In this article, we will take a look at the 10 cheap pot stocks to buy. If you want to explore similar stocks, you can also take a look at 5 Cheap Pot Stocks To Buy.
The pot industry includes the production, distribution, sale, and consumption of cannabis products. This includes medical marijuana, recreational marijuana, and hemp products. The industry has seen rapid growth in recent years as more countries and states legalize the use of marijuana. The industry has also seen an increase in investment, with venture capital firms, private equity firms, and even large corporations investing in the industry.
Pot Market’s Growth Estimates
According to a Markets and Markets report, the global cannabis market was worth $22.5 billion in 2021. The market is expected to reach a valuation of $82.3 billion by 2027, growing at a compound annual growth rate of 24.3% from 2022 through 2026. This growth is expected to be largely propelled by the acceptance of marijuana for both medicinal and recreational use, the legalization of marijuana, and investments in R&D to make the production and consumption of cannabis more eco-friendly and user friendly.
What is Driving The Growth of The Pot Industry?
The legalization and decriminalization of cannabis in many countries is one of the primary drivers of the industry’s growth. As more countries relax their laws on cannabis, the industry has seen an increase in the number of users, as well as an increase in the number of businesses that are able to legally operate and provide cannabis-based products and services.
The burgeoning medical marijuana industry is also a major driver of the cannabis industry’s growth. Medical marijuana is increasingly being used to treat a variety of conditions, including chronic pain, anxiety, depression, and more. As more research is conducted, the number of medical conditions that cannabis can treat is expected to expand, leading to further growth in the cannabis industry.
The increasing acceptance of cannabis as an alternative to traditional drugs and treatments is also driving the industry’s growth. More and more consumers are turning to cannabis as an alternative to traditional pharmaceuticals, especially for those suffering from chronic pain or other ailments for which traditional medications have been ineffective. This has led to an increase in the demand for cannabis-based products, including edibles, tinctures, and topicals.
Major Companies Suffer Losses From Their Cannabis Investments
Tobacco giant Altria Group, Inc. (NYSE:MO) and beverage giant Constellation Brands, Inc. (NYSE:STZ) were all excited marijuana when things looked good for the space. However, regulatory headwinds that put pressure on pot stocks caused these companies to suffer major losses on their cannabis investments. Altria Group, Inc. (NYSE:MO) is reported to have incurred a $438 million loss on its cannabis investment in Cronos Group Inc. (NASDAQ:CRON). Constellation Brands, Inc. (NYSE:STZ) reported that it lost roughly $1.1 billion from its investment in Canopy Growth Corporation (NYSE:CGC). While both Altria Group, Inc. (NYSE:MO) and Constellation Brands, Inc. (NYSE:STZ) have not spoken officially about discarding their cannabis investments, if the current state of affairs persist, these companies might abandon ship.
Why are Pot Stocks Undervalued?
A prominent venture capital firm that is pouring hefty investments into the cannabis space is Denver-based KEY Investment Partners. The firm has has invested across both ancillary and plant-touching cannabis businesses operating in the private equity space. KEY Investment Partners released a white paper which details the investment opportunities in the cannabis space and explains why most publicly traded cannabis companies are undervalued.
According to KEY Investment Partners’ research, there is a lack of institutional ownership in publicly traded cannabis stocks. Since marijuana remains illegal in the United States, at the federal level, most of the plant-based cannabis businesses are listed on the Canadian Stock Exchange and have lower liquidity, lower trading volumes, and lower institutional participation, according to KEY Investment Partners.
Moreover, KEY Investment Partners touched on the fact that there is a massive funding gap of roughly $90 billion in the global cannabis market, due to regulatory issues, which presents an attractive investment opportunity for early-stage investors. The Denver-based VC firm hypothesizes that the cannabis industry has reached an inflection point due to reduced stigma, increased awareness, and a massive funding gap.
The pot industry is one of the fastest growing industries in the world, and is expected to grow rapidly in the coming years, as more countries and states legalize the use of marijuana for medical and recreational purposes, and the drug gains social acceptance. Some of the top companies operating in the cannabis space include Cronos Group Inc. (NASDAQ:CRON), Canopy Growth Corporation (NYSE:CGC), and Organigram Holdings Inc. (NASDAQ:OGI). This piece will focus on the best cheap pot stocks to buy now.
Our Methodology
We analyzed the marijuana industry and selected some of the best stocks with TTM PE ratio values of of less than 25. In addition to decent PE ratios, these companies have solid fundamentals, robust pipelines, and competitive market positions. That’s why these pot stocks look cheap when compared to their peers. Along with each company, we have included the hedge fund sentiment and analyst ratings. We have ranked these stocks is a descending order of their PE ratios, as of January 3.
10 Cheap Pot Stocks To Buy
10. Jushi Holdings Inc. (OTC:JUSHF)
PE Ratio as of January 3: 20.83
Jushi Holdings Inc. (OTC:JUSHF) is a vertically integrated cannabis and hemp company. The company is an innovative and disruptive operator in the cannabis and hemp industries, with operations in the United States and Europe. Jushi Holdings Inc. (OTC:JUSHF) focuses on the development, manufacturing, and distribution of a wide range of cannabis and hemp–derived products.
Last October, BTIG analyst Jonathan DeCourcey started coverage of Jushi Holdings Inc. (OTC:JUSHF) with a Buy rating and a C$3 price target.
On December 13, Jushi Holdings Inc. (OTC:JUSHF) launched three new cannabis brands in California, the Seche Pre-Roll Singles, Tasteology Fruit Chews, and The Lab Vapes.
While Jushi Holdings Inc. (OTC:JUSHF) is trading at a PE multiple of 20x, as of January 3, the stock can be argued as cheap considering the company’s stride’s in the cannabis space and its potential to capture further market share due to its size and scale. The stock is placed among the best cheap pot stocks to buy now.
9. Innovative Industrial Properties, Inc. (NYSE:IIPR)
PE Ratio as of January 3: 18.99
Innovative Industrial Properties, Inc. (NYSE:IIPR) focuses on the acquisition, ownership, and management of specialized industrial properties leased to state-licensed operators for their regulated medical-use cannabis facilities. The company intends to provide investors with a dividend-yielding REIT that invests in high-growth cannabis-related properties. As of January 3, the stock is trading at a PE ratio of 18.99, not too expensive for a high growth stock, and is offering a forward dividend yield of 7.10%. Industrial Properties, Inc. (NYSE:IIPR) is one of the best cheap pot stocks to buy now.
On November 9, Roth Capital analyst Scott Fortune updated his price target on Innovative Industrial Properties, Inc. (NYSE:IIPR) to $170 from $190 and maintained a Buy rating on the shares.
At the close of Q3 2022, 12 hedge funds were long Innovative Industrial Properties, Inc. (NYSE:IIPR) and disclosed positions worth $251.9 million in the company. As of September 30, Zimmer Partners is the largest investor in the company and has a position worth $172.5 million.
Like Cronos Group Inc. (NASDAQ:CRON), Canopy Growth Corporation (NYSE:CGC), and Organigram Holdings Inc. (NASDAQ:OGI), Innovative Industrial Properties, Inc. (NYSE:IIPR) has a strong competitive position in the cannabis market and is one of the top players in the space.
8. Turning Point Brands, Inc. (NYSE:TPB)
PE Ratio as of January 3: 10.72
Turning Point Brands, Inc. (NYSE:TPB) is a leading US–based provider of tobacco products. The company operates through three segments: Zig-Zag Products, Stoker’s Products, and NewGen Products. Turning Point Brands, Inc. (NYSE:TPB) is an ancillary cannabis stock, and is well-positioned to gain as the legalization and acceptance of marijuana kicks in. The stock is trading at a compelling valuation and is presenting a buying opportunity for early stage investors looking to increase their exposure to pot stocks. As of January 3, Turning Point Brands, Inc. (NYSE:TPB) has a trailing twelve-month PE ratio of 10.72 and is one of the cheapest pot stocks to buy now.
On November 2, Turning Point Brands, Inc. (NYSE:TPB) declared a quarterly cash dividend of $0.06 per common share. The dividend is payable on January 6 to shareholders of record on December 16. As of January 3, the stock is offering a forward dividend yield of 1.11%.
At the end of the third quarter of 2022, 14 hedge funds were bullish on Turning Point Brands, Inc. (NYSE:TPB) and held positions worth $81.4 million in the company. Of those, Mangrove Partners was the top investor in the company and held a stake worth $16.7 million.
7. Procaps Group S.A. (NASDAQ:PROC)
PE Ratio as of January 3: 7.20
Procaps Group S.A. (NASDAQ:PROC) is a Colombian pharmaceutical company which produces generic and branded medicines, nutritional supplements, and OTC products. The company has been in business for more than 40 years and has a prominent presence in the Colombian market. The company is known for its strong focus on innovation and quality and has been expanding its footprint in the medical marijuana space and has developed the first pharmaceutical-grade CBD-based medicine for epilepsy patients. Procaps Group S.A. (NASDAQ:PROC) is trading at a PE multiple of 7x, as of January 3, and is placed seventh among the best cheap pot stocks to buy now.
On November 14, Procaps Group S.A. (NASDAQ:PROC) posted earnings for the fiscal third quarter of 2022. The company reported an EPS of $0.31 and outperformed expectations by $0.18. The company’s revenue for the quarter amounted to $110.40 million.
At the end of Q3 2022, Procaps Group S.A. (NASDAQ:PROC) was spotted on 6 investors’ portfolios that held collective positions worth $13.47 million in the company. Of those, LMR Partners was the largest shareholder in the company and disclosed a stake worth $7.4 million.
6. The Scotts Miracle-Gro Company (NYSE:SMG)
PE Ratio as of January 3: 7.13
Originally a lawn care company, The Scotts Miracle-Gro Company (NYSE:SMG) has emerged as a leader in the cannabis space. In recent years, the company has made a major push into the cannabis industry and has become one of the leading suppliers of hydroponic and lighting systems used to grow marijuana. Moreover, The Scotts Miracle-Gro Company (NYSE:SMG) has invested heavily in research and development in the sector, and has acquired several cannabis–related companies, such as Gavita, a Dutch company that produces specialized lighting systems for indoor growing. The Scotts Miracle-Gro Company (NYSE:SMG) is currently trading at an attractive valuation, at a PE multiple of 7x as of January 3, and is one of the best cheap pot stocks to buy now.
On November 8, Barclays analyst Gaurav Jain upgraded The Scotts Miracle-Gro Company (NYSE:SMG) to Overweight from Equal Weight and reiterated his price target of $75 on the shares.
The Scotts Miracle-Gro Company (NYSE:SMG) was a part of 29 investors’ portfolios at the close of Q3 2022. The total stakes of these funds amounted to $128.3 million. As of September 30, First Eagle Investment Management is the top shareholder in the company and has a position worth $67.3 million.
In addition to The Scotts Miracle-Gro Company (NYSE:SMG), for investors that are looking increase their exposure to the high-growth cannabis industry, some of the top pure-play stocks include Cronos Group Inc. (NASDAQ:CRON), Canopy Growth Corporation (NYSE:CGC), and Organigram Holdings Inc. (NASDAQ:OGI).
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Disclosure: None. 10 Cheap Pot Stocks To Buy is originally published on Insider Monkey.
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