Robinhood's no-fee trading platform has helped it add 3 million users since launching in 2013, making it as popular as major brokers like E-Trade Financial Corp. (NASDAQ: ETFC).
There's just one problem for investors looking for marijuana stocks: Robinhood doesn't let you buy stocks trading on over-the-counter exchanges.
Since marijuana is still illegal at the federal level, cannabis companies have trouble getting their stocks listed on major U.S. stock exchanges. Those that do get their stocks on the NYSE or Nasdaq are usually Canadian companies, where marijuana is 100% legal. Others work at arm's length from cannabis in the United States.
That might limit your options when it comes to buying marijuana stocks on Robinhood, but it doesn't have to limit your profits.
We're going to show you how you can cash in on the cannabis sector's explosive growth with the three best pot stocks on Robinhood.
These cannabis stocks didn't make our list just because they're available on Robinhood. These are some of the best pot stocks on the market, period. We've been telling our readers about them for years.
These include a stock with 71% upside potential this year and a rare cannabis stock that pays a huge 5.5% dividend yield.
Best Marijuana Stocks on Robinhood, No. 3
Constellation Brands Inc. (NYSE: STZ) might not be the first marijuana stock that springs to mind, but it's one of the best options out there. You could even call it a "blue-chip pot stock."
Constellation Brands is a global, Fortune 500 company known for its lineup of alcoholic beverages. You've almost certainly seen its Corona beers or Svedka vodka brands at your local watering hole.
But Constellation is more than just a spirits company. It's taking the cannabis world by storm. Constellation bought a 10% stake in Canopy Growth Corp. (NYSE: CGC) in 2017 worth $4 billion. It now owns 37% of the firm.
That puts Constellation on the forefront of the growing cannabis sector, and it creates new opportunities for Constellation's brands.
Cannabis-infused beverages are become increasingly popular. In fact, Fortune Business Insights projects the market for these drinks will balloon by over 1,000% between 2018 and 2026.
Since Constellation already has the beverage companies, the distribution networks, and the know-how to navigate a regulated industry like alcohol, it's perfectly positioned to dominate the growing cannabis beverage industry.
That's on top of the potential it has to profit off of marijuana legalization through its ownership of Canopy Growth.
But by owning Constellation instead of Canopy, you get the stability of a Fortune 500 company that pays a solid 1.58% dividend yield. While Canopy's stock took a 50% beating over the last year, Constellation powered 12% higher. And analysts are projecting its share price will jump from $190 to $265, a 37% gain, by the end of the year.
And the next marijuana stock on Robinhood offers something you rarely find in a cannabis stock...
Best Marijuana Stocks on Robinhood, No. 2
Because the industry is still in its early stages, cannabis companies have to spend most of their money on growth. That's why very few offer investors dividends.
That's not the case for Innovative Industrial Properties Inc. (NYSE: IIPR).
This is a REIT that specializes in the cannabis sector, and its innovative business model gives you immediate income with upside potential.
Innovative Industrial Properties specializes in leaseback deals where it buys property from cannabis companies and leases it back to them at market rates. This frees up money for the cannabis companies to expand, while giving Innovative a steady income. Plus, all of its leases are "triple net," which means the tenants pay taxes, insurance, and maintenance on the property.
That's how Innovative is able to reward shareholders with a huge 5.5% dividend yield, which is more than double the average yield you'll find on the S&P 500.
IIPR has growth potential too.
As more states legalize cannabis and the industry continues to grow, even more companies will be taking advantage of this leaseback program.
It's no wonder analysts predict the stock could soar 60% higher in 2020, jumping from $95 a share to $151 a share.
But our best cannabis stock on Robinhood has even higher upside and is a pure play on the legal cannabis industry...
Best Marijuana Stocks on Robinhood, No. 1
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Cronos Group Inc. (NASDAQ: CRON) is a Canadian cannabis company with global reach.
Cronos develops its own products, but it also invests in other cannabis companies across the different cannabis sectors. That's making it one of the top CBD and medical marijuana companies on the market, and giving it a foothold into the growing industry in the United States.
It just bought Redwood Holdings, an American CBD company, for $300 million in 2019. Plus, it has plenty of cash to grow even more. Altria Group Inc. (NYSE: MO) poured nearly $2 billion into Cronos last year.
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In addition to plans to grow its U.S. business, Cronos is selling its medicinal products in Germany and Poland with plans to expand to Australia, Israel, and Colombia.
Another advantage for Cronos is that it's already made it through regulatory hurdles that could hinder newer firms trying to compete in these markets. By having an established business presence in the United States, it's more likely to get a first-mover advantage over local startups.
Cronos has already proven it can turn legalization into cash. The company's revenue surged from $554,000 in 2016 to $15.7 million in 2018, the year Canada legalized marijuana. And it's on track to show a profit this year.
With nine states voting on cannabis legalization this year and Cronos's expansion to international markets, we think the future is bright for the firm.
Shares trade for $7.30 right now, but don't be surprised if it closes the year $10 higher.