Top Marijuana Stocks for January 2022

The marijuana industry is made up of companies that either support or are engaged in the research, development, distribution, and sale of medical and recreational marijuana. Cannabis has begun to gain wider acceptance and has been legalized in a growing number of nations, states, and other jurisdictions for recreational, medicinal, and other uses. Some of the biggest companies in the marijuana industry include Canopy Growth Corp. (CGC), Cronos Group Inc. (CRON), and Tilray Inc. (TLRY). Many big marijuana companies have continued to post sizable net losses as they focus on investing in equipment to speed up revenue growth.

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.

Below we look at the top five marijuana stocks with the best value, the fastest growth, and the most 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.

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• GrowGeneration Corp.: GrowGeneration is a distributor of agricultural products and one of the largest hydroponics suppliers in the country. The company operates retail hydroponic and organic specialty gardening retail outlets. It offers thousands of products, including plant nutrition, farming soils, advanced lighting technology, and hydroponic and aquaponic equipment. It owns and operates 62 retail and distribution centers. GrowGeneration recently announced that it has acquired the assets of Mobile Media Inc. and MMI Agriculture, a mobile shelving manufacturing and warehouse facility, for $9.4 million. The company also announced in mid-December the retirement of Tony Sullivan, the company’s executive vice president and chief operating officer (COO). The company mentioned no plans to fill the COO position, saying that the current operational team was sufficient to expand the company “in 2022 and beyond.” GrowGeneration hired four people to fill high-level executive or operating positions in 2021.
• Cresco Labs Inc.: Cresco Labs is involved in growing, manufacturing, distribution, and packaging of cannabis products. The company operates in 10 states, including production facilities and dispensaries. Its brands include Cresco, Reserve, Remedi, High Supply, Wonder Wellness Co., Mindy’s, Good News, Sunnyside, and FloraCal Farms. Cresco Labs’ stock also trades over the counter (OTC) in the U.S. under the ticker CRLBF. The company announced in December the closing of its acquisition of Laurel Harvest Labs LLC, a vertically-integrated clinical registrant based in Pennsylvania. The deal was first announced in mid-October with a total closing consideration value of $80 million.
• Hydrofarm Holdings Group Inc.: Hydrofarm Holdings Group is a holding company that, through its subsidiaries, makes and distributes hydroponic products to customers throughout the U.S., Canada, and Europe. The company offers hundreds of brands. It has a total of nine distribution centers, offering a product line of more than 5,000 items. The company announced in early November that it has completed its acquisition of Innovative Growers Equipment Inc., a manufacturer of horticulture benches, racking, and LED lighting systems. The $58.0 million acquisition was announced in late October.
• Village Farms International Inc.: Village Farms International is a Canada-based vertically integrated greenhouse produce company. In addition to growing, producing, and distributing fresh produce to national grocers in North America, the company also produces cannabis. The company’s brands include: Village Farms Fresh, a vertically integrated greenhouse grower; Pure Sunfarms, a cannabis producer; ROSE LifeScience, a cannabis producer and distributor; Balanced Health Botanicals, a CBD brand with an e-commerce platform; Village Fields Hemp, a hemp grower; and VF Clean Energy, a subsidiary that converts landfill gas to clean energy. The company announced in mid-November that it has acquired 70% of ROSE LifeScience, a vertically-integrated branded cannabis producer, for CA$46.7 million ($36.7 million) in cash and Village Farms shares.
• Ayr Wellness Inc.: Ayr Wellness is a cannabis company involved in the cultivation, manufacturing, and dispensing of cannabis and cannabis-derived products. The company’s product portfolio includes flowers, seltzers and tinctures, edibles and vape products under brands including Kynd, Origyn, Stix Preroll Co., Levia, Road Tripper, Entourage, Haze, Wicked, Secret Orchard, and Cannapunch. Ayr Wellness also trades OTC in the U.S. under the ticker AYRWF. The company announced in November that it agreed to acquire Gentle Ventures LLC, which owns and operates two licensed retail dispensaries in Chicago and does business under the name “Dispensary 33”. Under the terms of the deal, Ayr Wellness will pay $55 million upfront with an earnout payable if certain adjusted EBITDA performance is achieved through Q3 2022.

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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• Verano Holdings Corp.: Verano Holdings is a vertically integrated, multistate cannabis operator. The company produces a wide range of medical and adult-use cannabis products, which it sells through its portfolio of brands, including: Verano, Avexia, Encore, and MÜV. It owns and operates 12 cultivation and manufacturing facilities and 93 retail locations in a number of states throughout the U.S. The company’s stock also trades OTC in the U.S. under the ticker VRNOF. Verano recently announced the appointment of Brett Summerer as chief financial officer (CFO). Summerer has over 21 years of financial management, including at General Motors Co. (GM), Kraft Heinz Co., (KHC) and Corning Inc. (GLW). He replaces Brian Ward.
• GrowGeneration Corp.: See above for company description.
• Jushi Holdings Inc.: Jushi Holdings is a holding company focused on branded cannabis and hemp-based assets. The company is engaged in retail, distribution, cultivation, and processing operations. Its brands include: The Bank, focused on plant genetics and cultivation; The Lab, specializing in vape products and concentrates; Nira, a maker of hemp-based CBD products that are physician formulated; Nira+, a producer of medicinal THC products; Sèche, which offers various branded ground and flower cannabis products; and Tasteology, a provider of THC-infused products. Jushi also trades OTC in the U.S. under the ticker JUSHF. The company announced in mid-November that it has agreed to acquire NuLeaf Inc., a Nevada-based, vertically-integrated operator, for $62.5 million. The acquisition is expected to close during the first half of 2022.
• Ayr Wellness Inc.: See above for company description.
• 4Front Ventures Corp.: 4Front Ventures owns and operates cannabis cultivation and production facilities. It cultivates marijuana, produces cannabis flower, edibles, and oil-based products, and distributes its products via medical dispensaries or adult-use stores. The company owns and operates production and retail facilities across five U.S. states. Its businesses include: BrightLeaf Development, which oversees cultivation, production, and manufacturing; Mission Dispensaries, a network of branded medical dispensaries and adult-use stores; and Pure Ratios, a maker of therapeutic cannabis products. 4Front’s stock also trades OTC in the U.S. under the ticker FFNTF.

Momentum investing is a factor-based investing strategy in which you invest in a stock whose price has risen faster than the market has as a whole. Momentum investors believe that stocks that have outperformed the market will often continue to do so because the factors that caused them to outperform will not suddenly disappear. In addition, other investors, seeking to benefit from the stock’s outperformance, will often purchase the stock, further bidding its price higher and pushing the stock higher still. These are the stocks that had the highest total return over the past 12 months.

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• Innovative Industrial Properties Inc.: Innovative Industrial Properties is a real estate investment trust (REIT) that engages in the acquisition, disposition, development, and management of industrial facilities leased to tenants in the regulated medical cannabis industry. The company’s portfolio consists of specialized industrial and greenhouse buildings leased to state-licensed, medical-use cannabis cultivators across the U.S. Innovative Industrial Properties announced in October that it has acquired a 201,000 square foot industrial property in California and entered into a long-term lease with Gold Flora LLC. The purchase price of the property was $51.0 million. Gold Flora is a vertically-integrated operator with extensive experience in the regulated cannabis industry. The operator is expected to complete tenant improvements on the property for which Innovative Industrial Properties will provide reimbursement of $9.0 million, bringing the total expected investment in the property to be $60.0 million.
• Arena Pharmaceuticals Inc.: Arena Pharmaceuticals is a clinical stage biopharmaceutical company that is developing a diverse portfolio of therapeutic candidates focused on the areas of gastroenterology, dermatology, and cardiology. It does not currently have any medicines or products that have been approved for use by any health authority. The company is working on developing a drug for treating pain related to gastrointestinal disorders called Olorinab, which uses cannabinoids. The company announced in mid-December that it has agreed to be acquired by Pfizer Inc. (PFE) for approximately $6.7 billion. Pending approval by regulators, the deal is expected to close in the first half of this year.
• Sundial Growers Inc.: Sundial Growers is a Canada-based diversified cannabis company engaged in the cultivation, manufacturing and processing, and retailing of various cannabis products. The company focuses on inhalables for the Canadian adult-use market. Its branded products are available in flower, vape, pre-roll, and other forms. The company’s brands include Sundial, Top Leaf, Palmetto, and Grasslands. Sundial announced in November that its board of directors has approved a new share repurchase program authorizing the company to repurchase up to CA$100 million ($78.6 million) of its outstanding common shares. The repurchase program will expire on Nov. 19, 2022.
• 4Front Ventures Corp.: See above for company description.
• OrganiGram Holdings Inc.: OrganiGram Holdings is a Canada-based producer of medical and recreational cannabis focused on producing high-quality, indoor-grown cannabis. It is the parent company of Organigram Inc., a producer of cannabis products, and The Edibles and Infusions Corp., a cannabis-infused, soft-chew and confectionary manufacturer. Its brands include The Edison Cannabis Co., Indi, Bag o’ Buds, SHRED, and Trailblazer. OrganiGram’s stock also trades in Canada on the TSX under the ticker OGI.TO. The company recently announced that it has acquired Laurentian Organic Inc., a licensed cannabis producer, for CA$36 million ($28 million) plus an earnout if certain EBITDA thresholds are surpassed by Laurentian in 2022 and 2023.

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