One of the hottest topics of the year has been cannabis stocks to buy, especially with elections nearing.
We can see that with more than 88% of Americans wanting to see legalization. The Administration is rescheduling cannabis as a Schedule III drug. More states are legalizing it. Florida could legalize it in November. Germany legalized its use, which could set off a domino effect of legalization efforts throughout Europe. And let’s be honest, cannabis is more popular than ever.
In fact, according to the Associated Press, “For the first time, the number of Americans who use marijuana just about every day has surpassed the number who drink that often, a shift some 40 years in the making as recreational pot use became more legal in nearly half of the states.”
Plus, as we near the presidential elections, we could hear more about the possibility of legalization, which could help sway more voters.
That being said, it’s a good idea to invest in cannabis stocks to buy, such as:
Innovative Industrial Properties (IIPR)
With a yield of 6.74%, Innovative Industrial Properties (NYSE:IIPR) is a real estate investment trust (REIT) focused on the acquisition, and management of state-licensed cannabis operators. It owns 108 properties across 19 states with 8.9 million rentable square feet. Also, 95.2% of its portfolio is under a triple-net lease.
Granted, earnings were mixed. But that should improve with more state legalization efforts. First quarter adjusted funds from operations (AFFO) came in at $2.21, which beat by 16 cents. Revenue of $75.5 million, down 0.8% year-over-year (YOY) did miss by $3.01 million.
After bouncing from a low of about $90, it just retested $115. Now back to $108 thanks to broad market weakness, I’d use the pullback as an opportunity. While we wait for further cannabis catalysts, and upside in IIPR, at least we can get paid to wait. It’s last dividend payment of. $1.82 was paid recently, with more on the way.
AFC Gamma (AFCG)
Another hot cannabis, dividend-paying REIT to buy and hold is AFC Gamma (NASDAQ:AFCG).
“AFC Gamma targets direct lending and bridge loan opportunities typically ranging from $5 million to $100 million across multiple real estate sectors, with a specialization in loans to state-licensed cannabis operators,” as noted on its site.
At the moment, it yields 15.61%, and should also benefit from the potential for further state legalization. Earnings were mixed with AFCG, too.
While EPS of 49 cents beat by six cents, net interest income of $14.76 million – down 12.3% YOY – missed by $1.33 million. However, much like IIPR, with cannabis sales likely to increase, AFCG could push higher, as well.
After finding support at $11.40, AFCG rally to a high of $12.60. Now consolidating around $12.25, I’d like to see it retest resistance at around $14 a share.
NewLake Capital Partners (NLCP)
There’s also NewLake Capital Partners (OTCMKTS:NLCP), which yields about 8.2%.
The REIT, which provides real estate capital to licensed cannabis operators through sale-leaseback transactions and owns a portfolio of 31 properties comprised of 14 cultivation facilities and 17 dispensaries, did post impressive earnings.
In its first quarter, funds from operations (FFO) came in at 50 cents, beating estimates by four cents. Revenue of $12.6 million, up by 10.5% year over year beat by $620,000.
President and CEO Anthony Coniglio also added, “Looking forward, the cannabis industry has much to be excited about following the proposal to reschedule cannabis from Schedule I to Schedule 3, an increase in meaningful dialogue among congressional leaders, and medical to adult-use conversion in Ohio and the Adult-use ballot in Florida.”
Technically, since bottoming out around $11, NLCP ran to a recent high of $20.50. From here, with the potential for further positive cannabis catalysts, I’d like to see it test $28.
Advisor Shares Pure US Cannabis ETF (MSOS)
With an expense ratio of 0.60%, the Advisor Shares Pure US Cannabis ETF (NYSEARCA:MSOS) is the first actively managed U.S.-listed ETF with dedicated cannabis stocks to buy focusing exclusively on U.S. companies, including multi-state operators, as noted on the ETF’s site.
Some of its top holdings include Green Thumb Industries (OTCMKTS:GTBIF), Curaleaf Holdings (OTCMKTS:CURLF), Trulieve Cannabis (OTCMKTS:TCNNF), and Cresco Labs (OTCMKTS:CRLBF).
As I usually note, ETFs are a great investment. Not only do they allow you to diversify with dozens of stocks, but they’re also cheaper. You can buy MSOS ETF, for example, for less than $9, while gaining exposure to its 25 holdings.
Technically, after bouncing from about $5 to a high of $11.07, it’s seeing selling pressure with the broader market. But give it time. From its last traded price of $8.11, I’d like to see it initially retest $14 a share as the cannabis boom starts to get hot again.
Cambria Cannabis ETF (TOKE)
We can also look at the Cambria Cannabis ETF (CBOE:TOKE).
With an expense ratio of 0.59%, the ETF is a low-cost option among related ETFs, targeting 20 to 50 global cannabis companies. It also offers exposure to real estate, food, medicine and tourism. Last trading at $6.13, it’s also dropping with the broader market. With time, and a good deal of patience, I’d like to see the TOKE ETF retest $8.
Some of its top holdings include Philip Morris (NYSE:PM), Trulieve Cannabis, Verano Holdings (OTCMKTS:VRNOF), Cronos Group, and Green Thumb Industries to name a few. Better, the company pays a quarterly dividend of $0.0627, which was recently paid out on April 1.
Before the recent pullback in the market, the TOKE ETF had just rallied from a low of about $5.40 to a high of $7.47. Now back to $6.13, it’s another solid way to diversify with cannabis.
Trulieve Cannabis (TCNNF)
Trulieve Cannabis is another one of the standout cannabis stocks to buy. After rallying from about $8 to a high of $14.50, TCNNF last traded at $10.50. And again, this one is weak at the moment, too, thanks to the market pullback.
However, it’s worth a buy, especially as we near potential cannabis legalization in Florida. In fact, Alliance Global Partners even noted TCNNF is best positioned for that. Even analysts at Needham raised their price target on TCNNF to $14.50 with a buy rating.
Earnings were strong, with a first-quarter EPS loss of five cents beating by six cents. Revenue of $298 million – up 4.6% year over year – beat by $12.27 million. It also generated a free cash flow from operations of $139 million and a free cash flow of $124 million.
In addition, TCNNF should benefit from not being bothered with the 280E tax with the upcoming rescheduling and potential legalization in Florida. As it stands now, “Section 280E has been applied to state-legal cannabis businesses, as cannabis is still declared a Schedule I substance. This applies to all businesses that partake in the cultivation, sale, or processing of the cannabis plant, for medical or recreational use,” as noted by the Marijuana Policy Project.
Planet 13 Holdings (PLNH)
Keep an eye on Planet 13 Holdings (OTCMKTS:PLNH), too.
At just 56 cents, it’s another one of the top cannabis stocks to buy that should benefit from potential legalization in Florida. Plus, it just closed its acquisition of VidaCann in a cash and stock deal.
That deal will be a good one for Planet 13, once you consider that “VidaCann operates 26 stores, accounting for 4% of Florida’s 625 cannabis shops. Despite a stable store count, sales per store have grown significantly. According to the report, flower volumes increased 157% year-over-year, while extracts rose 37% year-over-year,” added Benzinga.com.
“Co-CEOs Bob Groesbeck and Larry Scheffler expressed optimism about VidaCann’s future, planning to open more dispensaries in Florida and enhance product offerings. This growth is part of Planet 13’s strategic multi-year plan aimed at expanding market presence, increasing profitability, and improving cash flow,” they added.
With exciting building for potential legalization in Florida, Planet 13 Holdings could see higher highs, as we near the vote.
On the date of publication, Ian Cooper did not hold (either directly or indirectly) any positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
