Plong-term conservative investors tend to do better in the stock market than those entering and exiting the market, because the S&P 500 has grown almost 270% over the past decade and is setting new records almost daily.
Having a time horizon that spans years, if not decades, will serve marijuana investors well, given the Horizons Marijuana Life Sciences ETF is down nearly 30% since its creation in 2017, compared to a gain of 115% for the general market index.
Image source: Getty Images.
This does not mean that all cannabis stocks will take so many years to generate a return, but a buy and hold philosophy will ensure that your portfolio gains are maximized.
This is why the following trio of marijuana stocks should be on every pot investor’s radar. They offer the best chance of providing short term rewards, as well as substantial returns for years to come.
Image source: Getty Images.
This lender for the marijuana industry is gaining momentum
Alex Carchidi (AFC Gamma): Advanced Flower Capital Gamma (NASDAQ: AFCG) solves a problem that many companies in the cannabis industry face: limited access to finance. While cannabis has been legalized in some states, it’s still illegal federally, which means the big banks refuse to lend to marijuana companies.
Therefore, when the time comes for these businesses to grow beyond what their cash flow supports, they have almost nowhere to turn for leverage, and this is where AFC Gamma (AFC) intervenes.
Since its founding in July 2020, AFC has provided loans to worthy cannabis companies, and all of these loans are secured by real estate held as collateral. Thus, her interest payments on the loans she issues are fairly secure, as defaulting borrowers will be forced to turn over their property, which can then be sold at market rates to recoup the original cost of the loan.
Among the loans it has already disbursed, the weighted average yield to maturity is 20%, which is quite high. If the company manages to maintain this return profile, its capital will explode in value over time.
At present, AFC is profitable and its loan income is growing rapidly sequentially each quarter. According to its third quarter earnings report, released on November 4, total interest income rose 21.4% to $ 10.6 million.
And, it will return a large portion of that income to investors through its dividend, which currently gives 7.53%. The dividend could continue to rise with each passing quarter, as it did most recently in the third quarter, when it rose 13.2%.
In short, AFC is still at the very beginning of its growth journey, so now is the time to buy it. Early investors will gain the greatest advantage over time as the business continues to grow.
Image source: Getty Images.
Bet on this outsider
Eric Volkman (Jushi Holdings): One of the hottest Multistate Operators (MSO) on the scene right now, Jushi Holdings (OTC: JUSHF) is poised to wrap 2021 impressively.
On the retail side of the marijuana industry, the game is all about scale. Every ambitious pot business with a few dollars in the bank and a product portfolio is actively looking for potential acquisitions, large and small, to expand their network.
What’s exciting about Jushi’s expansion strategy is that the company has established itself in two cannabis markets that are still years away from their full bloom: Pennsylvania and Virginia.
The former is the fifth most populous US state and has only legalized medical marijuana until now. With the neighboring big guns of New York and New Jersey both recently activating recreational grass, Keystone state can’t be far behind. Jushi is not yet a nationwide powerhouse, but it certainly has a strong presence in Pennsylvania, with a relatively large total of 15 of its BEYOND / HELLO dispensaries.
As for Virginia, which, after a somewhat inexplicable delay, will officially make recreational marijuana sales legal in 2024, is bordered by five states that have not flipped said switch. Assuming the status quo is maintained, Virginia will attract pot lovers not only within the state, but throughout its sprawling region.
Jushi therefore has explosive growth ahead of him in the years to come. But I also think the company’s powerful hybrid of organic growth and acquisitions will deliver some interesting results when the company releases its third quarter numbers later this month.
With recent acquisitions to come (like that of Massachusetts-based Nature’s Remedy), we shouldn’t be surprised to see something like 15% and 220% sequential revenue improvement year over year. that Jushi posted in the second quarter.
It also wouldn’t be shocking to see a return of this rarest animal in the pot industry, a net profit. The second quarter saw the company go dark with net income of nearly $ 5 million for the period.
Jushi’s management is gifted at strategic thinking, as evidenced by its effective value-added acquisitions. the company recently secured a $ 100 million credit facility specifically for this purpose. So, more smart shopping is on the way, and we’ll be hearing a lot more about this very promising cannabis player before the year is out.
Image source: Planet 13 holdings.
An extraordinary opportunity
Rich Duprey (Planet 13 Holdings): MSO Planet 13 Holdings (OTC: PLNH.F) does cannabis differently. While it operates a handful of marijuana dispensaries in a few states like other MSOs, what sets Planet 13 apart from the competition is its focus on provide cannabis users with a.
According to Planet 13, its Las Vegas dispensary is the largest in the world, but in addition to having a large selection of dried cannabis, paraphernalia and derivatives to buy in the retail store, it also has a cafe. , a processing center and an events scene.
Due to its presence near the Las Vegas Strip, the dispensary attracted over a million visitors in 2019, before the pandemic shut everything down, and it still accounted for over 9% of all marijuana sales in the world. ‘State. If the number of visits is still below the two-year level, the volume increases and should eventually reach parity.
Management believes the dispensary will generate $ 130 million in annual revenue at its Nevada stores by 2023.
But it’s more than Las Vegas. Planet 13 recently opened another supermarket in Orange County, California, near Disneyland, Knott’s Berry Farm, and some of the state’s best-known beaches. It also intends to have an operational home delivery program to serve both local residents and resorts.
Beyond its megaplexes, Planet 13 also operates a smaller neighborhood retail concept called Medizin, which is the same experience, but in a smaller footprint. Instead of a 55,000 square foot facility, Medizin is fully built at just 4,750 square feet. This could be the model that Planet 13 is using to grow across the country to increase both sales and profits as the small store generates a higher percentage of its sales from higher margin internal brands. .
Within five years, Planet 13 intends to have at least eight supermarkets and nearly two dozen small stores.
At just $ 3.77 per share, Wall Street sees the MSO nearly doubling in value over the next year, setting a consensus price target of $ 7 per share. Revenue is expected to rise from $ 70 million last year to $ 205 million by the end of next year, from a loss of $ 0.05 per share in 2019 to a profit of 0.06 $ per share.
The stock is down after the company missed third-quarter estimates, but that makes Planet 13 Holdings a reduced price shares to buy today.
10 stocks we prefer over Jushi Holdings
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Alex Carchidi has no position in any of the stocks mentioned. Eric Volkman has no position in any of the stocks mentioned. Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns stock and recommends Jushi Holdings and Planet 13 Holdings Inc. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.