Patient investors tend to do better in the stock market because S&P 500 has grown by almost 270% over the past decade and is setting new records.
This long-term perspective will serve marijuana investors well given the Horizons ETF Marijuana Life Sciences is down 21% since its creation in 2017, compared to a gain of 94% for the general market index.
This doesn’t mean that all cannabis stocks will take decades to generate a return for investors, but a buy and hold philosophy will ensure that your portfolio earnings are maximized. This is why the following pair of marijuana stocks should be on the radar of any pot investor, as they offer the best chance of providing short-term rewards as well as substantial returns for years to come.
One of the largest vertically integrated multistate (OSM) operators in the country, Cresco Laboratories (OTC: CRLBF) takes a two-pronged approach to growth. On the one hand, it owns its retail business which includes some 37 dispensaries and 20 production facilities, and on the other hand, it operates an extensive and industry-leading wholesale business. The combination gives it a unique punch.
Based on the total number of licenses it holds, Cresco could have up to 50 outlets to its credit. And when its acquisition of Cure Pennsylvania is finalized in the fourth quarter, it will add three more.
Its retail business also tends to focus on limited license markets, such as Illinois, Ohio, and Pennsylvania, where regulators limit the number of dispensaries that can open or the number of stores one can open. only business can operate. While this may cap its own growth potential, it also limits the number of competitors it faces in the market.
Yet it is also present in California, the largest marijuana market in the world, following its acquisition of Origin House in 2020, which allows it to integrate its own branded cannabis products in more than 575 dispensaries across the state.
Although the wholesale cannabis business generally generates lower margins than the retail trade, it will be able to offset in volume what it might otherwise lose in profits.
Wall Street expects this to happen as analysts predict revenue will almost quadruple between 2020 and 2024, from $ 476 million to $ 1.57 billion. Cresco is also expected to reach profitability as early as next year and not look back after that.
With its stock down 21% year-to-date, Cresco Labs looks like a stock of marijuana that investors can hold onto for decades.
Green thumb industries
Another MSO, Green thumb industries (OTC: GTBIF), has one of the largest physical footprints in the United States among marijuana inventories with 65 operating dispensaries, 16 manufacturing facilities, and licenses for 114 dispensaries. In addition, it has enough retail licenses to open four dozen more outlets.
Like Cresco, many Green Thumb retail stores are located in limited license states while also focusing on high dollar value states. He believes this approach will allow him to develop his brands as those sought after by customers, which will allow him to develop a loyal following. Its main dispensary chain, Rise, has stores in nine states.
To the benefit of Green Thumb, it offers a wide range of cannabis products and derives the majority of its revenue from higher margin derivatives such as vapes, edibles, oils and infused drinks. And because derivatives are less prone to oversupply issues compared to dried cannabis flower, they allow for recurring profitability.
One of the things that separates Green Thumb from Cresco is that it has been profitable on a recurring basis for the past year, although this is at least in part due to fair value adjustments on equity investments. But analysts predict exponential growth in earnings over the next several years.
Where Green Thumb had generally accepted accounting principles (GAAP) profit of $ 15 million in 2020, it is expected to produce some $ 322 million in 2024, a 21-fold increase. Revenue is expected to increase more modestly four times, to over $ 2.1 billion. It is a cannabis business that can also be held for the long term.
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