From time to time, the stock market sees the effects of something called “sector rotation” — basically, investors’ waxing and waning interest in different business categories. For example…
tech stocks got beat up after investors rotated into consumer discretionary names looking for a bit more security and stability following last year’s big run-up.
Other sectors glow bright early, only to flame out quickly, leaving tremendous opportunities amidst the ashes. Cannabis stocks neatly fit this bill. The promise of marijuana legalization sent the industry soaring, only to see it tumble back to earth after the reality of regulation and taxation caused investors to realize profits could take longer than expected.
That doesn’t mean investors should avoid the space. In fact, the two stocks below have been unfairly discarded by the market despite possessing enormous growth potential.
1. Columbia Care
Multistate operator Columbia Care (OTC:CCHWF) is an exampe of the market throwing the baby out with the bathwater. This marijuana stock is a fast-growing small cap moving quickly to establish itself as a go-to cannabis brand.
Columbia Care is licensed to operate in 18 of the 36 states that have legalized marijuana for either personal or medicinal use. It operates 99 dispensaries, runs 31 cultivation and manufacturing facilities, and has wholesale distribution in 13 markets, making it one of the largest vertically integrated MSOs around.
To achieve market dominance, Columbia is pursuing a two-pronged strategy, targeting growth by acquisition to achieve scale quickly and focusing on states where competition is legislatively limited. With only so many licenses to go around, a well-known brand could mean a leading operator in the market.
Shares of Columbia Care have fallen over 37% since the start of the year and are down nearly 50% from their February highs as investors have abandoned the cannabis space en masse.
Analysts, though, see significant upside in Columbia Care’s stock, with Cantor Fitzgerald setting a $5.50 price target on its shares. Other analysts also see huge potential, as the industry is expected to produce some $20 billion in annual sales. Marijuana’s ever-greater acceptance in the U.S. is leading to ever-greater growth opportunities for businesses like Columbia Care, whose beaten-down stock is primed to benefit.
2. Trulieve Cannabis
Trulieve Cannabis (OTC:TCNNF) is another MSO with differentiated levers it can pull to rise above the rest. First, it’s primarily focused on operating in Florida, where it is the state’s largest licensed medical marijuana provider (the state only allows medical cannabis at this time). It has the most locations and the greatest volume in the Sunshine State and boasts about a 50% share of the market.
And now it’s looking to…
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