Investing in Cannabis Stocks: Our Top Cannabis Stock Tips [2023]

Active participation is a known way to encourage growth. This clearly applies to the cannabis industry. As legalized products aren’t available in all states, however, one effective way to stimulate this sector is investing in cannabis stocks. You can invest in the cannabis industry from anywhere this way, and doing so can provide significant insight to the industry as a whole. Below are some tips on how to buy cannabis stocks and what the market looks like today.

Understanding cannabis stocks 2023

The latest BDS Analytics (BDSA) report predicts $29.6 billion in sales in the US legal market in 2023 and $45 billion in legal sales by 2027. Cannabis research firm BDSA co-founder and CEO Roy Bingham points to new recreational markets in Missouri, New Jersey and New York as directors of growth. “Over the next five years, the biggest drivers of cannabis industry growth in the U.S. will be the thriving Midwest and East Coast markets,” he said in a press release introducing the report. Further, cannabis as an industry is expected to expand at a compound annual growth rate of at least 25% through 2030.

One important aspect to note is that these stocks have fluctuated quite a bit over the past few years. Therefore, it is key to monitor trends, as they often dictate price direction in the months ahead. Merger & acquisition transactions in the U.S. cannabis industry hit a record $10.3 billion in 2021 before dropping off to about $3 billion in 2022. Increased dealmaking in 2023 could indicate growing investor confidence in the industry’s future. As a disclaimer, the information provided here does not constitute a recommendation for purchases, sales or to adopt a particular investment strategy. Please consult a financial professional before investing.

Choosing top cannabis stocks

Even the best cannabis stocks carry risks and challenges not common to other industries, including the area being a relatively new industry, foreign (i.e. Canadian) stocks, potential for scams, being considered speculative investments at this point and not yet being fully embraced by the financial services industry due to federal legality and banking uncertainty. As cannabis stocks 2023 would greatly benefit from banking reform in the industry, this is an essential topic to keep on the radar.

When choosing your top cannabis stocks for investment, consider market capitalization, also known as market cap. The larger the market cap, generally, the more established the company, and the less likely it is to go out of business. The largest companies have market caps over $10 billion, medium-sized companies have market caps between $2 billion and $10 billion, and the smallest companies have market caps below $2 billion. These are known as large-, mid- and small-cap stocks, respectively. For example, think of the difference between long-established companies, such as garden-supply company ScottsMiracle-Gro and pharmaceutical company Abbvie Inc. and pure-play cannabis stocks, which operate solely within the industry.

Best cannabis stocks

When reviewing the best cannabis stocks, consider these:

AFC Gamma, Inc. (AFCG): Well-known cannabis ancillary company with good cash flow and capacity management.

IMC (IMCC): Global pioneer in the medical and adult-use recreational cannabis industries, operating in Israel, Germany and Canada.

Green Thumb (GTBIF): Manufacturing, distribution and sale of various cannabis products for medical and adult-use; considered a blue-chip cannabis stock.

AdvisorShares Pure US Cannabis ETF (MSOS): Invests at least 80% of its net assets (plus any borrowings for investment purposes) in securities of companies which derive at least 50% of their net revenue from the marijuana and hemp business in the United States.

MariMed (MRMD): Cultivation, production, and dispensing of medicinal and recreational cannabis domestically and internationally.

POSaBIT Systems (POSAF): Developed a compliant electronic payment system for cannabis stores and sells its own point-of-sale devices.

Here’s a final word of advice: always keep abreast of information pertaining to the industry. Here is some of the latest news in cannabis stocks:

• TerrAscend (CSE:TER,OTCQX:TRSSF) announced an agreement to acquire a medical dispensary in Maryland, a transaction worth US$22.1 million.
• SNDL (NASDAQ:SNDL) appointed Alberto Paredero-Quiros as its new CFO. “We are thrilled to have Alberto join SNDL as CFO. His extensive leadership experience in global consumer-facing industries, proven capabilities in navigating financial complexity, and strategic acumen will prove instrumental in shaping SNDL’s path forward.” said Zach George, CEO of SNDL.
• The Toronto Stock Exchange (TSX) is considering listing U.S. cannabis stocks. The company TerrAscend (TRSSF) is apparently making progress and could be the first to be listed on the TSX.
• Fire & Flower Holdings (TSX:FAF,OTCQX:FFLWF) filed for creditor protection under the Companies’ Creditors Arrangement Act (CCAA). This federal law assists financially troubled companies avoid bankruptcy by assisting with restructuring of business and finances.

Investing in the stock market can be rewarding, but it is a risky venture. Balance risky decisions with completely safe ones, such as utilizing FreshStor products for keeping your cannabis fresh for longer. Shop the ultimate cannabis storage solutions!

This article was originally published in June 2021 and was updated in June 2023.