Which Small-Cap Marijuana Stocks are Worth the Risk?

Growth-oriented investors looking for small-cap marijuana stocks can find opportunities by treading carefully and investing with care.

cannabis in jar on table and in grinder and joints on a table

Investors looking to take advantage of an improving marijuana legalization outlook in both the U.S. and Canada have to carefully navigate not only legal uncertainty but also the hurdles of investing in companies without the support of large institutional investors.

That institutional interest and the accompanying large-scale buying is what provides the lion’s share of support for stocks as well as the momentum to drive share prices higher. However, growth-oriented investors can still find opportunity in the marijuana space, including in the difficult-to-navigate small-cap realm.

In Canada, where marijuana has been legal nationwide since October 2018, the industry is farther ahead, by some measures. But as I write, producers are still recovering from a period where supply exceeded demand, prices fell, and companies dumped assets at fire sale prices to recover liquidity and “right-size” their businesses.

In the U.S., we’re behind Canada on the legal front. But medical marijuana is legal in 36 states while recreational (or adult-use) marijuana is now legal in 19 states—and the numbers are going up. And the advantage of our state-by-state legalization process is that we’ve avoided the one big problem that beset the Canadian market. Instead, we have 36 small markets that are each working to find the best way forward. And some of those markets aren’t that small; California’s population is slightly larger than Canada’s!

Still, the federal government is a big part of the equation, and in the long run, everyone in the industry is working toward the day that full legalization enables free interstate commerce of marijuana—or at least as free as that of the alcohol industry, which is still limited by state laws set up long ago.

How we’ll get there is still unknown. The first national step came in the Farm Bill of 2018, which made hemp legal nationwide, and thus gave a boost to the CBD market. But for true nationwide marijuana sales to begin, we need to see at least two more measures pass.

One is the SAFE Banking Act, which would protect banks that service state-legal cannabis businesses from being penalized by federal regulators.

The other is the STATES Act, which would recognize at the federal level the legalization of cannabis in states that have legalized it through their legislatures or citizen initiative.

Without a doubt, federal legalization will come, but if you wait until then, the best investment opportunities will be gone. Smart investors are making money now.

However, there are real risks.

The Risk of Investing in Low-priced Marijuana Stocks
Most marijuana stocks are low-priced, and low-priced stocks tend to be riskier, for several common reasons. In the case of marijuana stocks, it’s because most of the businesses are young, have inexperienced managements, little or no institutional sponsorship, and in many cases, the stocks are thinly traded. Every one of these factors raises the risk profile of these stocks. (A very rough rule of thumb is that the lower the price, the higher the risk.)

Additionally, because marijuana is still illegal under federal law in the U.S., most institutions won’t invest in these stocks—and that leaves them more susceptible to the emotions of individual investors!

On the other hand, if you get on board one of the companies early and it becomes one of the leaders of the industry years down the road, the profits could be huge—and that’s why the industry is worth a look, even at this early stage.

So, here we go, with profiles of eight low-priced marijuana stocks, all priced under $10 a share. I begin with the company that has the highest market capitalization—meaning investors in general perceive it as the best investment—and work my way down the list from there.

8 Low-Priced Marijuana Stocks
Cronos Group (CRON)
Price 7.3

Market capitalization $2.74 billion

Average Trading Volume/day 2,785,000 shares

Toronto-based Cronos Group sells marijuana products in Canada and Israel, and hemp-derived CBD products in the U.S. Brands include Spinach, Lord Jones, and Peace Naturals. The latest quarter saw revenues of $12.6 million, up 50% from the year before.

High Tide (HITI)
Price 6.4

Market capitalization $324 million

Average Trading Volume/day 400,000 shares

Calgary-based High Tide has a suite of companies in the marijuana industry: a major retail chain, a global manufacturer, and a major accessories e-commerce platform (Grasscity.com) that is frequented by 20 million consumers a year. Equally important, revenues have grown every quarter in recent years; most recently up 99% from the year before to $40.9 million.

Planet 13 Holdings (PLNHF)
Price 6

Market capitalization $1.18 billion

Average Trading Volume/day 400,000 shares

Based in Las Vegas, Planet 13 operates a mega-sized marijuana store and entertainment center just off the Strip and opened its second superstore in July 2021 in Santa Ana California. Plus, the company grows its own product, which it also distributes to more than 40 retailers in Nevada. The latest quarter saw revenues of $23.8 million, up 42% from the year before.

4Front Ventures (FFNTF)
Price 1.1

Market capitalization $827 million

Average Trading Volume/day 560,000 shares

Phoenix-based 4Front is a vertically integrated multistate operator (MSO) with operations in California, Illinois, Massachusetts, Michigan and Washington. It’s small, but it’s growing. In the latest quarter, revenues were $23.0 million, up 82% from the year before.

Charlotte’s Web (CWBHF)
Price 3.2

Market capitalization $440 million

Average Trading Volume/day 235,000 shares

Boulder-based Charlotte’s Web was the leading CBD seller in the U.S. in the wake of hemp legalization, but the stuff is so easy to grow that competition quickly arose and the company’s revenues have been essentially flat since ($23.4 million in the latest quarter). However, the stock’s price has fallen from 25 to below 4, and it’s been building a base in this region for over a year.

Valens Company (VLNCF)
Price 1.8

Market capitalization $305 million

Average Trading Volume/day 237,000 shares

Based in Kelowna, British Columbia, Valens specializes in extraction services, transforming cannabis into crude oil, refined oil and also white labeling both. Management believes that consumer will increasingly favor manufactured products (capsules, tinctures, vapes, beverages, concentrates edibles and topicals) over flower and is ready to be a leading provider of those services. And Valens just acquired Green Roads, the second largest U.S. CBD company (behind Charlotte’s Web). In the latest quarter, revenues were $20 million.

Marimed (MRMD)
Price 0.8

Market capitalization $261 million

Average Trading Volume/day 925,000 shares

Based in Newton, Massachusetts, Marimed is a small multistate operator with operations in five states (Illinois, Massachusetts, Delaware, Maryland and Nevada). It’s growing (revenues of $24.6 million in the latest quarter), it’s profitable (EPS of a penny a share for each of the past three quarters) and it’s a lot cheaper than it used to be, when the stock was at 5.8 in late 2018.

IM Cannabis (IMCC)
Price 4.9

Market capitalization $326 million

Average Trading Volume/day 106,000 shares

With operations in Israel and Europe as well as Canada, Vancouver-based IM Cannabis is focused on medical-grade cannabis, aiming eventually to supply a large number of European countries with cannabis from Canada and Israel. The latest quarter saw revenues of $8.8 million (a new high) and earnings of three cents a share.

Which Low-priced Marijuana Stock Should I Buy?
When you’re dealing with low-priced stocks, diversification is critical, so I wouldn’t buy one, I’d buy a bunch, leaning toward the more successful companies at the top of the list.

However, I’d also check out the latest charts, and focus on stocks in uptrends not downtrends.

Are there any low-priced marijuana stocks that you like right now? Share your picks in the comments.


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