3 Best Marijuana Stocks to Buy in July

Senate Majority Leader Chuck Schumer and some of his Democratic colleagues unveiled their proposed cannabis reform legislation on Wednesday. The draft bill would decriminalize marijuana at the federal level and leave it up to individual states to enforce their own cannabis laws. 

What should investors do differently with this legislation in the works? Nothing, in my view. There’s no guarantee that the bill will receive enough support in the Senate to avoid a filibuster. 

However, there are several companies operating in the cannabis industry that have strong growth prospects regardless of what happens in Washington, D.C. Here are my picks for the three best marijuana stocks to buy in July.

Cannabis leaf in a tiny shopping cart with U.S. cash in the background.

Image source: Getty Images.

Cresco Labs

Cresco Labs (OTC:CRLBF) ranks as the top U.S. wholesaler of branded cannabis products. It’s also one of the biggest multistate cannabis operators, with operations in 10 states and 33 retail cannabis dispensaries.

The company’s revenue skyrocketed nearly 169% year over year in the first quarter to $178.4 million. Unlike several of the biggest Canadian cannabis operators, Cresco is already generating positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). 

Cresco should be on target for annualized revenue of $1 billion by the end of this year. The company’s acquisitions of Florida medical cannabis operator Bluma Wellness and Massachusetts-based Cultivate should boost sales.

What really makes Cresco stand out, though, is its valuation. Compared to most pot stocks, Cresco is dirt cheap with shares trading at only 4.3 times sales. 

Innovative Industrial Properties

Innovative Industrial Properties (NYSE:IIPR) is one of the relatively few cannabis stocks that could appeal even to risk-averse investors. The company is organized as a real estate investment trust (REIT) and serves the U.S. medical cannabis industry. 

In the first quarter of 2021, IIP’s revenue more than doubled year over year to $42.9 million. Its earnings jumped 122%. The company achieved this strong growth by buying additional properties and leasing them to medical cannabis operators.

All IIP has to do to keep its momentum going is to add more properties to its portfolio. That shouldn’t be too difficult. Since the end of Q1, the REIT has bought and leased seven new properties, bringing its total number of properties to 72 in 18 states.

IIP also offers a nice bonus that you won’t find with most cannabis stocks — a dividend. Its dividend currently yields 2.7%. The company has quadrupled its dividend payout over the last three years. 

Trulieve Cannabis

Trulieve Cannabis (OTC:TCNNF) dominates the Florida medical cannabis scene with a market share of close to 50%. The company also currently has operations in California, Connecticut, Massachusetts, Pennsylvania, and West Virginia. 

The cannabis operator’s revenue more than doubled year over year in Q1 to $193.8 million. Trulieve also delivered its 13th consecutive quarter of profitability with earnings of $30.1 million, up 27% year over year.

Most of Trulieve’s growth thus far has been in Florida. However, the company should be able to spread its wings quite a bit with the pending acquisition of Harvest Health & Recreation (OTC:HRVSF)

Once the Harvest deal closes, Trulieve will be the biggest U.S. cannabis operator based on a combined retail and cultivation footprint. It will also be the most profitable multi-state operator in the industry. I think that Trulieve is set to continue generating great returns for a long time to come.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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