centers. GrowGeneration announced two acquisitions in December: Southern California-based Canopy Crop Management and its complete portfolio of products; and Grassroots Hydroponics, a three-store chain of hydroponic garden centers in Southern California.
- TerrAscend Corp.: TerrAscend is a Canada-based integrated cannabis company offering a range of products, brands, and services for the global medical- and adult-use cannabis market. Its portfolio of businesses include: The Apothecarium, a cannabis dispensary; Arise Bioscience Inc., a manufacturer and distributor of hemp-derived products; Ilera Healthcare, a medical marijuana cultivator, processor, and dispenser; Valhalla Confections, a manufacturer of cannabis-infused edibles; and more. The company announced in late November that it had received a permit from the New Jersey Department of Health to dispense medical cannabis from its first dispensary in New Jersey, which was scheduled to open on November 30.
- Jushi Holdings Inc.: See above for company description.
- Trulieve Cannabis Corp.: Trulieve Cannabis is a holding company that, through its subsidiaries, engages in the cultivation, possession, sale, and distribution of medical cannabis. Its products are designed to alleviate seizures, muscle spasms, pain, nausea, loss of appetite, and other symptoms associated with serious medical conditions such as cancer. The company operates 71 U.S. stores, 66 of which are located in Florida where it serves more than 383,000 patients. Trulieve announced in the first half of November that it had completed its acquisition of all of the equity interests in cultivator and producer PurePenn LLC and Pioneer Leasing & Consulting LLC, collectively known as PurePenn. It simultaneously announced the acquisition of dispensary operator Keystone Relief Centers LLC, doing business as Solevo Wellness. The total cost of the transaction for both PurePenn and Solevo was $66 million.
- Amyris Inc.: Amyris produces and distributes various products that serve the specialty and performance chemicals, flavors and fragrances, cosmetics ingredients, pharmaceuticals, and nutraceuticals markets. The company’s proprietary process of engineering organisms utilizes renewably-sourced carbon from plants in oder to make sustainable, custom molecules used by its customers, enabling them to create products such as plant-sugars or anti-malarial drugs.
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These are the marijuana stocks with the best value, fastest growth, and most momentum for February 2021.
Ranking Canada’s Top Marijuana Growers
There have been some big changes among the leading cannabis producers since June.
To say that there have been big changes in the Canadian cannabis landscape in recent months would be a major understatement. Although Canada was expected to be a global marijuana pioneer given that it was the first industrialized country in the modern era to green-light recreational pot, a number of regulatory issues have stymied growth. As a result, most Canadian pot stocks continue to lose money, and many have needed to adjust their game plans, accordingly.
Perhaps the magnitude of these changes is best served by comparing peak production estimates for Canada’s top-tier growers in early June 2019 to what those peak output estimates look like in February 2020, inclusive of pending asset sales and construction project halts.
Image source: Getty Images.
Ranking Canada’s top cannabis growers
- Aurora Cannabis (NYSE:ACB) : 662,000 kilos.
- Canopy Growth (NASDAQ:CGC) : 500,000 to 550,000 kilos.
- Aphria (NASDAQ:APHA) : 255,000 kilos.
- CannTrust Holdings (OTC:CNTTQ) : 200,000 to 300,000 kilos.
- The Green Organic Dutchman (OTC:TGOD.F) : 219,000 kilos.
- HEXO: 150,000 kilos.
- Aleafia Health: 138,000 kilos.
- Zenabis Global: 131,300 kilos.
- Cronos Group: 117,500 kilos.
- OrganiGram Holdings: 113,000 kilos.
Today, just eight months later, the top five Canadian marijuana growers by peak production have changed considerably:
- Canopy Growth: 500,000 to 550,000 kilos.
- Flowr Corp. (OTC:FLWPF) : 500,000+ kilos.
- Aphria: 255,000 kilos.
- Aurora Cannabis: Approximately 230,000 kilos.
- Aleafia Health: 129,500 kilos.
In short, the previous projected leader has fallen to No. 4, a grower that wasn’t even in the top 10 in June is likely to now be a core producer, and a number of major growers have fallen way down the list for a variety of reasons.
Image source: Getty Images.
What happened to previously top-tier growers?
As you’ve probably noticed, Aurora Cannabis had one of the more notable descents among Canadian marijuana growers by peak production. This decline has to do with a combination of more accurately matching output with market demand, as well as conserving cash. Aurora Cannabis announced in November that it would immediately halt construction at its 1.62-million-square-foot Aurora Sun facility in Alberta, and its 1-million-square-foot Aurora Nordic 2 campus in Denmark. With the exception of utilizing 238,000 square feet of cultivation space at Aurora Sun, this effectively idles around 325,000 kilos of annual run-rate output.
But that’s not all for Aurora. It also recently put the 1-million-square-foot Exeter greenhouse up for sale. Exeter will need to be retrofitted to grow cannabis and is projected to yield 105,000 kilos at peak operating capacity. With these cultivation assets stripped from the equation, Aurora Cannabis only has the potential to produce around 230,000 kilos a year. As long as financing remains a concern, don’t expect Aurora Cannabis to expand its output anytime soon.
You’re probably also wondering what on Earth happened to CannTrust and Green Organic Dutchman? As for TGOD, as Green Organic Dutchman is known, it was the first to announce a significant cutback in output to match Canada’s subdued launch and supply problems. Instead of aiming for 219,000 kilos in peak output, TGOD’s fiscal 2020 production is expected to target only 20,000 to 22,000 kilos for the year.
Then there’s CannTrust, which had its cultivation and sales licenses suspended by Health Canada in September. This follows an admission that the company had illegally grown weed in five unlicensed rooms over a period of six months between October 2018 and March 2019. With no guarantee that it regains its licenses, or is able to expand its outdoor cultivation assets, CannTrust’s 200,000 to 300,000 kilos is a big zero for the moment.
A number of other growers, including OrganiGram, HEXO, and Cronos, have also halted construction on expansion projects or repurposed existing space that had been used for cultivation.
Image source: Getty Images.
A select few growers have stood firm on production
On the flipside, a small number of growers have held firm on their peak production estimates, or perhaps even increased their capacity.
For example, you probably noted Flowr at No. 2, and you may not have even heard of the company before. As of June, Flowr was entirely focused on its Kelowna campus in British Columbia, which is capable of around 50,000 kilos of premium and ultra-premium cannabis products. It also envisioned another 300,000-plus square feet of outdoor and greenhouse grow adjacent to Kelowna. But none of this made it anything more than a mid-tier producer. What vaulted Flowr into the spotlight was its acquisition of Holigen last year, giving it ownership of the Aljustrel outdoor grow farm in Portugal, capable of up to 500,000 kilos of peak annual output. This added production makes Flowr a logical player in the burgeoning EU medical marijuana market.
You’ll also note that estimates for Canopy Growth and Aphria haven’t changed since June. Canopy Growth tends to keep a very tight lid on its growth projections, so this has more to do with not getting any specific company updates on output than any direct commentary from management.
Meanwhile, Aphria (finally) received its cultivation license for Aphria Diamond in November. This joint venture cultivation project should account for 140,000 kilos of Aphria’s 255,000 kilos in peak annual output. Though it remains to be seen if all of this production is actually needed, Canopy Growth and Aphria appear to have dug in their heels as leading marijuana growers in Canada.
There have been some big changes among the leading cannabis producers since June.