Many cannabis stocks have struggled recently, meaning it’s possible to enter at a low price point. As the regulatory environment around cannabis slowly becomes more favorable, long-term investors have the potential to realize big gains in cannabis stocks.
While some cannabis stocks have experienced double-digit declines recently, there are a few companies that have experienced growth in the past year.
For our best performing cannabis stocks rankings, we selected stocks based on the following criteria: highest year-to-date returns among cannabis stocks, inclusion in a major cannabis exchange-traded fund, covered by at least one Wall Street analyst and market capitalization of at least $1.5 billion.
Best-performing cannabis stocks
Compare the best-performing cannabis stocks
Methodology
The best growth stocks included above all trade on a major U.S. stock exchange and meet the following criteria:
- Consensus analyst recommendation of “buy” or better. A high number of analyst “buy” ratings indicates an expectation that the stock will outperform the overall market.
- Market capitalization of at least $1.5 billion. If a company has a leading market share and competitive advantages in a sizable industry, it will have a market cap greater than $1.5 billion. This shows investor confidence in the company and its ability to position itself as an industry leader.
- Holding in the Cambria Cannabis ETF (TOKE). The TOKE ETF is one of the best-performing cannabis ETFs for 2023 despite its negative return to date. This ETF seeks capital appreciation from global equity markets that have exposure to the broader cannabis industry.
- Relatively high year-to-date (YTD) returns. As mentioned, the cannabis industry has struggled in 2023, meaning most of the returns you see are negative. However, these returns are still better than most in the industry.
Why other stocks didn’t make the cut
While some stocks may be worth considering due to their position in the industry, they typically don’t make the cut based on the criteria in the methodology above. For instance, they may be part of the TOKE ETF but have significantly negative year-to-date returns.
Of course, as an emerging industry, cannabis developments can change rapidly. Stocks that make the list this year might be laggards in the coming years, and those that didn’t make the cut could become industry leaders.
Many factors could influence the winners and losers, from regulatory outcomes to who can secure the most capital. Those who believe there will be growth in the cannabis industry must be patient as policies continue to take shape.
Final verdict
Cannabis stocks have generally struggled throughout 2023, leading to mostly negative returns. This isn’t bad news for long-term investors, who can buy at discounted prices and hope to capitalize on big gains in the future.
However, as an emerging industry, the winners in the cannabis realm are yet to be determined. That makes this a high-risk, high-reward situation, and it would behoove cannabis investors to hedge their bets alongside other investments. Until the industry matures more, it’s anyone’s guess who the winners (or losers) will be.
Cannabis market overview
The U.S. cannabis industry was valued at over $13 billion in 2022. However, the market is predicted to grow with a compound annual growth rate (CAGR) of 14.2% from 2023 to 2030, according to Grand View Research. In the U.S., cannabis is often used in the pharmaceutical, cosmetic and food and beverage industries.
While cannabis remains illegal at the federal level, several states have moved to legalize it, either for medicinal purposes, recreational purposes or both. The increase in legalization efforts has spurred growth in the market, and research continues into new uses of cannabis products.
For instance, the Food and Drug Administration has approved the use of a cannabis-derived drug: Epidiolex. This suggests that the regulatory environment is improving at the federal level — and legalization at the federal level would likely further grow in the industry.
Frequently asked questions (FAQs)
Buying cannabis stocks can be a good move because the industry is still in its infancy, and the winners and losers are still being determined.
There’s a possibility of higher growth rates for those who invest in successful cannabis companies. But there can also be significant losses, so investors should start small and balance their portfolios with safer investments. Talk to a financial professional to see if cannabis stocks make sense for your risk tolerance and investment goals.
Investing in marijuana stocks has become increasingly simple, especially as more appear on major stock exchanges. Some marijuana stocks are still unavailable on major exchanges. But you can often buy them through online brokers. Others are traded in major cannabis ETFs, so you can also buy shares in a cannabis ETF of your choice.
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