Four Marijuana Stocks to Buy Now

The US marijuana industry has a lot of potential to grow and presents a good investment opportunity, although there is some uncertainty regarding the regulations. On the one hand, medical marijuana has been legal in 28 states and the District of Columbia and eight states allow the sale and possession of cannabis for both medical and recreational use. In Canada, medical marijuana is also legal and the country is moving fast to make recreational use legal later this year, which might create some cross-border trading and collaboration opportunities. At the same time, many marijuana companies are facing regulatory hurdles and other issues, such as banks’ unwillingness to conduct business with marijuana dispensaries, forcing them to operate entirely with cash.

Investing in a market that is at its inception and has good growth prospects seems like a good opportunity. However, when it comes to investing in the US marijuana market, there aren’t that many choices. Most stocks that you can invest in are pharmaceuticals focused on developing cannabis-based drugs. There are some companies that are trading on over-the-counter markets, but they are not as tightly regulated as companies on NYSE or NASDAQ, so there are some pitfalls to be avoided.

Another good option is to find an investment vehicle that invests in private marijuana startups, such as Phyto Partners, whose strategy is to invest in companies that service marijuana companies and provide products, services and solutions to companies that grow or work directly with cannabis.

However, if you are looking for marijuana stocks to buy now, your best bet is to go with pharmaceutical companies that are developing and marketing cannabis-based drugs. To minimize risk, one can choose a large company, such as AbbVie Inc (NYSE:ABBV), but because cannabis drugs represent a tiny fraction of their operations, the exposure to the industry is similarly small. So, it’s better to look at smaller pharmaceutical companies whose pipelines have a larger share of cannabis-based drugs and do some research to understand their potential. An easier way to identify the best marijuana stocks to go for is to look at where smart money invests.

At Insider Monkey, we track over 600 hedge funds and other big smart money investors. We compile data from their quarterly 13F filings and identify their collective sentiment towards thousands of companies. This information is primarily used as part of our small-cap strategy that identifies the best small-cap stocks that the best-performing hedge funds are bullish on, but we also can identify most popular stocks among hedge funds in different industries, including marijuana.

With this in mind, let’s take a look at five marijuana stocks to buy now, based on the hedge funds’ collective sentiment towards them. Interestingly enough, not all marijuana stocks that we selected are pharmaceuticals.

In GW Pharmaceuticals PLC- ADR (NASDAQ:GWPH), the number of funds long the stock (among those we track) increased by four to 28 during the fourth quarter, while compared to the end of 2016, the number went up by eight. At the end of December, the funds in our database held $994.79 million worth of stock, which represented almost 32% of the company.  GW Pharmaceuticals PLC- ADR (NASDAQ:GWPH) is developing and selling therapeutics from its cannabinoid product platform, so it’s one of the closest pure-play marijuana stocks you can invest in. The company currently has a marketing approval under review at the European Medicines Agency and the US Food and Drug Administration. The approval is for Epidiolex, a drug for the adjunctive treatment of seizures associated with Lennox-Gastaut syndrom and Dravet syndrom, two forms of epilepsy. In addition, for the first fiscal quarter (ended December 31), GW Pharmaceuticals PLC- ADR (NASDAQ:GWPH) reported revenue growth of 203% on the year to $7.70 million, which beat the estimates by $5.42 million, but its net loss of $2.44 missed the consensus estimate by $0.31.

Scotts Miracle-Gro Co (NYSE:SMG) saw 15 funds in our database holding shares at the end of December, down by one over the quarter and from 20 funds that had disclosed stakes a year earlier. The company is a large manufacturer and seller of loan care products, fertilizers and pesticides. In addition, Scotts Miracle-Gro Co (NYSE:SMG) has diversified itself into the marijuana business by acquiring a range of companies specialized in indoor gardening and hydroponics that it gathered under its Hawthorne Gardening division. For the fiscal first quarter, Scotts Miracle-Gro Co (NYSE:SMG) posted sales of $221.5 million, up by 7% on the year, with sales of the Hawthorne unit growing by 20% to $76.7 million. However, the company pointed out that the Hawthorne segment growth was due to acquisitions, excluding which the sales actually declined by around $12 million, which the company attributed to slower-than-expected regulatory changes in California. Scotts Miracle-Gro Co (NYSE:SMG) expects flat organic sales growth at Hawthorne, but is optimistic that the segment will have strong long-term growth.

There were eight funds long Cara Therapeutics Inc (NASDAQ:CARA) at the end of 2017, compared to 12 funds at the end of the previous quarter and seven funds at the end of 2016. Cara Therapeutics Inc (NASDAQ:CARA) is a clinical-stage biopharmaceutical company focused on developing and commercializing drugs to alleviate pain and pruritus (severe itching) by focusing on kappa opioid receptors. Cara Therapeutics Inc (NASDAQ:CARA)’s pipeline also includes CR701, a cannabinoid receptor agonist for chronic pain, but the product is currently in preclinical stage.

Insys Therapeutics Inc (NASDAQ:INSY) also saw a decline in hedge fund sentiment during the fourth quarter, as the number of investors from our database long the stock inched down by two to seven. A year earlier, there were 15 funds long the stock. Insys Therapeutics Inc (NASDAQ:INSY) has two marketed products, Subsys, a sublingual fetanyl spray for BTCP in opioid-tolerant adult patients, and Syndros, a orally-administered liquid formulation of dronabinol for the treatment of CINV and anorexia associated with weight loss in patients with AIDS. At the end of December, the US FDA granted Fast Track designation to Insys Therapeutics Inc (NASDAQ:INSY)’s cannabidiol oral solution for the treatment of Prader-Willi syndrome.

Disclosure: none