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The Best Cannabis Stocks Of 2022

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With the growing acceptance of cannabis among American consumers and their elected representatives, this edgy asset class offers your portfolio an excellent source of growth. According to data from Leafly, an online marijuana marketplace, legal U.S. cannabis sales—medicinal and recreational—increased 35% in 2021, to a total of $24.6 billion.

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.

As always, you should ensure any potential investment choice aligns with your personal goals and risk tolerance. And please note, stocks and funds are listed below in alphabetical order only, by category.

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The Best Pure Play Cannabis Stocks

• Cronos Group (CRON). Canadian marijuana stocks had a brutal year in 2021, with share prices across the group down by double digits. Cronos, which makes a wide variety of adult-use cannabis and CBD products, is no exception. But the company has a big advantage worth considering: Three years ago, U.S. tobacco giant Altria acquired 45% of Cronos in a deal valued at $2.4 billion, and also received an option to buy a controlling stake in the firm. Altria continues to look for ways to diversify its business away from tobacco, and some analysts see the company’s relatively low share price as a reason for Altria to buy the rest of Cronos.

• GrowGeneration (GRWG). Once upon a time, “hydroponics” were for someone growing weed in their basement. Today, they are one of the top cultivation methods for the legal cannabis industry—and GrowGeneration is the leading supplier of hydroponics equipment in the U.S. Offering over 50 retail centers throughout the U.S., GRWG 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.

• Urban-Gro (URGO). This B2B company provides the U.S. cannabis industry with “controlled environment cultivation facilities,” otherwise known as marijuana grow houses. If you want to start a cannabis growing operation, Urban-Gro provides fully built-out facilities equipped with everything from air sanitizers to plumbing, and they also help with diagnostic software and staff training. URGO’s market cap is around $122 million as of writing, and over the past five quarters it has seen an average year-over-year revenue growth of 120%.

• Trulieve Cannabis (TCNNF). Shares of this Canadian-traded, U.S.-based cannabis company have lost more than half their value over the last year, in line with the rest of the industry, leaving a market cap of just $4.6 billion. Despite the terrible chart, there’s still a lot to like at Trulieve, starting with 15 consecutive quarters of profitability. Today the company operates nearly 160 dispensaries across 11 states, with a focus on Florida, Pennsylvania and Arizona. In addition, the company has been delivering consistent revenue growth.

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The Best Pure Play Cannabis ETFs

• AdvisorShares Pure US Cannabis ETF (YOLO). Actively managed ETFs are hard to come by, but here’s one for the cannabis sector. If you’re looking to dip a toe into cannabis, this ETF can help you get all the benefits of an actively managed mutual fund with the real-time liquidity of an ETF. A relatively new fund, it invests in mid-cap industry firms in the U.S., Canada, the U.K. and even Israel. As an active ETF, the expense ratio is high, clocking in at 0.76%.

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• Amplify Seymour Cannabis ETF (CNBS). Like most of this sector’s ETFs, CNBS is short on history—the fund was launched in 2019—giving investors little to go on for historical performance. Still, inventors can get a taste for the industry without risking a positive drug test at the workplace, as 80% of the fund’s holdings derive at least 50% of their revenue directly from cannabis. Like other ETFs in the cannabis sector, the expense ratio is high at 0.75%.

• The Cannabis ETF (THCX). This passively managed fund tracks the Innovation Labs Cannabis Index, comprised of public companies that produce legal cannabis, hemp and cannabidiol (CBD) products. THCX provides both complete transparency in its holdings and a very well diversified portfolio of marijuana investments, giving investors who want to try the industry on for size an easy entry. Shares do come with a steep expense ratio for a passively managed ETF, at 0.75%.

• Global X Cannabis ETF (POTX). With the lowest expense ratio amongst the ETFs noted in this article, at 0.51%. 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 around 5% as of writing, a very attractive prospect for those looking to tap into cannabis sector growth.

The Best Large-Cap Stocks with Cannabis Exposure

• Altria Group Inc. (MO). You’ll know this stock best as the maker of Marlboro and one of the behemoths in the tobacco sector (along with its dabblings in the adult beverage industry). Because of that, for ESG investors, Altria’s likely not an option. For those who don’t mind the vice, the company’s making a play for cannabis, holding a substantial stake in Cronos Group, detailed above.

• 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 approximately a 36% share of the company, Constellation saw a substantial return on investment in 2020, although 2021 was a big challenge for the partnership. While not a pure cannabis play, this analyst-favorite stock is having a heyday with a three-year return of almost 12% and a dividend yield of 1.3%.

• 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 marijuana 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 50,000 square foot facility for R&D to explore how their fertilizer products impact cannabis growth.

The Best REIT with Cannabis Exposure

• Innovative Industrial Properties Inc. (IIPR). Cannabis has to grow somewhere, and that’s what Innovative Industrial Properties is betting on. This real estate investment trust (REIT) invests in the industrial side of the cannabis industry: greenhouses and other industrial facilities that support cultivation and distribution. With a dividend yield of 3.45%, it’s attractive from an income perspective. For those looking to diversify holdings into real estate, this could be an interesting portfolio addition, especially considering that this REIT has generated a three-year return of over 37%.

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The Bottom Line on Cannabis Stocks

Depending on your personal preference and portfolio needs, there are a wide variety of ways to test cannabis-related holdings in your portfolio. With all emerging industries, investors should be aware of the risks and have an asset allocation and diversification strategy to help absorb inevitable sector volatility.

10 Best Marijuana Stocks to Buy Now

Investors in marijuana stocks have been put through the wringer for years. Will 2022 finally be their time to shine?

Cannabis investors have been waiting for a surge in marijuana stocks since the end of 2017. So far, they have gotten nothing but false starts.

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But investors that hold the industry’s best stocks and the best exchange-traded funds (ETFs) – and perhaps a bit more patience – should be best-positioned for marijuana’s renaissance.

The Prime Alternative Harvest Index, which tracks the performance of some of the cannabis industry’s most prominent companies, is working on its fifth consecutive calendar year with double-digit negative returns. Perhaps worse: A $10,000 investment in the index at its inception on Dec. 18, 2017, would today be worth around $3,200.

Amazingly, while marijuana stocks haven’t delivered the long-term returns investors have yearned for over the past five years, the cannabis industry in the U.S. is extremely healthy – and that’s despite a continued delay in federal legalization. You can thank a growing number of forward-thinking states such as New Jersey, which legalized recreational-use marijuana on April 21.

In 2022, estimates put U.S. legal cannabis sales at $33 billion – up 32% from 2021 – and $52 billion by 2026. The economic impact is expected to be even more significant.

“While federal legalization flounders in Washington, D.C., the American cannabis industry’s economic impact could near $100 billion by end of 2022 and nearly $158 billion by 2026,” Fortune reported Jenel Stelton-Holtmeier, editor of MJBiz Factbook, tells Fortune. “This means that for every $1 consumers and patients spend at adult-use stores and dispensaries, an additional $1.80 will be injected into the economy, much of it on a local level.”

The long-term prognosis for the cannabis industry is excellent. Ultimately, the following 10 picks look like the best marijuana stocks (and funds) to benefit from this ongoing growth and maturation.

Data is as of April 28.

Scotts Miracle-Gro

  • Market value: $5.6 billion

Believe it or not, one of your favorite garden supply brands is also a way to invest in cannabis.

Scotts Miracle-Gro (SMG, $101.35) made a big splash in the medical marijuana market in late March when affiliates of the company acquired Etain Health, one of New York state’s original medical marijuana producers.

With the state legalizing recreational sales expected later in 2022 or early in 2023, the $247 million cash-and-stock acquisition gives the Ohi0-based maker of lawn care and gardening products more direct participation in the cannabis industry. In addition, the company’s mergers-and-acquisitions specialist, Mark Sims, will become CEO of Etain, pushing aside its founders.

Before Scotts invested in Etain, Raymond James analyst Joseph Altobello lowered his price target on SMG to $150 from $185. Altobello cut the target price by $35 because Scotts cut its 2022 growth estimates for its Hawthorne hydroponics business. It now expects Hawthorne’s sales to fall by 25% this year.

However, Altobello still rates Scotts a Strong Buy – and believes shares still have 48% upside over the next 12 months.

“Our Strong Buy rating on the shares of Scotts Miracle-Gro reflects our view that the gains made by its U.S. Consumer segment during the COVID-19 pandemic should prove largely sustainable, while its Hawthorne hydroponics business is well-positioned for long-term growth despite near-term headwinds,” Altobello said in March. “Further, valuation remains very attractive, as it seems investors are essentially getting Hawthorne for free.”

That valuation has admittedly become even more attractive, given that SMG shares have been caught up in the market’s recent downturn and shed another 20% of its price.

British American Tobacco

  • Market value: $95.3 billion

British American Tobacco (BTI, $41.84) is best known for cigarette brands such as Lucky Strike, Camel, Pall Mall, Rothmans, and Dunhill. However, the U.K.-based company also has developed non-combustible products such as Vuse vaping products, Velo nicotine pouches and Glo tobacco heating products. The company expects these “New Category” products to reach 5 billion British pounds (or $6.4 billion) by 2025.

BTI is also a global player. It currently generates 45% of its revenue from the U.S., 23% from Europe and North Africa, 16% from Asia/Pacific and the Middle East, and 15% from the Americas and Sub-Saharan Africa.

However, the company’s 19.5% ownership stake in Canada cannabis producer OrganiGram Holdings (OGI) is what has BTI on this list of marijuana stocks. In March, BTI invested $5.1 million in OrganiGram, upping its position from its original C$220 million ($172.4 million) in 2021.

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“Innovation is an important cornerstone of Organigram’s core strategy, and the Product Development Collaboration with BAT underscores our commitment to the development of disruptive, consumer-focused cannabis products,” Organigram CEO Beena Goldenberg said in a statement.

In March, Argus Research David Coleman reiterated his Buy rating and $50 price target on BTI shares.

“We believe that BTI shares offer value and like the high dividend yield,” he says; that yield is 8.8% at current prices.

Coleman believes British American Tobacco will earn $4.90 a share in 2022 and $5.20 in 2023. BTI’s shares currently trade at 8.5x projected 2022 earnings, below its five-year historical average.

In the future, if the cannabis industry rises off the mat, BTI would likely up its stake in OrganiGram, possibly acquiring it outright. But, as Coleman says, BTI is a good marijuana stock to hold if you’re a value investor who likes healthy dividends.

Innovative Industrial Properties

  • Market value: $4.2 billion

Innovative Industrial Properties (IIPR, $150.78) is a real estate investment trust (REIT) that invests in greenhouses and industrial facilities for the medical cannabis industry. It was founded in 2016, when it had just one property under its umbrella; that expanded to 66 by the end of 2020, and it currently boasts 105.

The REIT’s diversified portfolio spans 19 states. Nine of them – including Illinois, California, and Pennsylvania – account for almost 90% of its 7.9 million square feet of rentable space.

In April, IIPR acquired a property in Maryland with 84,000 square feet of industrial and greenhouse space for $25.0 million. This exemplifies the REIT’s business model: The seller, Maryland Cultivation and Processing, then entered into a long-term, triple-net lease. It intends to use the facility for cultivating cannabis.

Piper Sandler analyst Alexander Goldfarb gives the REIT an Overweight rating (equivalent of Buy) with a $230 target price, some 53% higher from current levels. In 2022, Goldfarb estimates its adjusted funds from operations (AFFO, an important measure of REIT profitability) will be $8.71 a share and $10.57 a share in 2023.

“Assuming the eventual federal legalization, IIPR retains the advantage of being the dominant cannabis landlord, who understands all facets: tenants, zoning, utilities, security, etc,” Goldfarb says.

Altria

  • Market value: $100.1 billion

Marlboro parent Altria (MO, $55.20) has not had a good stretch over the past few years. The stock has delivered a five-year annualized total return (stock price and dividends) of -0.15%, considerably less than the 13.3% total return for the entire U.S. market. On the other hand, its annualized total return over the past 52 weeks is 24.5%, considerably higher than -2.1% for the entire U.S. market.

So if nothing else, it’s building a little momentum.

Stifel, which in April produced a tobacco-industry outlook, said it believes Altria has a strong profit outlook due to rising prices. Accordingly, it has a Buy rating on the stock, with estimated 2022 earnings of $4.87 a share. Further, its reduced-risk products should continue to deliver strong earnings in 2023 and beyond. Accordingly, it raised its Altria target price to $60.

“The company’s aggressive approach to share repurchases (we model $2 billion this year) and the 6.6% dividend yield support strong upside potential for the shares, in our view,” Stifel’s April 19 report stated. (Altria now yields 6.5%.) “We believe a solid first-quarter performance, progression toward more consistency in its earnings, and a potential improvement in its future growth profile (reduced-risk products) support continued upward movement for the share price from this level.”

As for its spot among the market’s top marijuana stocks? Altria owns 45% of Cronos Group (CRON), a large Canadian marijuana firm. It also has warrants to acquire an additional 10% of the company, allowing it to control Cronos in the future. These warrants expire on March 8, 2023, so there is a possibility Altria will control Cronos by this time next year.

Investors shouldn’t forget that Altria owns 10% of Anheuser-Busch InBev (BUD).