How to Pick A Portfolio of Marijuana Stocks For Cannabis Investing

If you are wondering how to pick a portfolio for getting started in cannabis investing and you are looking for marijuana stocks to acquire look no further.  I have a subscriber, Richard, that has inherited a sum of money and simultaneously stumbled upon my content.  We have had a few conversations about what stocks he should be looking at and I thought this could be an interesting exercise for others.  On this site, there are a couple of pages to start to get a good idea of what to look for to learn how to get started in cannabis investing as well as what my top picks are, the best marijuana stocks to buy.

I am both a mathematician and economist having studied and worked in the markets in both capacities.  I am going to spare you the idea of learning Alpha and Beta and other measures of risk parameters.

Instead, I am going to keep this fairly simple and focus on just diversification within cannabis stocks.  Fact is, there is going to be tremendous growth with cannabis companies as they ramp up over time.  Projections are that within a few short years cannabis will grow by some 4x its current value.  For example, California, the most populous state in the Union, has current revenue of $4B for cannabis but, expectations are for some $15B in just a few short years’ time as the state ramps up for adult-use cannabis sales.

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A Cannabis Investment timeframe

A few points to consider with where Richard is right now. First, Richard wants to invest some $25K, or slightly more, into cannabis stocks.  He inherited this money from a recent passing in his family.  He is nearing, or at retirement age and he is not looking for any kind of immediate return from any cannabis investment.

Richard has many years to hold on to some marijuana stocks and, I believe that is a solid starting point.  Richard wants to invest in cannabis stocks and hold on to them for anywhere between 10 years – 25 years timeframe.

The cannabis industry is at its infancy.  And, during that amount of time there are going to be tremendous changes to the cannabis industry.  But, if you were to look at the overall bigger picture there will be tremendous growth in marijuana stocks in general.

A quick briefer on me

First, I am not a financial advisor at all, despite having worked in the financial world for some years.  Richard is looking at my picks from the perspective of general idea of recommendations of what to look at, but, not to buy.  He fully intends upon doing all of his own due-diligence.  This is very wise advice for anyone getting involved in cannabis investing.  You can look at my recommendations as recommendations of consideration, but not to purchase.  Do your own due-diligence.

Risk Tolerance

We all have different levels of risk tolerance when it comes time to investing.  Richard is of mind that since he inherited the money he can take more risk than usual.  But, I do not see the listing I have as being too risky.

The idea of being an entrepreneur is to eliminate risk as much as possible.  While cannabis is in its infancy, I do not see these individual companies as have too much in the way of risk.  At some level, the companies I am looking at are all at the very least EBITDA profitable.  They have revenue projections that will ensure economies of scale will get these individual companies to a point where they are net earnings positive and thereby profitable for Richard.

AdvisorShares Pure US Cannabis ETF

Here is a chart on the AdvisorShares Pure US Cannabis ETF:

MSOS Daily Chart Marijuana Stocks for cannabis investing
MSOS Daily Chart Marijuana Stocks

If you wanted to get involved in cannabis investing and did not want to buy any individual marijuana stocks, this ETF is a solid representation of the industry in general.  The ETF launched in October of 2020 and has moved upwards since.

MSOS Cannabis Stocks Listing

There are solid US producers that will do well over the years, but I do have two bones to pick with this ETF.  First, here are the listings:

  • Green Thumb Industries GTBIF
  • Curaleaf CURLF
  • Trulieve TCNNF
  • Cresco Labs CRLBF
  • AYR Wellness AYRWF
  • TerrAscend TRSSF
  • Innovative Industrial Properties IIPR
  • Columbia Care CCHWF
  • Harvest Health HRVSF
  • Grow Generation GRGW

My gripes with this listing are that there are two companies, while important, are not cannabis producers.  IIPR and GRWG are a real estate company and producer of grow products.  For me, I am looking for actual producers, but, hey, this is me.

Nonetheless, this is a solid listing of US marijuana stocks and each will hold their own and do well over the years.  Note that Trulieve is in the process of acquiring Harvest Health so, this list will change very soon.

My Top Picks For Cannabis Investing

If you are wondering what my top picks are for cannabis investing then simply look to the Best Marijuana Stocks to Buy Now.  Here, I list all of my top picks with price targets.  There are currently 13 stocks on the list.  But, I think I can add a couple here and there.

I am not going to review each respective stock individually because I have already done that for each company.  Instead, I wanted to put together a list of a couple of marijuana stocks that I wanted to recommend to Richard that he could invest in and hold for a very long time.

My diversification rationale

There are essentially three different business models in the cannabis world:

  • Growers
  • Product Producers
  • Dispensaries

Then, there is a size indication with a term called MSO; Multi-State operator.  There are certainly advantages to being in different states.

I am approaching this from the perspective of diversification of geographical region as well as what each respective company does.  There are dispensaries in this list and there are companies that produce premium products.  But, mostly, you will find these companies are spread out across the country (And, some are in Canada).

My preference for any one kind of company is both a dispensary and a producer of a premium product; I am not a huge fan of growers as these offer the lowest margins of the three business models while also the highest costs.  The premium producers have excellent metrics but, I also believe that getting in to the dispensary business is crucial.  I think some premium products are ultimately going to get squeezed out and then forced into an acquisition to ensure longterm growth.

M&A activity

One thing I think is going to be a continual theme is that cannabis is still early on and we will see more and more M&A activity over the years.  This is an opportunity.

My Top Cannabis Investing Picks

Here are seven stocks I like a lot, plus one additional one.  The intention is that Richard invest some $5K into each of these stocks.  The idea behind this listing is that these are some of the very best of the Complete list of Top 100 Cannabis Companies.  Because of that there is

Nevada Dispensaries

C21 Investments CXXIF & Planet 13 PLNHF

Both of these companies are dispensary companies in Nevada; albeit they both have operations elsewhere.  Nevada had very strict restrictions during the initial COVID pandemic and these are starting to be lifted.  The end result is these dispensary systems will see large moves higher in revenues solidifying their position.  Because they are so focused in one state, I can see this as a potential acquisition target in the years to come.  I like both of these cannabis companies equally and you would not go too far off to purchase one over the other, but, you could simply split your investment in half.

Canada Dispensaries High Tide HITI

This is a Canadian dispensary system that is just going to continually grow.  Plus, since they are the biggest retailer in Canada, they make for a solid acquisition from a large American company looking to expand into Canada.  I see being a mostly-dispensary company as being a very big asset with tremendous advantages.

Premium Product Producers

Massachusetts MariMed MRMD

MariMed is a multi-state operator that just happens to have the best-selling edible on the market. Their revenue growth is strong and I expect with continued partnerships they will grow in many markets and sell their products in multiple locations.  At the same time, their stock is significantly undervalued when you consider what they have going on.

Canada Decibel Cannabis Company DBCCF

Mostly, Decibel is a vertical Canadian company.  But, their branding is strong as well they also have dispensaries in many locations.  I see this as a company that can continue to grow with its premium branding as this is a little easier to do in Canada since there are provincial dispensaries involved.  Plus, like many of these smaller companies I can see Decibel being an acquisition target.

Vertical Companies

Arizona Harvest Health HRVSF & Trulieve TCNNF

As I mentioned before, Harvest Health is being acquired by Trulieve.  Harvest Health is mainly based in Arizona and with the recent new adult-use legalization, Arizonans are pushing up retail sales numbers in a big way.  Trulieve made a strong acquisition in this they are getting a solid company in a different state; Trulieve is mainly based in Florida.

Colorado Schwazze SHWZ

After some mergers Schwazze is the largest dispensary in Colorado.  They are vertical and produce their own products.  Schwazze has impressive numbers across the board.  They will be very profitable over the years.  But, from my perspective, they are an acquisition target and will be swallowed up into a far bigger company which will be beneficial to Schwazze, whoever acquires them, and certainly the stock holder.

Verano Holdings VRNOF

This may be one of the most undervalued cannabis stocks I am looking at.  Verano has some 82 stores as of now and that number will continue to move higher.  They have an additional 90+ planned.  There is a lot of upside potential for this stock as I can see this hitting upwards of $100.00 within two years off of about $15.00 right now.  Currently, they are in about 9 different states.

Plus One More

Halo Collective HCANF

There is yet one more stock that I like a great deal because of its enormous upside potential and that is Halo Collective HCANF stock. Halo has seen better days in its stock price but, the California grower and producer is turning a corner in its retooling and getting the company moving forward.  The company has massive grow capacity as they are sitting on about 575 growable & planed acres.

Cannabis Investing for the longterm

Over the years, cannabis is going to see tremendous growth.  These are some of my favorite cannabis companies to invest in right now and I see a lot of upside potential with these companies.  Some are already profitable and the rest are growing in a way that an investment in any of these will return significant upside potential.

Best of luck in your cannabis investments!

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One thought on “How to Pick A Portfolio of Marijuana Stocks For Cannabis Investing

  1. Hi D.H.,
    That was way cool of what you just did for me and all of us who follow you.

    From the first time I discovered and started watching your videos I found your style and presentation very interesting and informative in a way that made sense, not that I understood it all, but I felt if I stuck with your teaching method of structuring and breaking down the information the way you do it would start sinking in. As you know from my previous e-mails have pretty much little or no experience in stocks or knowing how to look at companies. I have a long way to go but I’m farther along now with the aid of your videos and website than I would have been and that’s for certain.
    Keep up the great work, thank you and as usual I will be looking forward to your next website update and video!
    And if your ever in town it would be a pleasure meeting you and dinner is on me!
    Warmest Regards

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