The National Institute for Cannabis Investors predicts the legal cannabis industry could soar as high as $300 billion over the next few years. It was worth just $10 billion last year.
That's 2,900% growth. And 2020 is providing many catalysts in that direction. One of our three pot stocks to watch is could soar 150% before the end of this year.
Here's why now could be the best time for you to start marijuana investing.
Why Pot Stocks Are About to Take Off
While the ETFMG Alternative Harvest ETF (NYSE Arca: MJ) is down about 25% year to date, that's mostly broader market forces weighing it down. Of course, some cannabis stocks won't be able to bounce back from the crisis, but the best cannabis stocks will survive and thrive in the long run.
We recently wrote about four major catalysts for marijuana stocks taking place in front of our very eyes. Those include nine states voting on legalization in the fall, a shifting cultural opinion on cannabis legalization, and the coronavirus pandemic itself.
That's right, COVID-19, as much as it's devastated the broader market, can be seen as good for pot stocks. Not only are dispensaries essential in several states, but the costs of fighting the pandemic are causing state lawmakers to consider marijuana as a new revenue stream.
That said, the climb to $300 billion hasn't even started yet. So here are some of the best pot stocks to watch while there's still time.
Our first has 26% upside potential for the year...
Best Pot Stocks to Watch, No. 3: Constellation Brands Inc.
Constellation Brands Inc. (NYSE: STZ) has fallen about 15% since the start of 2020. Nonetheless, the international beverage company remains a favorite cannabis stock this year.
This stock was actually beating the ETFMG Alternative Harvest ETF (NYSE: MF) by a huge margin toward the close of 2019. MF was down 50%, while Constellation gained 15%.
Its ability to beat the cannabis industry and withstand a broader market downturn has a lot to do with its diverse portfolio. Constellation owns brands like Modello beer, Svedka vodka - and yes, Corona, though it was reported in February that Corona beer sales had not been hurt by the coronavirus.
Just Released: Learn money-doubling trading strategies with Tom Gentile's Options 101: The Easiest Options Guide You'll Ever Read. It's free - click here to get it now.
But of course, this is more than a beer company. Constellation has become one of the pioneers in cannabis beverage investment. Last year, it bought a 38% stake in Canopy Growth Corp. (NYSE: CGC). That's more than a third of one of the biggest cannabis names on the New York Stock Exchange.
This is a $30 billion company. So it's much less of a gamble than its cannabis peers. The company also pays a dividend yield of 1.79%.
Tack on some 26% profit potential from today's $163, and you have one of the best marijuana stocks to buy right now.
If you're looking for a pot stock that's even more tethered to the cannabis industry boom, this one has 88% profit potential...
Best Pot Stocks to Watch, No. 2: Innovative Industrial Properties
Innovative Industrial Properties Inc. (NYSE: IIPR) is a real estate investment trust (REIT) specializing in cannabis. It actually collects rent from cannabis companies, and the money goes to investors.
The necessity of a company like this came from mainstream financial institutions hesitating to work with cannabis firms. Laws changing state to state muddied the waters. But that also opened an opportunity for Innovative Industrial to serve marijuana companies around the country.
Today, it serves companies like PharmaCann in New York, Green Leaf in Pennsylvania, and Holistic in Maryland. Much of its portfolio of over 50 cannabis companies remains in business, as medical marijuana has been considered "essential" in several states during the COVID-19 lockdown.
This company has steadily grown its profits over the years. It caught a 214% spike in revenue from 2018 to 2019. Profits also grew 228%. But Innovative Industrial has yet only started its climb.
IIPR has contracts extending as long as 20 years, so it's a reliable source of income as long as rents are being paid. So far, that looks promising, with dispensaries still open. Investors are collecting a dividend yield of 4.99% right now.
This stock is currently around $78. But some analysts think it could reach as high as $151 over the next few months.
Still, that doesn't compare to our best pot stock today. Here's what you've been waiting for, the 150% gainer...
Best Pot Stocks to Watch, No. 1
[mmpazkzone name="in-story" network="9794" site="307044" id="137008" type="4"]
Trulieve Cannabis Corp. (OTCMKTS: TCNNF) happens to be one of Innovative Industrial Properties' key holdings. It's a vertically integrated "seed to sale" company, with 46 medical marijuana dispensaries in Florida.
According to Trulieve CEO Kim Rivers, the company has increased its home deliveries 500% during the pandemic.
But this is a company that will continue to thrive as cannabis legalization ramps up, long after the current crisis.
Its financials look great when compared against a cannabis sector that has struggled in the last year - 2019 saw a 313% boost in profit from 2018, from $42 million to $178 million.
Trulieve is sitting on 279% more cash from 2018 to 2019, and total assets have increased 361%.
This company controls 50% of the market in Florida, with operations in California, Connecticut, and Massachusetts as well.
CEO Kim Rivers sees 2020 as an opportunity to expand that Florida footprint. Analysts seem to believe her, posting a high target of $25 for the year. That's 150% profit potential for investors who buy it at $10 today.
Action to Take: The cannabis industry could reach $300 billion value in the next 10 years. And the coronavirus pandemic might have even accelerated that. As legalization becomes more attractive to states, look at Constellation Brands Inc. (NYSE: STZ), Innovative Industrial Properties Inc. (NYSE: IIPR), and Trulieve Cannabis Corp. (OTCMKTS: TCNNF) for the best combinations of upside and income. Trulieve could earn you 150% if you buy at the current $10 mark.
The 3 Things You Need to Consider Before You Invest a Single Penny in Cannabis
The cannabis industry is on track to become a $1 trillion industry as it goes global. With that kind of capital on the line, the profit potential here is absolutely stunning.
But you don't want to get into this blindly.
That's why the National Institute for Cannabis Investors teamed up with a very special guest to deliver you three need-to-know considerations before you touch a single cannabis stock.
You can learn all about them right here.
Follow Money Morning on Facebook and Twitter.
About the Author
Mike Stenger, Associate Editor for Money Morning at Money Map Press, graduated from the Perdue School of Business at Salisbury University. He has combined his degree in Economics with an interest in emerging technologies by finding where tech and finance overlap. Today, he studies the cybersecurity sector, AI, streaming, and the Cloud.