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The marijuana industry is upside down, there is no doubt about it. When it comes to legalization, everything is skyrocketing and headed for the moon. And then, when nothing has happened and growth investors are bored and look away, cannabis stocks seem to crash quickly. This is what is happening now, with the Horizons Marijuana Life Sciences ETF fall of more than 15% in just three months. It’s a bizarre situation, especially given the industry‘s long-term growth potential.
But investors shouldn’t be put off, as the recent downward spiral in stock prices simply means that there are attractive investments in cannabis today. Three of the most promising to examine are Jushi Holdings (OTC: JUSHF), Village Farms International (NASDAQ: VFF), and MariMed (OTC: MRMD).
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1. Jushi Holdings
What I love about Jushi Holdings is that the company operates in some of the most attractive cannabis markets in the country. These markets include Illinois, Massachusetts, Nevada and California, where Jushi has operational dispensaries and where potty is legal for recreational use. However, most of its dispensaries (16) are in Pennsylvania, which has yet to legalize recreational pot.
Additionally, Jushi owns a cannabidiol store in New York City – a state that recently legalized adult marijuana and could be one of the hottest new markets of 2022.
Jushi is not overly aggressive in his growth and chooses the locations of his stores carefully. In October, it only opened its 26th store nationwide. By comparison, the multistate operator Truly has over 100 locations just in the state of Florida.
And Jushi’s strategy has paid off for the company. For the period ending June 30, sales of $ 47.7 million increased 15% from the prior period and the company reported profit of $ 4.8 million, more than 10% of its turnover. Marijuana growers generally struggle with profitability, and the fact that Jushi is already there is impressive.
Jushi’s stock has fallen over 24% in the past three months, but I think the decline is unwarranted. Given its growth potential in some strong markets, it may only be a matter of time before Jushi takes off.
2. Village farms
Normally I wouldn’t put a cannabis company that operates in Canada on a list like this. And that’s because the market is so saturated – there are over 700 licensed producers in Canada, so you don’t wonder why marijuana companies love it. Aurora Cannabis and Canopy growth fight profitability and generate constant revenue growth.
But what makes Village Farms special is its low-cost cannabis greenhouse that it operates through its subsidiary Pure Sunfarms. For 11 consecutive quarters, Pure Sunfarms posted positive earnings before interest, taxes, depreciation and amortization (EBITDA). And it is the best-selling brand of dried flowers in several provinces (based on data at the end of June). Focusing on dried flowers is key to the company’s strategy, as it encompasses over two-thirds of retail pot sales in Canada.
If you’re a little worried about investing in Canadian pot stocks, Village Farms may be the safest route to take right now, as it’s still primarily a production business. North America, with operations in Canada, the United States and Mexico. In the first six months of 2021, Village Farms reported more than $ 42 million in revenue from its cannabis operations (Pure Sunfarms), but the bulk of its revenue came from product revenue, which s ‘amounted to $ 80 million.
Village Farms shares are down 18% in three months and their shares have not traded this low since November 2020.
3. MariMed
MariMed is another multi-state operator to put on your watchlist. Like Jushi, MariMed is not running a very large operation at the moment. It has only seven operational dispensaries, including four in Illinois, one in Massachusetts, and two in Delaware.
The company reported its last earnings on Aug. 16, when sales for the period ending June 30 totaled $ 32.6 million and were up 239% year-over-year. Increased production in Massachusetts helped improve results, as did the growth of its retail outlets. What is impressive is that MariMed reported net income of $ 7.6 million on these revenues, which is a profit margin of over 23%.
During the quarter, the company also generated positive cash flow from operations totaling $ 10.8 million. Not only does MariMed generate profits, but it accumulates cash that can facilitate more growth opportunities in the future.
MariMed shares have fallen about 3% in the past three months, the smallest loss on this list. The company is in a strong financial position, and with MariMed still in the early stages of its growth, now is a good time to add it to your portfolio.
This article represents the opinion of the author, who may disagree with the “official†recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.
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