The cannabis industry faced similar obstacles in 2023 as it did in 2022, with a lack of reform both in the United States and Canada proving to be a significant roadblock to growth in the market.
This list was put together based on the top-weighted pure cannabis stocks included in the AdvisorShares Pure US Cannabis ETF (ARCA:MSOS) and the Horizons Marijuana Life Sciences Index ETF (TSX:HMMJ) as of November 30, 2023. Share information for companies is accurate as of November 30.
Cannabis remains illegal at the federal level in the US, but state market openings have allowed some US-based operators to thrive. Typically these firms set up vertically integrated businesses with a focus on branded products, retail networks and licenses.
While these companies have adapted to regulatory challenges, they have much to gain from country-level reform in the US, and are eager to see more welcoming federal laws that will allow their businesses to develop further.
US-focused cannabis fund
The AdvisorShares Pure US Cannabis ETF (NYSEARCA:MSOS) provides investors with exposure to companies exclusively operating within the US cannabis industry.
By investing in companies that are working in states with clear guidelines, MSOS gives investors a way to be more selective about the types of cannabis companies they’re investing in, rather than just investing in the industry as a whole.
MSOS has decreased in value by 0.73 percent in 2023, resulting in a price point of US$6.82 as of November 30.
1. Green Thumb Industries (CSE:GTII,OTCQX:GTBIF)
ETF weight: 25.94 percent; market cap: US$2.48 billion; current share price: US$10.48
Green Thumb Industries makes up 25.94 percent of the MSOS ETF. It is a multi-state operator (MSO) with headquarters in Chicago, Illinois. Green Thumb Industries produces and sells cannabis products for recreational and medical use out of 87 stores across 15 states.
The third quarter of 2023 was a significant period for the company, which reported revenue of US$275 million and GAAP income of US$11 million. These figures represent a 9 percent increase in revenue over the previous quarter. The company has attributed such explosive growth to the start of adult-use sales at Green Thumb’s four cannabis shops in Maryland following legalization on July 1.
2. Curaleaf Holdings (CSE:CURA,OTCQX:CURLF)
ETF weight: 19.33 percent; market cap: US$2.66 billion; current share price: US$3.77
Curaleaf Holdings has a significant presence in the US cannabis market, with 146 dispensaries and 21 cultivation centers in 18 states, making them a major player in the industry. The company is also continuing its expansion into the European cannabis market with the anticipated increase in demand for medical cannabis products, especially in Germany and the UK, where the company already has a significant presence. The company applied to be uplisted to the TSX on October 10 and is awaiting approval.
Curaleaf is one of the many companies in the US that are optimizing their operations to cope with the challenges of the industry. Q3 saw Curaleaf complete the final steps of the company’s asset optimization plan, which included reducing inventory and adding new product offerings. The company’s Q3 2023 results reported revenue of US$333 million, representing a year-over-year increase of two percent, and an adjusted EBITDA margin of 23 percent. In a statement released alongside the results, Executive Chairman Boris Jordan said he was “pleased that (Curaleaf’s) changes are showing results.”
3. Verano Holdings (NEO:VRNO,OTCQX:VRNOF)
ETF weight: 14.64 percent; market cap US$1.02 billion; current share price: US$5.50
Verano Holdings is a vertically integrated, premiere cannabis company. It delivers high-quality products out of its 136 chic Zen Leaf and MÜV retail locations, spread across 13 states. The company reported a revenue of US$240 million during its Q3 results conference call on November 8, representing year-over-year growth of five percent.
Unlike other US operators listed on a Canadian exchange, Verano recently moved its listing to the Cboe from the CSE, opting not to apply for a TSX listing. The move is expected to increase the company’s visibility and accessibility to investors, while at the same time leaving it in a better position to transition to a US exchange if cannabis is legalized there, according to the company’s CEO George Archos.
4. Trulieve Cannabis (CSE:TRUL,OTCQX:TCNNF)
ETF weight: 11.9 percent; market cap: US$1.02 billion; current share price: US$5.50
Truelieve Cannabis is a vertically integrated medical marijuana company with a dominant market share in its home state of Florida.
Trulieve Cannabis recently announced that it would be redeeming its 9.75 percent senior secured notes, worth US$130 million, on December 1, six months ahead of the original due date in June 2024. This comes on the heels of a strong third quarter for the company, with retail sales accounting for 96 percent of its total revenue of US$275 million.
5. TerrAscend (CSE:TER,OTCQX:TRSSF)
ETF weight: 6.89 percent; market cap: US$558.69 million; current share price: US$1.67
TerrAscend is a vertically integrated MSO with operations in the US as well as Canada. Its diversified ownership structure is a good representation of the growing interest in the cannabis industry from various sources.
TerrAscend has 37 dispensaries in five states, including six medical dispensaries in Pennsylvania and four in Maryland, where adult-use recreational cannabis became legal this year. TerrAscend also has a strong presence in New Jersey, with retail stores and a state-of-the-art cultivation and production facility. The Garden State is the company’s most profitable market, and the company’s Q3 2023 report revealed that TerrAscend had climbed to second place in market share in the state at 18.6 percent — less than 1 percent from the top spot.
TerrAscend’s Q3 net revenue was up 34.7 percent year-over-year, jumping from US$66.2 million to a record US$89.2 million.
In 2018, Canada became the first G7 nation to legalize adult-use cannabis and create its own streamlined program regulated by both federal and provincial powers. Since then, companies working in the country have faced ups and downs in dealing with tight marketing rules, high tax rates and ongoing competition with the unregulated market.
Canada-based cannabis fund
The Horizons Marijuana Life Sciences Index ETF (TSX:HMMJ) was the first cannabis ETF available in Canada, and it holds a variety of companies involved in cannabis in some way along with several non-flower companies. For this list, instead of solely considering ETF weight, we will only be including companies that have notable involvement with the cannabis industry.
While the HMMJ does not invest in US-based multi-state operators, it does have exposure to the US market through Canadian companies that have interests in the US cannabis industry.
Overall, HMMJ is designed to give investors broad exposure to the cannabis industry, with a particular focus on North American companies.
This ETF hasn’t had the best year, with a year-to-date loss of 27.16 percent as of November 30 and a price point of US$8.61. ETF performance data was gathered on November 28.
1. Innovative Industrial Properties (NYSE:IIPR)
ETF weight:15.72 percent; market cap: US$2.24 billion; current share price: US$25.82
Innovative Industrial Properties (NYSE:IIPR) is a real estate investment trust that provides specialized real estate opportunities for cannabis companies in 19 states. Its properties mostly consist of processing plants, greenhouses and warehouses, with retail spaces making up a small percentage of its portfolio.
IIP has provided long-term absolute net lease agreements to some of the cannabis industry’s biggest names like Green Thumb Industries, Tilt Holdings (NEO:TILT,OTCQB:TLLTF), Ascend Wellness (CSE:AAWH.U,OTCQX:AAWH) and Curaleaf. The company’s attractive sale-leaseback program has helped cannabis companies access a source of capital, a much-needed workaround in the US where there are fewer traditional financing options.
2. Cronos Group (NASDAQ:CRON,TSX:CRON)
ETF weight: 14.73 percent; market cap: US$744.1 million; current share price: US$1.95
Cronos Group is the Canada-based company behind the Spinach, Peace Naturals and Lord Jones cannabis brands. The company recently re-entered the German medical cannabis market through its partnership with a German medical cannabis company called Cansativa Group and is positioned to take advantage of potential adult-use legalization in the country. Cronos also serves the Israeli market through its subsidiary Cronos Israel.
The company’s Q3 results revealed a 22 percent year-over-year net revenue increase, marking one of the “best quarters in Cronos history,” according to Mike Gorenstein, the chairman, president and CEO of the company. Gorenstein also mentioned in the press release that his company had recently agreed to start sending cannabis products to Vitura Health for sale in Australia, further expanding its global reach.
3. Tilray Brands (NASDAQ:TLRY,TSX:TLRY)
ETF weight: 11.22 percent; market cap: US$1.29 billion; share price: US$1.77
Tilray Brands has a presence in over 20 countries worldwide with a wide range of cannabis products including edibles, flower and oils. The company solidified its position as one of the largest players in the global cannabis market after it merged with medical cannabis brand Aphria in 2020. This past June, Tilray announced it had completed an accretive acquisition of HEXO, a cannabis company out of Gatineau, Québec — a move that contributed to a 6 percent year-over-year increase in total revenue on a constant-currency basis.
The bulk of Tilray’s sales lies in the Canadian and international medical cannabis export markets. The company has a relatively small presence in the US and is limited to selling products infused only with CBD.
4. SNDL (NASDAQ:SNDL)
ETF weight: 5.46 percent; market cap: US$366.97 million; current share price: US$1.41
SNDL, formerly known as Sundial Growers, is the largest private-sector liquor and cannabis retailer on the Canadian market. The company has made the headlines quite frequently throughout 2023, notably in October when it chose to close its Olds, Alberta, cannabis facility. Its stock price has fallen more than 40 percent in 2023, but the steps the company has taken to reduce its debt and the introduction of new products to the SNDL lineup have resulted in a positive free cash flow of US$16.5 million in Q3, a 147.5 percent increase from Q3 2022.
Net revenue for cannabis retail and operations has also increased year-over-year. Q3 results reported earnings of US$75.5 million from cannabis retail, an increase of 14.1 percent compared to 2022 and net revenue of US$21 million for cannabis operations, a 77.4 percent increase.
5. Canopy Growth (NASDAQ:CGC,TSX:WEED)
ETF weight: 3.88 percent; market cap: US$447.96 million; current share price: US$0.54
Canopy Growth is a company that’s grown alongside Canada’s cannabis industry. Founded in 2013, it has become one of the largest producers of cannabis in the world, fostering brand deals with celebrities like Martha Stewart and Snoop Dogg.
The company released positive fiscal Q2 2024 results on November 9, indicating that the company was on track for another profitable year, despite the setbacks faced by many in the cannabis industry.
“Our financial results demonstrated marked improvement this quarter, including significant gross margin gains and reduced cash burn. This enhanced performance, together with a series of completed balance sheet strengthening actions, has solidified our foundation and set the stage for profitable growth ahead,” Chief Financial Officer Judy Hong said in a statement released with the financial report.
FAQs for investing in cannabis
Are cannabis stocks worth investing in?
Each investor will have to think and act for themselves to manage their own risk exposure, but it’s no secret that cannabis stocks have taken a beating for some time now. While financial experts point to the long-term upside of US operators as more state markets expand, the stock market has not been kind to these names lately.
Are cannabis stocks considered a high- or low-risk investment?
Cannabis investments are extremely young in the grand scheme of the investment universe. There is an exciting and refreshing element to these stocks, but the market has always been characterized by volatility and unpredictability.
While wild, spontaneous swings in the open market have become less common, cannabis stocks are often moved — both positively and negatively — by big pieces of market news or legalization updates.
Why do people buy cannabis stocks?
Investors may choose to get exposure to the cannabis market as a way to participate in the development of a new drug market with consumer packaged goods capabilities. Some participants are bullish on the industry’s long-term outlook and expect more welcoming laws in the US and across the world to provide upward momentum.
Securities Disclosure: I, Meagen Seatter, hold no direct investment interest in any company mentioned in this article.