Cannabis businesses have been deemed essential during the pandemic and business is booming. All five state marijuana legalization measures on the ballot have passed. Recreational and/or medical marijuana was legalized in Arizona, Mississippi, Montana, New Jersey and South Dakota.
Although cannabis investors didn’t get the blue wave they were hoping for, there is hope for pot stocks in 2021. If the federal government takes steps for broader reform beyond legalizing cannabis, including passing the SAFE Banking Act, the companies that make up the industry would get the boost that they need and could send shares soaring. The SAFE Banking Act would allow state-legal cannabis businesses to work with financial institutions, a game changer for small businesses within the group.
Other catalysts could help, too. For instance, if the federal government removed marijuana from its list of Schedule 1 drugs, or if it eliminated Section 280E of the IRS tax code, U.S.-based cannabis stocks could generate significantly higher profits and cash flow.
Here is a list of our favorite U.S. based pot companies to invest in for 2021.
Curaleaf Holdings (CURLF) could be the way to go if you’re looking for a pure-play U.S. cannabis company. The company operates in 23 states, and it owns and operates 95 dispensaries, 22 cultivation sites and 30 processing sites.
While it got its start in medical marijuana, CURLF is working to develop lifestyle brands that support adult customers’ recreational use. Vertically integrated, it controls its cannabis business from start to finish. And Curaleaf is becoming one of the world’s leading cannabis companies by using science to enhance the customer experience.
The company has operations from coast-to-coast. And as more states legalize adult-use, Curaleaf will continue to grow its business organically and through acquisitions. Since its IPO in September 2018, it has made 14 acquisitions including its acquisition of Cura Partners in May of 2019. Cura Partners’ Select brand is known for its cannabis oil. It recently expanded its U.S. presence by making Select Oil available to the 131,654 medical cardholders in Ohio. Select products are available in 14 states.
Most importantly, Curaleaf delivered five consecutive quarters of positive adjusted earnings and is very close to profitability on a GAAP basis. Be careful with CURLF, as it’s traded over-the-counter, sometimes at very thin volumes. But it could end up being one of the best marijuana stocks of 2021.
Innovative Industrial Properties (IIPR) is a rarity among marijuana stocks in that it’s a real estate investment trust (REIT). Specifically, IIPR invests in greenhouses and industrial facilities for the medical cannabis industry.
Oner the past two years IIPR has delivered a total return of nearly 150%. By comparison, well-known cannabis pick Canopy Growth (CGC) has lost nearly half of its value in that time.
Currently, this REIT remains an excellent play on the growing cannabis trade in the U.S.. In 2018, IIPR owned nine properties that it leased to medical cannabis producers. Today, that’s up to 58 properties, with 4.4 million rentable square feet, boasting an occupancy rate of 99.2%. IIPR swelled by 11 properties during the first six months of fiscal 2020, spending $138.7 million for almost 1.4 million square feet in triple-net leases (the tenant pays for insurance, maintenance and taxes, making the REIT’s profits more consistent and predictable).
IIPR is a popular stock among analysts, garnering three Strong Buys and three Buys versus just one Hold and no Sell calls of any sort. IIPR stock also comes along with a 3% yield.
Green Thumb Industries (GTBIF) stands out as one of the largest multistate cannabis operators in the U.S.. It owns and runs two retail cannabis chains, Rise and Essence, with 48 stores in 12 states, including California and Florida. Green Thumb has expanded its footprint in Illinois and Pennsylvania without overextending its balance sheet, it already has a sizable presence in New Jersey. New Jersey especially presents a tremendous opportunity for Green Thumb; it could be a multibillion dollar market, like Illinois.
Green Thumb should have a clear path to future growth as the cannabis markets expand in the states where it already operates. The company owns 48 additional licenses for retail cannabis locations, which would enable it to double its store count.
Business is soaring for Green Thumb. The company reported revenue in Q3 of 2020 totaling $157.1 million, a 131% year-over-year jump and a 31% quarter-over-quarter increase. It reached profitability for the first time in Q3 and generated positive operating cash flow for its third consecutive quarter.
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