Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Why Marijuana Stock MariMed Soared 371% in 2018

By Beth McKenna - Updated Apr 16, 2019 at 5:14PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This cannabis stock was on fire last year. Here's what investors should know.

What happened

Shares of Boston area-based cannabis company MariMed ( MRMD -0.35% ) rocketed 371% higher in 2018, according to data from S&P Global Market Intelligence

That would be a fantastic gain in any market, but it's even more notable since the overall market was down last year. The S&P 500 returned negative 4.4%.

Moreover, MariMed was the best-performing stock among the hot cannabis group last year -- and, yes, it even beat out shares of the hottest Canadian marijuana grower, Tilray, which soared 215% in 2018. (Tilray, however, only began trading on a U.S. exchange in July.) 

(In 2019, MariMed stock is up 7.9% through Wednesday, Jan. 9, versus the S&P 500's 3.2% return.)

An American flag surrounded by marijuana leaves.

Image Source: Getty Images.

So what

We can probably safely attribute MariMed stock's mighty performance last year to two main (and somewhat overlapping) factors.

First, investors poured money into cannabis stocks in general, which pushed up many of their share prices. The catalysts here were surely the expanding size of the global legal marijuana market and the anticipation of continued brisk growth. Second, investors were likely enthused about MariMed's prospects, specifically. (The company describes itself as a "multi-state cannabis organization that develops, owns and manages cannabis facilities and branded product lines.") 

MariMed has been laying the groundwork to be a major beneficiary if and when -- and we can probably say "when" -- marijuana becomes legal on a federal level in the United States. Moreover, it's positioned itself to profit from the legalization of hemp in the U.S. On Jan. 1, marijuana's low-psychoactive-content cannabis cousin became legal across the country. Like marijuana, hemp can also be used to extract cannabidiol (CBD), a chemical found in the cannabis plant that has been linked to a host of wellness and medical benefits. In November, MariMed invested $30 million in Kentucky-based GenCanna Global, which the press release announcing the deal described as a "global leader in the hemp CBD industry."

Now what

Risk-adverse investors might want to put MariMed on their watch list for the reasons previously discussed. Moreover, it's one of the few pure-play marijuana players that's profitable from an operating basis. It has also sporadically generated positive operating cash flow in recent years.

However, there's also something notable to monitor: its cash-burn situation. The company's cash position is light compared to the amount of cash it's been using to grow its business.

Check out all our earnings call transcripts.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

MariMed Inc. Stock Quote
MariMed Inc.
MRMD
$0.69 (-0.35%) $0.00

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
634%
 
S&P 500 Returns
141%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/02/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.