In this piece, we will take a look at the 12 most profitable pot stocks now. If you want to skip our overview of the pot and cannabis industry, then you can skip ahead to 5 Most Profitable Pot Stocks Now.
Pot, marijuana, or cannabis is one of the oldest drugs in the world. Since unlike other Schedule I substances it does not require complex chemical processes for its production or consumption, the drug has been used for thousands of years. Since then, it has evolved into several forms and spread all over the world, from Asia to the Western hemisphere. It is also one of the most widely used drugs in the U.S., and recent trends under the Biden-Harris administration have proved to be quite ‘stimulating’ to the industry.
President Biden kept his campaign promise when he asked the Department of Health and Human Services to evaluate whether an earlier classification of cannabis as a Schedule I substance is still the correct determination in light of recent medical developments. A Schedule I listing puts cannabis right alongside heroin and other dangerous drugs, despite the fact that the aftereffects and the addictive potential of all of these are quite different.
In response to the President’s request, the HHS did recommend to the Drug Enforcement Administration (DEA) earlier this year that cannabis should be reclassified as a Schedule III drug instead. Should this reclassification occur, then the cannabis industry is bound to see some great tailwinds as the fines or punishments levied on users for possession will drop. Since the legal cannabis industry in the U.S. is quite young, research reports peg it with impressive growth rates. One such report suggests that the sector is slated to grow by $46.9 billion between 2022 and 2027 at a compounded annual growth rate (CAGR) of 24.03%. Within the industry, research shares that submarkets such as the cannabis testing market and the infused edible market are also slated to post double digit growth rates which are expected to sit at 13% and 19.32% between 2020-2025 and 2022-2027, respectively.
Naturally, the more global attitudes relax toward cannabis, the more companies that operate in the industry can prosper. Some high-end cannabis stocks belong to established pharmaceutical companies that are also eager to sell medicinal cannabis products while others are also pure play cannabis companies that exclusively focus on the product itself. Some such names include Bausch Health Companies Inc. (NYSE:BHC), Cronos Group Inc. (NASDAQ:CRON), Aurora Cannabis Inc. (NASDAQ:ACB), and Village Farms International, Inc. (NASDAQ:VFF).
Starting from Bausch, it offers Cesamet capsules that feature a compound that is similar to cannabinoids. The firm generally markets its capsules to patients who are undergoing the devastating effects of chemotherapy on the human body. Cesamet is typically used by patients suffering from chemotherapy induced nausea and vomiting who are unresponsive to other treatment options.
On the other hand, Cronos Group, a Canadian company that is a pure play medicinal cannabis provider spent the tail end of November streamlining its balance sheet. Cronos agreed to a C$23 million sale agreement of its facility in Ontario, Canada. Once the agreement is consummated, the company will then lease the facility and improve its balance sheet by removing excess costs that are typically associated with property ownership.
Finally, here’s what the management of Aurora Cannabis had to say during the firm’s third quarter earnings call in June 2023:
At the same time, we are realizing the benefit of our long term commitment to science and quality cultivation. And that demand for our products globally is beginning to outpace supply. So we see upside opportunity, but are expanding capacity prudently and smartly. Revenue growth, as it arrives, is incremental on our path to positive cash flow and could accelerate the timing of reaching our goal. This road to positive free cash flow, while also preparing to realize incremental revenue opportunities. Certainly, distinguishes Aurora during the period of intense and rapid industry change and rationalization. Aurora is positioned with balance sheet strength and realistic growth prospects to thrive over the long term as the global cannabis market expands.
The actions I just outlined are the starting point on our journey to reach positive free cash flow by the end of calendar 2024. To make sure that we can be opportunistic, during this period of industry rationalization, we will exclude any growth CapEx from our free cash flow target. That is discretionary, but that we might deploy to increase shareholder value even further. We currently have approximately CAD80 million remaining on our convertible notes due in 2024. Subsequent to our year end of March 31, we repurchased about $50.9 million in aggregate principal amount of convertible senior notes. The total cash consideration was approximately $46 million. And we issued 6.4 million common shares in settlement of a further $4 million of principal on this debt.
With these details in mind, we decided to take a look at the most profitable pot stocks right now. Among these, the top picks are AFC Gamma, Inc. (NASDAQ:AFCG), Innovative Industrial Properties, Inc. (NYSE:IIPR), and WM Technology, Inc. (NASDAQ:MAPS).
Photo by CRYSTALWEED cannabis on Unsplash
Our Methodology
For our list of the most profitable pot stocks, we ranked the holdings of the Global X Cannabis ETF (POTX) by their trailing twelve month net income and selected the most profitable pot stocks. For these stocks we have also mentioned hedge fund sentiment. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.
12 Most Profitable Pot Stocks Now
12. Organigram Holdings Inc. (NASDAQ:OGI)
Trailing Twelve Month Net Income: -$167 million
Organigram Holdings Inc. (NASDAQ:OGI) is a Canadian company headquartered in Toronto, Ontario. The firm makes and sells a variety of recreational and medical use cannabis products in its home country. It scored a win in November 2023 when tobacco giant British Tobacco announced a C$124 million private placement in the company to expand its business beyond tobacco combustibles.
During Q3 2023, four out of the 910 hedge funds part of Insider Monkey’s database had held a stake in Organigram Holdings Inc. (NASDAQ:OGI). Jim Simons’ Renaissance Technologies was the firm’s largest shareholder as it owned 460,948 shares that are worth $608,000.
Just like Innovative Industrial Properties, Inc. (NYSE:IIPR), AFC Gamma, Inc. (NASDAQ:AFCG), and WM Technology, Inc. (NASDAQ:MAPS), Organigram Holdings Inc. (NASDAQ:OGI) is one of the most profitable pot stocks.
11. SNDL Inc. (NASDAQ:SNDL)
Trailing Twelve Month Net Income: -$162 million
SNDL Inc. (NASDAQ:SNDL) sells cannabis and alcohol products and is headquartered in Calgary, Canada. The firm has been struggling on the financial front as of late by having missed analyst EPS estimates in all four of its latest quarters.
By the end of this year’s September quarter, three out of the 910 hedge funds profiled by Insider Monkey were SNDL Inc. (NASDAQ:SNDL)’s shareholders.
10. Cronos Group Inc. (NASDAQ:CRON)
Trailing Twelve Month Net Income: -$108 million
Cronos Group Inc. (NASDAQ:CRON) is a diversified hemp supplement and cannabis products company headquartered in Toronto, Ontario, Canada. It expanded its non combustible cannabis product portfolio in December 2023 by announcing two new cannabis vapes.
Insider Monkey’s third quarter of 2023 survey covering 910 hedge funds outlined that eight had invested in the firm. Cronos Group Inc. (NASDAQ:CRON)’s biggest hedge fund investor is Tracy Lerner’s Chescapmanager LLC due to its $16.6 million stake.
9. Flora Growth Corp. (NASDAQ:FLGC)
Trailing Twelve Month Net Income: -$52 million
Flora Growth Corp. (NASDAQ:FLGC) is a Canadian pure play medicinal cannabis company that is also involved in selling some general use products such as gummies. The two analysts covering its stock have rated the stock as Buy on average and set a whopping average share price target of $20.
As September 2023 ended, three out of the 910 hedge funds tracked by Insider Monkey had bought and owned Flora Growth Corp. (NASDAQ:FLGC)’s shares. Steven Boyd’s Armistice Capital was the largest investor among these courtesy of its $519,243 investment.
8. MyMD Pharmaceuticals, Inc. (NASDAQ:MYMD)
Trailing Twelve Month Net Income: -$14.6 million
MyMD Pharmaceuticals, Inc. (NASDAQ:MYMD), as the name suggests, is a biotechnology company developing a cannabidiol to help users manage anxiety, depression, and other ailments. It scored a big win in December 2023 when a non-CBD treatment of rheumatoid arthritis cleared phase two clinical trials.
By the end of 2023’s third quarter, two out of the 910 hedge funds profiled by Insider Monkey were MyMD Pharmaceuticals, Inc. (NASDAQ:MYMD)’s shares.
7. Incannex Healthcare Inc. (NASDAQ:IXHL)
Trailing Twelve Month Net Income: -$13.56 million
Incannex Healthcare Inc. (NASDAQ:IXHL) is an Australian healthcare company developing several CBD based treatments for a variety of diseases. Somewhat of a pioneer in using drugs for health, it also scored a win in December 2023 when a subsidiary won an endorsement for using psychedelics in a therapeutic setting.
6. Bright Green Corporation (NASDAQ:BGXX)
Trailing Twelve Month Net Income: -$9.5 million
Bright Green Corporation (NASDAQ:BGXX) is an American firm that produces and sells cannabis products. It ended the third quarter with $15.1 million in liquidity, which should be sufficient to fund operations for several months at the least.
As of September 2023 end, just one out of the 910 hedge funds part of Insider Monkey’s database had invested in Bright Green Corporation (NASDAQ:BGXX). It joins AFC Gamma, Inc. (NASDAQ:AFCG), Innovative Industrial Properties, Inc. (NYSE:IIPR), and WM Technology, Inc. (NASDAQ:MAPS) in our list of the most profitable pot stocks.
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Disclosure: None. 12 Most Profitable Pot Stocks Now is originally published on Insider Monkey.