In this article, we discuss 10 weed stocks to buy in 2022.
2021 was a landmark year for weed stocks. The debate surrounding the legalization of weed advanced to a new level as federal lawmakers took concrete steps towards shaping a bill aimed at removing marijuana from a list of illegal substances. The bill will have support across both sides of the aisle but there is uncertainty with regards to final numbers required to make it into law. There were a lot of mergers and acquisitions (M&A) in the industry as well. According to Viridian Capital Advisors, there were 306 M&A transactions in 2021, compared to 86 in 2020.
Cannabis is already legal in 16 states across the United States and is gaining international recognition as well. Some of the biggest growth opportunities in the sector moving forward are related to the use of technology. Since cannabis is still an illegal substance at the federal level, transactions related to it through the use of digital banking are difficult. Hence, many cannabis firms have started offering cash-on-delivery services. These services raise more than $9 billion in sales per year, per a report by news platform CNBC.
Many cannabis firms finished 2021 on a low note as inflation concerns led to a mass sell-off in growth stocks. However, analysts expect the industry to bounce back strongly in 2022. Some of the top weed stocks to buy in 2022 include Canopy Growth Corporation (NASDAQ:CGC), Tilray, Inc. (NASDAQ:TLRY), and Innovative Industrial Properties, Inc. (NYSE:IIPR), among others discussed in detail below.
Our Methodology
The companies that operate in the cannabis sector and have long-term growth catalysts were selected for the list. The business fundamentals and analyst ratings for these firms are also discussed to provide readers with some additional context for their investment choices.
Data from around 900 elite hedge funds tracked by Insider Monkey in the third quarter of 2021 was used to identify the number of hedge funds that hold stakes in each firm.
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Weed Stocks to Buy in 2022
10. The Scotts Miracle-Gro Company (NYSE:SMG)
Number of Hedge Fund Holders: 30
The Scotts Miracle-Gro Company (NYSE:SMG) operates as a fertilizer and agricultural chemicals firm. The company has a large hydroponics business catering mainly to the cannabis sector. The firm has an impressive dividend history stretching back 16 years. It has grown dividend payouts for the past twelve years. On January 24, the firm declared a quarterly dividend of $0.66 per share, in line with previous. The forward yield was 1.72%.
On February 8, Barclays analyst Gaurav Jain maintained an Overweight rating on The Scotts Miracle-Gro Company (NYSE:SMG) stock with a price target of $165, noting that the hydroponics industry would bounce back in 2022.
Among the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in The Scotts Miracle-Gro Company (NYSE:SMG), with 713,833 shares worth more than $104 million.
At the end of the third quarter of 2021, 30 hedge funds in the database of Insider Monkey held stakes worth $257 million in The Scotts Miracle-Gro Company (NYSE:SMG), compared to 32 the preceding quarter worth $369 million.
Just like Canopy Growth Corporation (NASDAQ:CGC), Tilray, Inc. (NASDAQ:TLRY), and Innovative Industrial Properties, Inc. (NYSE:IIPR), The Scotts Miracle-Gro Company (NYSE:SMG) is one of the stocks that growth investors are keeping their eye on.
In its Q2 2021 investor letter, Madison Funds, an asset management firm, highlighted a few stocks and The Scotts Miracle-Gro Company (NYSE:SMG) was one of them. Here is what the fund said:
“In Consumer Staples on the other hand, Scott’s Miracle-Gro (SMG) was our worst performing stock, ironically after posting record results. There are a few factors at play here. SMG’s lawn care business benefited immensely from the lock down and work from home, as homeowners spent more time at home and invested in remodels and upgrades which included their lawn and gardens. Furthermore, the weather was very supportive for lawn and garden season. However, stocks are forward looking vehicles and investors are betting that the best is behind Scott’s and reopening will mean less spending on lawn care. While it’s difficult to argue against a slowdown, we continue to like this dominant franchise for two reasons. First, home ownership has expanded and continues to expand, and second, Scott’s owns the Hawthorne franchise. Hawthorne sells lighting, nutrients and grow media into the fast growing commercial cannabis market. It is the country’s largest and most profitable cannabis supply vendor. Over the last 6 months, laws legalizing recreational marijuana use have passed in several states including New York, Connecticut, South Dakota, and Virginia. Meanwhile the most mature legal states like Colorado and California are still growing rapidly for Hawthorne’s products. The pullback in the stock has been dramatic and excessive, in our opinion. We believe a sum of the parts framework can yield great insight. The Hawthorne business is an effective duopoly with Hydro Farm (HYFM) – also a portfolio company. The market values HYFM at 5x revenue. If we apply the same multiple to Hawthorne’s revenue, this implies that the market leading Scotts’ Miracle-Gro franchise, with greater than 25% Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) margins, is valued at just 5x EBITDA.”
9. Sundial Growers Inc. (NASDAQ:SNDL)
Number of Hedge Fund Holders: 7
Sundial Growers Inc. (NASDAQ:SNDL) is a Canada-based firm that markets cannabis products. Some of the inhalable products it sells include flower, pre-rolls, and vapes. The cannabis products are sold under brand names such as Top Leaf, Sundial Cannabis, Palmetto, and Grasslands. The stock has climbed in the past few days after the NASDAQ gave the firm 180 more days to comply with a minimum bid requirement for listing on the exchange.
In October last year, Sundial Growers Inc. (NASDAQ:SNDL) purchased the liquor retailer Alcanna in a deal worth C$346 million. The latter operates in more than 170 locations across Canada and is the largest private liquor retailer in the country.
At the end of the third quarter of 2021, 7 hedge funds in the database of Insider Monkey held stakes worth $8 million in Sundial Growers Inc. (NASDAQ:SNDL), compared to 10 the preceding quarter worth $76 million.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Renaissance Technologies is a leading shareholder in Sundial Growers Inc. (NASDAQ:SNDL), with 5.7 million shares worth more than $3.9 million.
8. Village Farms International, Inc. (NASDAQ:VFF)
Number of Hedge Fund Holders: 4
Village Farms International, Inc. (NASDAQ:VFF) markets agricultural products. In November last year, the company purchased a 70% stake in ROSE LifeScience, a Canadian cannabis producer and supplier. Michael DeGiglio, the CEO of Village Farms International, Inc. (NASDAQ:VFF), said at the time that the purchase was a “prudent and strategic means” to enter and ramp sales in one of the largest provincial cannabis markets in Canada.
In November, Cantor Fitzgerald analyst Pablo Zuanic upgraded Village Farms International, Inc. (NASDAQ:VFF) stock to Overweight from Neutral and raised the price target to $12.75 from $11.50, citing “sectoral momentum and attractive valuation” as the reasons behind the upgrade.
At the end of the third quarter of 2021, 4 hedge funds in the database of Insider Monkey held stakes worth $315,000 in Village Farms International, Inc. (NASDAQ:VFF), compared to 6 in the preceding quarter worth $11 million.
Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in Village Farms International, Inc. (NASDAQ:VFF), with 422,700 shares worth more than $3.5 million.
7. Cronos Group Inc. (NASDAQ:CRON)
Number of Hedge Fund Holders: 7
Cronos Group Inc. (NASDAQ:CRON) makes and sells hemp-derived supplements and cosmetic products. It is based in Canada. On January 27, Jefferies analyst Owen Bennett upgraded Cronos Group Inc. (NASDAQ:CRON) stock to Hold from Underperform with a price target of $3.24, noting that the stock was not too far off the “cash value”. The analyst also highlighted that tobacco giant Altria would continue to support the firm in the near-term.
Cronos Group Inc. (NASDAQ:CRON) sells the cannabis products it develops through e-commerce, retail, and hospitality partner channels. These products are sold under brand names such as Lord Jones and Happy Dance.
Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in Cronos Group Inc. (NASDAQ:CRON), with 762,114 shares worth more than $4.3 million.
At the end of the third quarter of 2021, 7 hedge funds in the database of Insider Monkey held stakes worth $65 million in Cronos Group Inc. (NASDAQ:CRON), compared to 8 in the preceding quarter worth $102 million.
6. Calyxt, Inc. (NASDAQ:CLXT)
Number of Hedge Fund Holders: 5
Calyxt, Inc. (NASDAQ:CLXT) is a tech firm that focuses on providing plant-based solutions. Hemp is one of the many products it develops, in addition to alfalfa, high fiber wheat, soybeans, oats, and storable potatoes. Roth Capital analyst Brian Wright has a Buy rating on the stock with a price target of $10. The analyst notes that the firm has successfully “commercialized agricultural products with improved characteristics” and developed a new synthetic bio platform.
Calyxt, Inc. (NASDAQ:CLXT) posted earnings for the third quarter of 2021 on November 4, reporting a revenue of $7.76 million, up close to 50% compared to the revenue over the same period last year and beating estimates by $3.5 million.
At the end of the third quarter of 2021, 5 hedge funds in the database of Insider Monkey held stakes worth $1.7 million in Calyxt, Inc. (NASDAQ:CLXT), compared to 6 in the preceding quarter worth $2.3 million.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Millennium Management is a leading shareholder in Calyxt, Inc. (NASDAQ:CLXT), with 199,310 shares worth more than $672,000.
Alongside Canopy Growth Corporation (NASDAQ:CGC), Tilray, Inc. (NASDAQ:TLRY), and Innovative Industrial Properties, Inc. (NYSE:IIPR), Calyxt, Inc. (NASDAQ:CLXT) is one of the stocks that retail investors have on their radar.
5. Hydrofarm Holdings Group, Inc. (NASDAQ:HYFM)
Number of Hedge Fund Holders: 11
Hydrofarm Holdings Group, Inc. (NASDAQ:HYFM) makes and sells agricultural equipment and supplies. Elite hedge funds hold large stakes in the company. At the end of the third quarter of 2021, 11 hedge funds in the database of Insider Monkey held stakes worth $51 million in Hydrofarm Holdings Group, Inc. (NASDAQ:HYFM), compared to 15 the preceding quarter worth $207 million.
Hydrofarm Holdings Group, Inc. (NASDAQ:HYFM) is one of the leading hydroponics providers in the United States. As uncertainty lingers around the legalization of cannabis, more producers are turning to hydroponics to grow their weed production.
In its Q4 2021 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Hydrofarm Holdings Group, Inc. (NASDAQ:HYFM) was one of them. Here is what the fund said:
“Our top 10 holdings represented 25.6% of the Fund’s net assets at the end of the fourth quarter. This is in line with historical weightings. Cash at the end of the quarter was 3.4%, which is in line with our low to mid-single digit targeted levels. We exited our position in Hydrofarm Holdings Group, Inc. as we felt the macro headwinds the company was facing in its end-markets were both challenging and worsening.”
4. Innovative Industrial Properties, Inc. (NYSE:IIPR)
Number of Hedge Fund Holders: 12
Innovative Industrial Properties, Inc. (NYSE:IIPR) is a real estate investment trust that runs medical-use cannabis facilities. The firm has paid a growing dividend to shareholders for the past four years. On December 15, it declared a quarterly dividend of $1.50 per share, in line with previous. The forward yield was 2.45%.
Major hedge funds hold bullish positions in Innovative Industrial Properties, Inc. (NYSE:IIPR). At the end of the third quarter of 2021, 12 hedge funds in the database of Insider Monkey held stakes worth $265 million in Innovative Industrial Properties, Inc. (NYSE:IIPR), compared to 15 in the preceding quarter worth $200 million.
3. GrowGeneration Corp. (NASDAQ:GRWG)
Number of Hedge Fund Holders: 13
GrowGeneration Corp. (NASDAQ:GRWG) owns and runs retail hydroponic and organic gardening stores. It runs 63 stores across the United States and is based in Colorado. 24 of these stores are in California. On December 7, Wells Fargo analyst Chris Carey initiated coverage of the stock with an Equal Weight rating and a price target of $18.
GrowGeneration Corp. (NASDAQ:GRWG) has attracted the interest of Wall Street as well. At the end of the third quarter of 2021, 13 hedge funds in the database of Insider Monkey held stakes worth $32 million in GrowGeneration Corp. (NASDAQ:GRWG), compared to 17 in the previous quarter worth $128 million.
2. Tilray, Inc. (NASDAQ:TLRY)
Number of Hedge Fund Holders: 16
Tilray, Inc. (NASDAQ:TLRY) makes and sells medical cannabis products. On January 25, the company announced that it would be expanding a medical cannabis product offering in Australia. It also revealed the launch of a new medical cannabis e-learning platform for healthcare providers. International cannabis products had led to 19% revenue growth for the company in the second quarter of 2021.
Tilray, Inc. (NASDAQ:TLRY) is one of the top cannabis stocks in the hedge fund universe. At the end of the third quarter of 2021, 16 hedge funds in the database of Insider Monkey held stakes worth $84 million in Tilray, Inc. (NASDAQ:TLRY), compared to 17 in the previous quarter worth $94 million.
1. Canopy Growth Corporation (NASDAQ:CGC)
Number of Hedge Fund Holders: 17
Canopy Growth Corporation (NASDAQ:CGC) markets cannabis-based products. On February 9, the company posted earnings for the third fiscal quarter, beating market estimates on earnings per share by C$0.04. The revenue over the period was C$141 million, smashing analyst predictions by more than $5 million. The market-beating results led to a share price rally across the cannabis industry.
Top hedge funds are bullish on Canopy Growth Corporation (NASDAQ:CGC). Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in Canopy Growth Corporation (NASDAQ:CGC), with 1 million shares worth more than $13 million.
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Disclosure. None. 10 Weed Stocks to Buy in 2022 is originally published on Insider Monkey.
