In this article, we will discuss the 11 most profitable pot stocks now. If you want to see more companies in this selection, go to the 5 Most Profitable Pot Stocks Now.
Pot, or more formally known as cannabis or marijuana, is gaining widespread recognition as 46 states in the US have given either a partial or complete go-ahead to the use of pot and other related products. Meanwhile, across the border, Canada legalized the use of pot for recreational purposes on a federal level way back in 2018. It is expected that cannabis sales in the US will increase to $38.8 billion by the end of this year, reflecting a year-over-year rise of over 17.5% from the expected sales of $33 billion by the end of 2022. Overall, the total retail sales are expected to reach $52.6 billion by 2026. On top of this, the share of recreational use of pot is increasing, and it is expected to increase from 64% of total retail sales in 2022 to 70% by 2026.
Pot companies are currently under pressure as they are facing cost-related challenges due to rampant inflation and pricing issues from the end market due to intense competition. Although new markets for pot showed stellar growth over the last year, mature markets saw a decline in sales, and this caused several leading companies to opt for employee reduction and cost-cutting techniques. Despite the federal prohibition on pot, the US government is beginning to demonstrate leniency towards the industry. In 2021, the House of Representatives passed the Secure and Fair Enforcement (SAFE) Banking Act, which requires financial services companies to offer services to the pot industry or face penalties. However, the legislation has yet to receive support from the Senate.
Developments in US Federal Policy Towards the Cannabis Industry
President Biden’s administration passed the Medical Marijuana and Cannabidiol Research Expansion Act in December 2022 to provide a boost to the cannabis industry. In addition to this, President Biden pardoned federal offenses that were related to the possession of pot. However, it must be noted that pot-related offenses are still much higher at the state level as opposed to the federal level. The President of the US has also asked the Attorney General and the Secretary of Health and Human to reconsider the classification of pot as a Schedule I substance, which happens to be the highest level of classification under federal law and thus results in tougher punishment when a person is charged under federal law. If the pot is classified as a Schedule II substance, it could be transported across state borders.
The pot industry is experiencing healthy merger and acquisition (M&A) activity. In comparison to the $3 billion in acquisitions in 2020 and the $3.7 billion in 2019, the amount of M&A transactions that had concluded in the industry as of the fourth quarter of last year was $8.5 billion. This reflects that institutional investors are taking an interest in the industry and have a positive outlook. Since the legalization of cannabis in the state of California back in 2016, the wholesale price of pot has declined by as much as 95%. Meanwhile, the state of Massachusetts has seen a decline in pot prices from $400 per ounce to $250 per ounce in the two years since its legalization. Green Thumb Industries Inc. (OTC:GTBIF), Innovative Industrial Properties, Inc. (NYSE:IIPR), and Verano Holdings Corp. (OTC:VRNOF) are some of the most profitable stocks in the market now. Pot stocks are attracting attention amongst hedge funds as well. You can also check out the 11 Most Undervalued Pot Stocks To Buy According To Hedge Funds.
Photo by Terre di Cannabis on Unsplash
Our Methodology
The process for identifying the most profitable pot stocks involved examining the financial health, growth prospects, and operational efficiency of the leading pot companies. We used the adjusted operating income as the benchmark to gauge the profitability of these companies. By removing the effects of one-time or unexpected occurrences that could cloud a company’s operational results, adjusted operating income paints a more accurate picture of a company’s profitability and performance. Our list includes pure-play pot stocks and companies that are heavily invested in the cannabis industry through their services. These companies have been ranked in ascending order of their trailing 12 months (ttm) adjusted operating income.
11 Most Profitable Pot Stocks Now
11. Cansortium Inc. (OTC:CNTMF)
TTM Adjusted Operating Income: $6.2 million
Cansortium Inc. (OTC:CNTMF) is a Miami, Florida-based vertically integrated company selling pot for medical purposes. The company has a presence in the US and Canada.
Cansortium Inc. (OTC:CNTMF) caters to the need of the customers through the Fluent house of brands that comprise BLACK Line, MOODS, Fluent Care and Flower, Freedom Town Holdings, etc. The CEO of Fluent, Robert Beasley, believes that the industry is at a consolidation stage, and the new entrants are finding it more challenging to find capital and achieve efficiency. He thinks that small measures of relief by the government will bring the industry back to its feet.
10. MariMed Inc. (OTC:MRMD)
TTM Adjusted Operating Income: $19.44 million
MariMed Inc. (OTC:MRMD) is a Norwood, Massachusetts-based multistate vertically integrated seed-to-consumer cannabis company that was founded by Bob Fireman and Jon Levine in 2012.
The company has a headcount of over 200 employees and has 17 cannabis licenses across six states. MariMed Inc. (OTC:MRMD) manages 300,000 square feet (sqft) of cannabis facilities. Nature’s Heritage, Betty’s Eddies, Bubby’s Baked, Vibations, K Fusion, and Florance are some of the brands under the umbrella of MariMed Inc. (OTC:MRMD). The company has also partnered with leading physician Dr. Dustin Sulak to develop the Healer brand, which offers dosage programs and cannabis education. You can go through the company’s earnings call transcript for Q3 2022 here.
9. Chicago Atlantic Real Estate Finance, Inc. (NASDAQ:REFI)
TTM Adjusted Operating Income: $32.6 million
Chicago Atlantic Real Estate Finance, Inc. (NASDAQ:REFI) is a commercial real estate finance corporation that maintains a diverse portfolio of real estate credit assets in the cannabis industry and is aggressively making investments along the value chain.
Due to the recent and upcoming state legalization of cannabis for recreational and medical use as well as rising consumer uptake, the demand for finance in the cannabis business is anticipated to increase further, with both trends necessitating sizeable financial investments by operators. Chicago Atlantic Real Estate Finance, Inc. (NASDAQ:REFI) faces little competition because of the government ban on cannabis use and commercialization, which also hinders several commercial and financial activities.
Chicago Atlantic Real Estate Finance, Inc. (NASDAQ:REFI) stock provides an attractive dividend yield of 12.5% as of February 28. The company paid a per-share dividend of 47 cents in the most recent quarter. Earlier this month, Chicago Atlantic Real Estate Finance, Inc. (NASDAQ:REFI) raised $6 million by issuing nearly 396,000 shares. The company made the secondary offering to fund the loan pipeline and meet its general corporate expenses. The company has a stellar pipeline of high-yielding loans.
8. AFC Gamma, Inc. (NASDAQ:AFCG)
TTM Adjusted Operating Income: $41.7 million
AFC Gamma, Inc. (NASDAQ:AFCG) is a West Palm Beach, Florida-based provider of high-yielding institutional loans to healthy cannabis entities that are involved in the production, cultivation, processing, and distribution stage of the value chain.
The company is structured as a real estate investment trust (REIT), which mandates it to distribute 90% of its net income as a dividend to shareholders and allows it to make a total deduction of only 20% as a qualified business income deduction. AFC Gamma, Inc. (NASDAQ:AFCG) was founded in 2020 during the pandemic and developed a rigorous loan approval process. Since its inception, the company has been presented with 661 potential deals. Out of these, 13 ideas have received funding, and 58 more are under further process. To read the company’s Q3 2022 earnings call transcript, click here.
7. Turning Point Brands, Inc. (NYSE:TPB)
TTM Adjusted Operating Income: $75.5 million
Turning Point Brands, Inc. (NYSE:TPB) is a Louisville, Kentucky-based company involved in making premium rolling papers through the famous Zig-Zag brand. The company also manufactures Cannabidiol (CBD) and Cannabigerol (CBG) products through NU-X. The brand has a diverse range of products ranging from gummies to disposables and tinctures.
Turning Point Brands, Inc. (NYSE:TPB) offers a quarterly dividend of six cents per share. This translates into a forward annual dividend yield of 1.10% as of February 28. The company claims that its wide range of cannabis and non-cannabis-based products are available across 210,000 retail outlets in North America and on its e-commerce platform as well.
6. Cresco Labs Inc. (OTC:CRLBF)
TTM Adjusted Operating Income: $89.7 million
Cresco Labs Inc. (OTC:CRLBF) is a Chicago, Illinois-based publicly listed, multi-state, and vertically integrated cannabis company with a diverse portfolio of brands, including Cresco, Sunnyside, High Supply, Floracal, Good News, Mindy’s, Wonder Wellness and Remedi.
Cresco Labs Inc. (OTC:CRLBF) has more than 58 licenses across seven states. Overall, the company has operations in 10 states through its 21 production facilities. The company also claims that its products are sold in over 700 dispensaries across the US through its wholesale distribution network. Cresco Labs Inc. (OTC:CRLBF) positively received Twitter’s decision to become the first social media company to allow cannabis advertisement on its platform.
Westerly Capital Management was the leading hedge fund investor in Cresco Labs Inc. (OTC:CRLBF) during Q4 2022.
In addition to Cresco Labs Inc. (OTC:CRLBF), Green Thumb Industries Inc. (OTC:GTBIF), Innovative Industrial Properties, Inc. (NYSE:IIPR), and Verano Holdings Corp. (OTC:VRNOF) are also some of the most profitable pot stocks now.
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Disclosure: None. 11 Most Profitable Pot Stocks Now is originally published on Insider Monkey.