Light Up Your Portfolio With These 15 Cannabis Stocks and ETFs

Along with higher-than-average risk and volatility, many leading investment advisors also believe the cannabis sector offers outsized upside potential, particularly for those taking a long-term view. Here, six contributors to MoneyShow.com offer their favorite ideas for investors looking for exposure to the growing marijuana market. Jimmy Mengel, The Crow's Nest I've traveled the entire globe inspecting cannabis crops -- from Canada to Colombia to Copenhagen. But despite the pot profits I've made in other countries, my travels have only brought me back to the biggest marijuana market in the world: the United States. All 50 states will soon legalize cannabis -- unleashing billions of dollars and creating over a million jobs. With a stroke of the pen, America could have a booming new industry. Prices are a steal right now, and as the wave of legalization starts, U.S. stocks are going to skyrocket. Cresco Labs -- a recent addition to our model portfolio -- is one of the largest multi-state, vertically integrated cannabis companies operating today. It controls the cultivation, manufacturing, extraction, and packaging practices. It covers pretty much every point in the seed-to-sales process. More importantly, it is uniquely positioned in the United States, which is currently the largest market in the world, and like I mentioned above, will only increase exponentially from here. Cresco Labs has one of the biggest footprints in the U.S. and is growing, with 11 operational states, 18 production facilities, 26 retail licenses and 20 owned dispensaries. Its products are sold in over 700 dispensaries across the U.S. About 80% of the company's sales for 2020 will come from Illinois, California, and Pennsylvania. The Illinois market is probably the most exciting right now. Cresco has just set up shop in the Chicago area. Illinois' adult-use cannabis market could reach up to $2.6 billion in annual revenue, according to a recent study. I'm also bullish on its exposure to the Pennsylvania market -- where they have more market share than any other company. It's the fifth-largest state and could very well be on its way towards recreational legalization, in which case Cresco would be in a great position. Cresco Labs also released record financial results for the first quarter ended March 31, 2021. Revenue of $178.4 million, was an increase of 9.9% quarter-over-quarter and 168.8% year-over-year. Gross profit of $87.0 million, or 48.8% of revenue, was an increase of 16.8% quarter-over-quarter and 268.9% year-over-year. Record retail revenue of $82.8 million from 24 stores was an increase of 15.2% quarter-over-quarter and 193.2% year-over-year. Current assets were $381.7 million, including cash and cash equivalents of $255.5 million. In addition, Cresco had working capital of $105.1 million and term loan debt, net of issuance costs, of $187.9 million. Chris Vermeulen, The Technical Traders The weekly chart of the ETFMG Alternative Harvest ETF shows the deep momentum base/bottom near $19.90 with moderate upside support above $20 to $21. Using a Fibonacci 100% Measured Move technique, we can identify upside targets near $22.40 and $24.50. I believe the upside potential in the sector is relatively strong. We believe the recent momentum base that setup across numerous cannabis sector stocks is presenting a very clear opportunity for traders to position trades for the pending multi-wave upside price trends. Very similar to the MJ setup, the weekly chart of Tilray shows a fantastic momentum advance after a moderate price pullback from recent highs. We are seeing strong accumulation in the recent trading volume indicated by the series of green candles -- suggesting the upside price trend is starting to build real momentum. We believe the next move higher will target the $23 to $24 level -- which will prompt a close above the first target level and setup TLRY on a stronger advance towards the second target level. From the current price close, the second target level, near $26.70, represents a solid +35% opportunity for traders to profit from this initial wave higher. Overall, we believe the cannabis/marijuana sector has moved away from the downside price trend that has dominated this sector over the past 2 to 3+ years. Now, after the Reddit group targeted this sector late in 2020, we are seeing renewed focus by traders into this sector. Once the momentum moves past moderate accumulation and into breakout trending, we may see another big explosive upside trend in a number of cannabis sector stocks. Ryan Irvine, Internet Wealth Builder Trulieve Cannabis Corp. is a vertically integrated cannabis company; it operates under licenses in six states including Florida, Mass., Calif., Conn., Penn., and West Virginia. It cultivates, produces, and sells medicinal-use and recreational cannabis products within these states. Of the six states, only California and Massachusetts allow both the sale of medical and recreational cannabis. Revenues for the fourth quarter ended Dec. 31, were $168.4 million, representing an increase of 111% from $79.7 million for the prior year's quarter. The large increase was primarily due to the addition of 28 Florida-based dispensaries during the 2020 fiscal year. In May, Trulieve and Harvest Health & Recreation announced they entered into a definitive agreement through which Trulieve will acquire all of the shares of Harvest for stock of Trulieve, representing total consideration of approximately $2.1 billion. This is a good deal for Trulieve. The combined company will have a strong and expanding multi-state presence, bolstering Trulieve's expansion in the U.S. northeast and southeast hubs and establishing a southwest hub in core markets including Arizona, where recreational adult use of cannabis was recently legalized. Based on the midpoint of management's forward fiscal 2021 EBITDA guidance of $365 million, TRUL is trading at under 13 times forward EBITDA. And based on the company's trailing EBITDA of $255.6 million, the company is currently trading at 17.5 times trailing EV/EBITDA. If the company is able to meet management's fiscal 2021 guidance of $365 million, and trade with a justified EV/EBITDA multiple of just 16.5 times -- relatively conservative compared to its current trailing figure -- we estimate fair value for the stock over the mid-term to be approximately C$62 per share. Buy. Mike Cintolo, Cabot Growth Investor Curaleaf looks like one of the real emerging leaders in the marijuana field; in fact, it's the largest U.S. weed company by revenue ($790 million during the past year), with a $9 billion market cap. The company operates in 23 states, has 30 processing facilities and has two million square feet of cultivation capacity; all together, it offers a powerful, vertically integrated operation that's producing ridiculous growth. The company also operates 102 retail locations (and has nearly 2,000 points of sale through wholesale partners) and, thanks to a recent acquisition, now has a foothold in Europe. And with a good-sized lead, it's just a matter of expanding its offerings (its new Select Squeeze THC-infused beverage enhancer was its most successful new product launch ever) and using its muscle to expand its store count and geographical reach both organically and through buyouts. Sales have expanded at triple-digit rates for many quarters (up 170% in Q1), and management says the bottom line will leap into the black in the second half of this year. (Analysts see earnings of four cents per share this year and 28 cents in 2022.) The stock got going from a long post-IPO base last November and ran to $18 before pulling in with most growth stocks and working on a new launching pad; CURLF still has work to do (18% off its high), and obviously macro factors (legalization trends) will move the stock. Plus, the shares are very thinly traded (just $12 million per day). But if you're comfortable with the risk, watch for a few days of good-volume upside, which should tell you the next rally has begun. Nick Hodge, Daily Profit Cycle I'm bullish on cannabis. Not only have cannabis stocks consolidated over the past three months, the industry itself is starting to consolidate as well. Trulieve's acquisition of Harvest Health was just one in a dizzying string of recent tie-ups. Hexo has taken out Redecan and Zenabis and 48 North. Curaleaf has taken out Los Sueños. Canopy Growth took out Supreme Cannabis. This is the next iteration of the cannabis market playing out before your eyes, with the larger players trying to buy U.S. market share. Longtime cannabis investors will know Innovative Industrial Properties as a company that owns properties and provides real estate capital for the cannabis industry. It's gone from $90 to over $220 in the past year, but has now pulled back and consolidated -- along with the rest of the sector. And that's where I want to start adding it to our portfolio. Buy on pullbacks below $180.00. Not only do I expect it to continue capitalizing on the U.S. cannabis market as it opens up, but also the mushroom market as it begins to gain traction. Sean Brodrick, WealthWave Cannabis stocks were -- until recently -- beaten flat with a gardening shovel. But they're starting to pick themselves up now and they have huge gaps in valuation to make up. I think 2021 could be a glorious year for select pot stocks. If you're in the right part of the market, your profits will grow like weeds. First-quarter results are in, and the better U.S. multistate operators (MSOs) are reporting red-hot revenue growth. Many reported double-digit revenue growth, even from just the fourth quarter of last year. And earnings? The better ones are making money, too, or soon will be. Meanwhile, the pandemic actually helped cannabis sales. In fact, 2020 saw record legal marijuana sales of $17.5 billion, up 46% year over year. That's according to data from cannabis market research firm BDSA, which predicts that the legal cannabis market will hit $56 billion by 2026. That's a compound annual growth rate of 26%. Federal cannabis legalization is stuck in the mud for a bunch of reasons, but legalization campaigns are winning one state at a time. In the U.S., 17 states have legalized medical marijuana, and 34 have approved it for medical usage. Some more facts: Support for legal marijuana is overwhelming. Just 8% say marijuana should not be legal for use by adults. That's according to the latest from Pew Research. Basically, marijuana is just as popular as ice cream. States have collected nearly $8 billion in tax revenue since recreational sales launched in 2014. That's from a new report from the Marijuana Policy Project (MPP). If there's one thing that politicians like, it's tax money! How can you play this? There are a bunch of cannabis exchange-traded funds (ETFs) -- the ETFMG Alternative Harvest ETF is the biggest, but there are others. They include: AdvisorShares Pure Cannabis ETF Cambria Cannabis Amplify Seymour Cannabis ETF The Cannabis ETF Global X Cannabis ETF All these funds have positives and negatives; but the one I believe has the most potential is the AdvisorShares Pure US Cannabis ETF . The reason I like this ETF is because it owns solely American cannabis companies. Other ETFs, particularly MJ, are more focused on Canadian marijuana ETFs. Canadian cannabis stocks consistently underperform; U.S. cannabis companies generally outperform. Until that dynamic changes, I want to focus on U.S. cannabis. And MSOS holds U.S. multistate operators, top U.S. cannabis real estate investment trusts (REITs), CBD companies, pharmaceutical companies and hydroponic suppliers - 31 companies in all. MSOS only made its debut at the end of August last year. MSOS took off like a rocket but has lost steam since mid-February. That's due to factors including Wall Street worrying about how marijuana purchases will fare once people can finally leave the house, plus good ol' fashioned profit-taking. Now, though, we're hearing that cannabis sales continue strong. And MSOS has probably bottomed. The next leg higher is around the corner. You'll want to be on board when it blasts off.

Light Up Your Portfolio With These 15 Cannabis Stocks and ETFs

Leading advisors offer their favorite ideas for investors looking for exposure to the growing marijuana market.

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