Between recent voter-approved initiatives legalizing recreational marijuana and a handful of state legislative decisions (notably New York and Virginia), the trend towards nationwide legalization seems all but inevitable. Whether that takes the form of a rolling, state-by-state process or a sudden change at the national level is yet to be seen. But opportunities abound for investors looking for the best hemp stocks to buy now.
Both recreational and medicinal cannabis remain illegal on the federal level, which can unfortunately sideline the big institutional investors that typically drive share prices higher. However, cannabis is currently an $18 billion market and is only slated to grow further. Savvy investors, both institutional and individual investors looking for the best hemp stocks to buy now are finding a variety of investing opportunities, not only in the grower space, but also in adjacent industries that are poised to benefit from ongoing growth.
There are a handful of ETFs which offer diversified exposure to the industry, such as the ETFMG Alternative Harvest (MJ), which has been trading on the Nasdaq since 2015. This ETF is both the oldest and largest and has holdings in a number of companies that either directly produce cannabis or operate in the periphery (or are themselves investors in grow operations such as Altria (MO) and Philip Morris (PM)).
As you can see in the chart below, the industry rallied after the November elections, peaked early this year, and then rapidly sold off in mid-February.
MJ extended well beyond its 50-day line in bubbly trading before trading back to that level and subsequently breaking support at the end of March. The ETF is still trading nicely above its 200-day line and a push back above the 50-day line could signal bullish trading with the possibility of a further upside breakout pulling the ETF out of its current low-volume consolidation.
Finding the best hemp stocks to buy now can be a tricky game since it requires investors to navigate a previously red-hot sector that is off its recent highs in a legally uncertain marketplace. Institutions looking to play that game have been emphasizing either fully legal companies that support the industry or established brands that are likely to adapt quickly to any shifting regulatory landscape.
What Are the Best Hemp Stocks to Buy Now?
Taking a cue from those institutional investors, we’ve identified three companies that have the potential to be market leaders when cannabis stocks rebound and enter a new bull market.
Innovative Industrial Properties (IIPR) is a real estate investment trust (REIT) that focuses on the cannabis industry and has a nationwide portfolio of specialized industrial and greenhouse properties. As a REIT, IIPR is also one of very few participants in this high-growth market that also offers investors a reasonable dividend yield. IIPR sold off with the broader industry earlier this year and is experiencing the same consolidation as other cannabis stocks. However, because of their unique leaseback program IIPR is less exposed to possible (although seemingly unlikely) changes to the regulatory environment.
Turning Point Brands (TPB) offers a diversified suite of products for tobacco, cannabis and CBD consumers, giving investors exposure to the growing cannabis market while also providing a buffer since these products are fully legal but industry adjacent. Their portfolio of products includes Zig Zag (an iconic maker of rolling papers and cigar wraps), Stokers (which produces chewing tobacco and snuff), and a number of rapidly growing vape and CBD products.
Curaleaf (CURLF) is a the only direct cannabis play of the best hemp stocks to buy now, and as such, has the most exposure to regulatory risk. That being said, this Massachusetts-based company was an early pioneer in the medical use space and operates in 23 states across the country. That presence demonstrates the company’s ability to navigate the legal landscape and the state-specific regulatory burdens imposed on cannabis producers.
Cannabis stocks are broadly consolidating after their rapid growth at the end of last year, but these three companies may be the best hemp stocks to buy now, or when the industry enters the next bull market.