After years of stagnation, cannabis stocks to buy are back on the menu. A range of bullish factors sent the sector surging over the past few weeks, with popular cannabis ETF Amplify Alternative Harvest ETF (NYSEARCA:MJ) jumping 10% in the past 5 days alone and 25% since January 1st.
Of course, not all cannabis stocks play on level ground. The field is competitive, margins are low, and regulatory demands are high. While the sector remains young, expect many of today’s top cannabis stock names to eventually roll up into larger firms, including existing “vice” companies like alcohol and tobacco retailers. And, just as likely, a huge swath of today’s cannabis stocks likely won’t exist once regulatory parameters loosen and market forces are fully unleashed.
Of the many cannabis stocks on the market, these three stand the best chance of staying the course – and returning massive gains for today’s early investors.
Tilray Brands (TLRY)
Among the cannabis stocks to consider, Tilray Brands (NASDAQ:TLRY) has an early lead in capitalizing on the next growth phase following Germany’s legalization efforts, hinting at new global market opportunities for the industry. The stock saw a 26% increase in just a few days, a significant shift for investors who have watched the stock decline since its February 2021 peak of just below $30 per share.
The future looks promising when considering additional sector-specific developments. There’s ongoing legislative effort in the United States to reclassify cannabis from Schedule I, the most restrictive category, to Schedule III, which is less so, even if full legalization is not yet on the horizon. Any federal easing of cannabis regulations could trigger a widespread uptick in cannabis stock values. In the meantime, Tilray is well-positioned to mitigate risks thanks to its unique advantages.
One significant aspect of Tilray’s strategy is its ownership of 5% of the national craft beer market. This presence provides a financial cushion while awaiting U.S. legalization and enhances profitability in areas where cannabis is already legal despite the plant’s challenging profit margins. Moreover, Tilray’s acquisition of multiple Anheuser-Busch (NYSE:BUD) craft beer brands has endowed it with valuable marketing, distribution, and compliance expertise—assets that will likely give Tilray a competitive edge as the legal landscape for cannabis evolves.
Valley National Bancorp (VLY)
Valley National Bancorp (NASDAQ:VLY) actively addresses the significant banking challenges cannabis operators face today, making it a diversified pick among weed stocks.
The regional bank stands out among its larger, more traditional counterparts by eagerly offering services to cannabis companies through its “Cannabis-Related Business Banking” division. These services enhance security for cannabis businesses, which often rely on cash transactions due to exclusion from conventional banking systems. This reliance on cash complicates operations and exposes businesses to the risks of fraud and theft. Like the cannabis sector, small regional banks are making a strong comeback in 2024, positioning Valley National to benefit from the growth potential in both sectors. Currently, the bank stock is deeply undervalued, trading at just 0.60 times book value.
Valley National also provides a dividend, rare among pure cannabis stocks, offering investors a steady return while they anticipate the boom in cannabis banking. Its total yield of 5.97% makes it competitive with high-yield savings accounts and T-Bills, making the stable banking stock the perfect play at the intersection of cannabis growth prospects and banking stability. Easily, this is one of the top cannabis stocks to buy.
Constellation Brands (STZ)
Like Tilray, Constellation Brands (NYSE:STZ) operates in the beer industry but, for them, beer is the primary breadwinner. As a Fortune 500 company, Constellation Brands generates nearly $10 billion in global product sales, boasting a significant customer base in the U.S. Despite focusing on beer, Constellation Brands also owns a substantial stake in the cannabis company Canopy Growth (NASDAQ:CGC), sharing a strategic vision similar to Tilray’s.
Constellation Brands currently takes a hands-off approach with its $4 billion investment in Canopy Growth, but clearly, its management is waiting for a shift in the legal landscape. With a 35% ownership stake in Canopy Growth, Constellation Brands has a significant presence in the weed sector. Meanwhile, Canopy Growth is actively strengthening its financial position, preparing for potential reclassification and legalization efforts.
While Constellation Brands may not take the conventional route, the lengthy timeline required for legalization efforts suggests a cautious approach. In the meantime, investors looking for a more conservative way to enter the cannabis sector can benefit from Constellation’s strong market position and solid stock performance. If you are looking for cannabis stocks to buy, start here.
On the date of publication, Jeremy Flint held no positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.