Patient, long-term investors tend to do better in the stock market than those who flit in and out of the market, as the S&P 500 has risen almost 270% over the past decade and sets new records almost daily. Having a time horizon that spans years, even decades…
will serve marijuana investors well, considering the Horizons Marijuana Life Sciences ETF is down almost 30% since it was created in 2017, compared to a 115% gain by the broad market index.
That doesn’t mean all cannabis stocks will need so many years before generating a return, but a buy-and-hold philosophy will ensure your portfolio’s gains will be maximized.
That’s why the following trio of marijuana stocks should be on every pot stock investor’s radar. They offer the best chance for providing near-term rewards, as well as substantial returns for years to come.
This lender for the marijuana industry is picking up steam
Alex Carchidi (AFC Gamma): Advanced Flower Capital Gamma (NASDAQ:AFCG) solves a problem that many of the companies in the cannabis industry have: poor access to financing. While cannabis has been legalized in certain states, it’s still illegal at the federal level, which means major banks refuse to lend to marijuana businesses.
Therefore, when it comes time for those companies to expand beyond what their cash flows support, they have almost nowhere to turn for leverage, and that’s where AFC Gamma (AFC) steps in.
Since its founding in July 2020, AFC issues loans to worthy cannabis businesses, and all of those loans are secured by real estate that gets held as collateral. So its interest payments from the loans that it issues are quite safe, as borrowers who default will be forced to turn over their property, which can then be sold at the market rate to recoup the initial cost of the loan.
Of the loans it has already disbursed, the weighted average yield to maturity is 20%, which is quite strong. If the company can maintain this return profile, its capital will explode in value over time.
Right now, AFC is profitable, and its loan revenue is rapidly expanding sequentially each quarter.According to its third-quarter earnings report, published on Nov. 4, total revenue from interest grew by 21.4%, reaching $10.6 million.”
And, it’ll return a lot of that revenue right back to investors through its dividend, which currently yields 7.53%. The dividend may continue to increase with every quarter that passes, as it did most recently in Q3, when it grew by 13.2%.
In short, AFC is still at the very start of its growth journey, so the time is ripe to buy it. Early investors will get the largest benefit over time as the company continues to expand.
Bet on this underdog
On the retail end of the marijuana industry, the game is all about scale. Every ambitious pot company with a few dollars in the bank and a product portfolio is actively seeking potential acquisitions, large and small, to expand its network.
The exciting thing about Jushi’s expansion strategy is that the company has planted roots in two cannabis markets that are still years away from full blossom: Pennsylvania and Virginia.
The former is the fifth most populous U.S. state and has only made medical marijuana legal so far. With neighboring big guns New York and New Jersey both flipping the switch on recreational weed recently, the Keystone State can’t be far behind. Jushi isn’t yet a nationwide powerhouse, but it sure has a strong presence in Pennsylvania, with a comparatively high total of 15 of its BEYOND/HELLO dispensaries.
As for Virginia, which after a somewhat inexplicable delay will officially make sales of recreational marijuana legal in 2024, it’s bordered by five states that haven’t flipped said switch. Assuming that status quo is…
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