Puff, Puff, Invest: 3 Top Cannabis Stock Picks to Celebrate 4/20

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The progress toward legalization of cannabis in the United States continues at a slow pace, but medical marijuana is now permitted in approximately 37 states. Germany recently became the latest country to legalize cannabis for personal use beginning in April, coinciding with the informal holiday of 4/20. It’s the decriminalizing of cannabis at the federal level in the U.S. that would significantly advance the industry.

It has been several months since the U.S. Department of Health and Human Services recommended relaxing restrictions on cannabis, resulting in an uptick in cannabis stock for 4/20 celebrations. However, since then, action on the federal level has been a little slow. Nonetheless, the upcoming election in November may create new possibilities to facilitate broader access as several states will vote on legalization measures.

Amidst the uncertain legal landscape, listed cannabis stocks remain in the high-growth sector with smaller market caps and higher volatility. For investors willing to take on the market risks in hopes of profiting from anticipated legal changes, there may be opportunities for gains in cannabis stocks as the industry expands rapidly.

As these businesses continue scaling operations to commercial levels, below are a few cannabis stocks for 4/20 and beyond worth monitoring for their growth potential. However, given the sector’s volatility, risk management is suggested.​

Canopy Growth (CGC)

Indoors marijuana growing, planting cannabis, holding it in a hand (canopy cgc stock)

Source: Shutterstock

As the cannabis sector prepares for the unofficial 4/20 marijuana celebration, one company stands out as a bellwether for investors — Canopy Growth (NASDAQ:CGC).

Canopy represents what an investor might expect from investing in cannabis stocks for 4/20 and beyond, as its share price has swung widely in recent weeks. During this period, the company celebrated Germany’s legalization initiative, promising to enter the new market as soon as possible.

With shareholders greenlighting a new class of exchangeable shares, Canopy is not just expanding its footprint. They’re also likely to attract more investor attention by clearing the way for Canopy USA to snap up some significant U.S. assets after Constellation Brands (NYSE:STZ) stepped down.

Analysts have been slowly raising their projections for Canopy’s Q1 earnings over the last 90 days, which often signals that the company might beat estimates when results are reported. As the largest cannabis company in the world by market cap, Canopy Growth’s performance could be a leading indicator of how other cannabis stocks for 4/20 and beyond may perform.​

IM Cannabis (IMCC)

a marijuana leaf displayed among other numbers related to stock performance

Source: Shutterstock

IM Cannabis (NASDAQ:IMCC), a medical cannabis company operating in Israel and Germany, has signed a licensing agreement to commercialize Avant Brands‘ flagship BLK MKTTM brand in Germany. The partnership will grant IM Cannabis’ German subsidiary, Adjupharm GmbH, exclusive rights to introduce the brand in Germany’s medical cannabis market, earning IM Cannabis a little more attention from investors seeking undervalued, albeit highly volatile, cannabis stocks for 4/20 and beyond.​

The company has already reported 2023 earnings and exceeded gross profit by 7.5% to $9.8 million while registering a net loss of $10.2 million. However, revenue and profitability in the German market saw a substantial increase despite the Israeli market challenges. Management highlighted the potential merger with Kadimastem and cost reductions as positives for future growth. With the worst challenges from the Israel conflict behind, the legalization in Germany could be well-timed to capitalize on the growing demand for this one of the cannabis stocks for 4/20 and beyond.

Innovative Industrial Properties (IIPR)

marijuana in storage

Source: Shutterstock

As investors research opportunities within cannabis stocks for 4/20 and beyond, one real estate investment trust (REIT) stands out as an interesting opportunity because it invests in land for growers — Innovative Industrial Properties (NYSE:IIPR). The company boasts a unique business model for investing in cannabis stocks for 4/20 and beyond. It actually generates profits by acquiring, owning and managing specialized properties leased to state-licensed cannabis operators. Its structure has enabled the REIT to become one of the few cannabis companies producing profits.

The company’s share price has also traded relatively stable compared to other cannabis stocks, fluctuating around 15% year-to-date (YTD). Trading at a forward price-to-earnings (P/E) ratio of 16.4x, IIPR provides an attractive dividend yield of 7.8%. The company generates consistent cash flows through its real estate portfolio comprising over 100 properties across 19 states and has increased annual dividends since its initial public offering (IPO).

For investors seeking exposure through a more established player with a proven business model, Innovative Industrial Properties warrants examination as part of a balanced strategy in cannabis stocks for 4/20 and beyond.

On the date of publication, Stavros Tousios did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Stavros Tousios, MBA, is the founder and chief analyst at Markets Untold. With expertise in FX, macros, equity analysis, and investment advisory, Stavros delivers investors strategic guidance and valuable insights.

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