Should you invest in cannabis stocks in 2022? Here’s where experts say the industry is headed

Cannabis stocks took a beating in 2021, but fund managers and stock experts are hoping for a rebound in 2022. They point to ongoing legalization efforts in multiple states and ancillary industries related to cannabis cultivation as reasons for optimism. 

“The story of 2021 for US cannabis companies was service through e-commerce,” said Alan Brochstein, a Chartered Financial Analyst (CFA) based in Houston and founder of 420 Investor, a site devoted to cannabis stocks. “Dispensaries were deemed essential businesses during the pandemic and started offering more online ordering and delivery.”

Brochstein believes the uptick in e-commerce could prove beneficial for cannabis stocks in 2022. 

Part of the reason for sluggish performance can be traced to Capitol Hill, Brochstein said. Legislators’ inability to legalize marijuana on a federal level spooked investors.

“People got a sense that legalization would happen quickly,” he said. “That brought in a lot of buyers who don’t understand it’s a drawn-out process. When no progress was made on the legal front, those people got dejected. Part of the reason for sluggish performance in 2021 can be traced to Capitol Hill.”

Brochstein didn’t make any suggestions as to which cannabis stocks investors should choose from. Instead, he encouraged them to do their research on the various options out there and to exercise caution when investing. 

But cannabis stocks can be hard to choose, mainly because so few trade on major exchanges like the New York Stock Exchange and NASDAQ. The bulk of cannabis stocks can be found on the OTC market, which is less regulated than the larger markets. 

“One major problem for investors is that most cannabis stocks don’t trade on NASDAQ and NYSE. They aren’t stocks you can buy through apps like can’t buy on Robinhood,” he said. “So people end up buying stock in the wrong companies.”

Dan Ahrens is a managing director and chief operating officer of AdvisorShares. He’s the portfolio manager of the Pure US Cannabis ETF (ticker: MSOS) – the first ETF to offer US-exclusive cannabis exposure.

“It’s very important for investors to know the difference between Canadian and U.S. companies,” he said. “Some of the biggest cannabis companies in Canada might be some of the financially worst companies operating.” 

“It’s very important for investors to know the difference between Canadian and U.S. companies,” he said. “Some of the biggest cannabis companies in Canada might be some of the financially worst companies operating.” 

Even though cannabis stocks have been beaten down the past 11 months, Ahrens believes the U.S. market is primed for better performance in 2022. 

“You can’t hide the fact that cannabis stocks have been in severe drawdown for 11 months,” he said. “The high came in February of 2021 and has been down severely since that time. I can’t think of any other sector in the economy that’s seen such a difference between stock price and company performance.” 

Ahrens said if you look at major U.S. cannabis companies’  balance sheets, revenue growth and other fundamental measures, their reality is wildly disconnected from their stock price.

Part of the problem, Ahrens said, may be that cannabis stock prices started 2021 too high to begin with. 

And, like Brochstein, Ahrens said inaction on the federal level has also stalled progress.

“In late 2020 and early 2021, prices might have gone up too much, too fast on expectations of reform in the U.S.,” he said. “Politicians haven’t followed through on campaign promises.”

Should cannabis stocks have a comeback year, it may be the perfect time to invest in cannabis. Right now, the biggest players in the cannabis sector include: 

• AdvisorShares Pure US Cannabis ETF (MSOS)

Traded on the NYSE Arca exchange, MSOS provides exposure to a variety of cannabis stocks and related industries. The fund began in September of 2020 and has more than a billion dollars in assets. The fund is actively managed, meaning managers continually make trades and update the ETF’s portfolio. 

• Trulieve Cannabis Corp (TCNFF)

Traded on the OTC exchange, this cannabis stock represents a company whose product is sold in dispensaries in 11 states. Trulieve recently announced a statewide grand re-branding of all Trulieve-affiliated locations across Pennsylvania. The company holds key market positions in Arizona, Pennsylvania and Florida. 

• Curaleaf Holdings Inc. (CURLF)

Traded on the OTC, Curaleaf has more than 350,000 registered patients in 23 states. The company recently completed the $210 million acquisition of Bloom Dispensaries in Arizona

These cannabis stocks could prove to be great investments in 2022, bearing in mind that any investment involves risk and should be carefully researched before purchase.

Jordan Guinn is a published journalist with bylines in the San Francisco Chronicle, the Los Angeles Times, the Stockton Record and more. He’s covered everything from agriculture, to violent crime to water.