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.
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 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.
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.
Fastest Growing Marijuana Stocks
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.
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.
The comments, opinions, and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or to adopt any investment strategy. Though we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described in our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy.
GRWG is top for value and growth, and IIPR is top for momentum
During the company’s second-quarter conference call in 2017, CEO Jim Hagedorn commented that hydroponics “is a space we understand really well. We’re growing-people. We intend to succeed in that space. I would say anyone wants to rumble with us, come on, let’s do this!”
A cannabis plant under an LED light. Image source: Getty Images.
Image source: Getty Images.
Two stocks you may never have guessed could benefit from legal weed
But there are companies with so-called “normal” business models that could certainly benefit from the marijuana industry if it continues to expand at the state level. Here are two potentially sneaky marijuana stock plays for the future.
Cannabis research firm ArcView pegged growth of legal North American weed at 34% last year to $6.9 billion, and it anticipates that sales of the drug could reach $22 billion by 2021. Even more recently, the Marijuana Business Factbook 2017 from Marijuana Business Daily predicts 45% growth in 2018 alone and a tripling in sales between 2017 and 2021.
To be perfectly clear, Cree makes absolutely no mention of the cannabis industry in its long-term strategy, but that doesn’t mean a steady switch to LEDs following additional state-level legalizations couldn’t begin making a top-line and even bottom-line difference for the company.
Scotts Miracle-Gro Company
Another company that could become an interesting play many years down the road is Cree (NYSE:WOLF) , a manufacturer of high-efficiency LED lighting and lighting systems.
Scotts would really prefer to see the federal government change its stance on pot, but considering that ardent cannabis opponent Jeff Sessions is the attorney general, the chances of this happening are seemingly slim-to-none. In the interim, it appears perfectly happy servicing US markets that are legal, and it should continue to see its hydroponics business handily outgrow its traditional garden and lawn care operations. At the same time, with its traditional businesses comprising a tad bit less than 90% of its sales, investors can still sleep easy at night.