Marijuana stocks, as represented by the ETFMG Alternative Harvest ETF (MJ), have dramatically underperformed the broader market. MJ has provided a total return of -28.6% over the past 12 months, well below the Russell 1000’s total return of 25.2%. These market performance numbers and all statistics in the tables below are as of Jan. 6, 2022.
GRWG is top for value and growth, and IIPR is top for momentum
These are the marijuana stocks with the lowest 12-month trailing price-to-sales (P/S) ratio. For companies in the early stages of development or industries suffering from major shocks, this can be substituted as a rough measure of a business’s value. A business with higher sales could eventually produce more profit when it achieves (or returns to) profitability. The P/S ratio shows how much you’re paying for the stock for each dollar of sales generated.
Best Value Marijuana Stocks
These are the marijuana stocks with the highest year-over-year (YOY) sales growth for the most recent quarter. Rising sales can help investors identify companies that are able to grow revenue organically or through other means, and find growing companies that have not yet reached profitability. In addition, earnings per share can be significantly influenced by accounting factors that may not reflect the overall strength of the business. However, sales growth can also be potentially misleading about the strength of a business, because growing sales on money-losing businesses can be harmful if the company has no plan to reach profitability.
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To help you choose the best cannabis investments, we take a closer look at stocks and funds, as well as a few less dank offerings it’s perhaps better to avoid. There are both pure plays—firms that specialize exclusively in bud—and large-cap names that also have some pot industry exposure.
• Constellation Brands, Inc. Class A (STZ). Spirits are Constellation’s main game, but like Altria, this company is diversifying into cannabis via investment in Canopy Growth (CGC), a Canadian cannabis producer. Holding a 38.6% share of the company, Constellation saw a substantial return on investment in 2020. While not a pure cannabis play, this analyst-favorite stock is having a heyday with a one-year return of almost 15% and a dividend yield of 1.5%.
The Best Pure Play Cannabis ETFs
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• Scotts Miracle-Gro Co. (SMG). Where does a company best known for plant fertilizers come into the cannabis mix? If you can make backyard plants grow, odds are you can make cannabis grow. For investors looking for the proven track record of a large cap stock with a leg in the growing cannabis industry, Scotts could be a fit. It’s acquired multiple cannabis-adjacent and pure cannabis companies and even built a brand new 50,000 square foot facility for R&D to explore how their fertilizer products impact cannabis growth. With a P/E ratio around 15.7 and a 1.7% dividend yield, Scotts stands as a respectable choice for investors exploring cannabis in their portfolios.
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• GrowGeneration Corp (GRWG). Back in the day, hearing “hydroponics” made you instantly think of someone growing weed in their basement. Today, hydroponics is one of the top cultivation methods for the legal cannabis industry, and GrowGeneration stands as the leading supplier of hydroponic equipment in the U.S. Offering over 50 retail centers throughout the U.S., this young company (founded in 2014) is growing by leaps and bounds. No dividends as of yet, but a P/E ratio above 104 says that growth-oriented investors might find what they’re looking for.
• Global X Cannabis ETF (POTX). With the lowest expense ratio amongst the ETFs noted in this article (0.51%), this ETF also posts respectable returns in excess of 11% year-over-year in September 2021. This passively managed fund outperforms many of the actively managed funds above, making the combination of a lower expense ratio, better performance and a rare dividend yield of roughly • Amplify Seymour Cannabis ETF (CNBS). Like most of this sector’s ETFs, CNBS is short on history—inception date: 2019—which gives investors little to go on for historical performance. However, with a low NAV in the $20 per share range, inventors can get a taste for the industry without risking a positive drug test at the workplace. Shares of CNBS are up more than 72% year over year, although the ETF is well off its it February 2021 highs near $40, making now a great time to jump in. Like other ETFs in the cannabis sector, the expense ratio is high at 0.75%..14 per share, as of writing, an attractive prospect for those looking to tap into cannabis sector growth.