All you have to do to see that there's a cannabis boom in the U.S. is simply look around. Eleven states plus the District of Columbia have legalized recreational marijuana. Thirty-three states have already legalized medical cannabis. After the November elections this year, those numbers will likely increase.
But where are the hottest marijuana markets in the U.S.? Cannabis-focused website Leafly recently published its jobs report for 2020. In addition to crunching the numbers on where the jobs are in the cannabis industry, Leafly also reported on the growth in the legal marijuana markets throughout the states. Here are five of the hottest marijuana markets in the U.S. based on this report -- and they just might surprise you.
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1. Ohio
Sure, access to medical cannabis in Ohio remains pretty limited. Last year, medical cannabis sales totaled only $56 million. But in terms of percentage growth, the Buckeye State ranks at the top of the list, according to Leafly, with a sizzling 273% year-over-year increase in the medical cannabis industry in 2019.
2. Oklahoma
The lyrics to a classic Broadway song stated that Oklahoma is "where the wind comes sweeping down the plain." It's also apparently where medical pot comes sweeping down the plain a good bit, too. Medical cannabis sales in Oklahoma skyrocketed 221% in 2019, according to Leafly. On a per-capita basis, more residents of the state have medical marijuana cards -- 1 in 20 -- than anywhere else in the U.S.
3. Massachusetts
Last year, Massachusetts became the first state on the Eastern Seaboard of the U.S. to launch an adult-use recreational marijuana market. Sales of legal pot in the Bay State soared 159% year over year to $404 million, with $156 million in 2018 for medical cannabis sales.
4. Pennsylvania
You might not think of Pennsylvania as a hotspot for pot. But Leafly reported that medical cannabis sales in the state doubled in 2019 to $406 million. Pennsylvania's cannabis industry now supports around 8,765 full-time positions.
5. Florida
It's not all that surprising to see Florida on the list of the hottest marijuana markets in the U.S. Medical cannabis sales in the Sunshine State jumped 93% in 2019. The primary catalyst behind Florida's strong growth was that patients were allowed to buy smokable cannabis flower products. Florida's medical cannabis market now rivals the size of the recreational marijuana markets in Oregon and Washington.
Heating up in 2020
As we just saw, the hottest markets for legal marijuana aren't necessarily the biggest markets. And the hottest markets of last year won't necessarily be the hottest ones in 2020.
Leafly predicts that the legal recreational pot markets in Illinois and Michigan could rank the states among the fastest-growing markets next year. For example, Illinois could rake in cannabis sales of $600 million in 2020, up 83% year over year. Missouri could also live up to its name as the Show-Me State next year by delivering huge growth.
California, which claims the largest legal marijuana market in the U.S., probably won't generate the high-percentage growth that some of the states with newer cannabis markets will. However, don't be surprised if California's market heats up in 2020 as cities and counties that banned cannabis businesses in the past ease up on their restrictions to claim their share of the job growth and tax revenue that some of their peers have enjoyed.
Stocks poised to win
Quite a few marijuana stocks could emerge as winners from the fastest-growing legal cannabis markets. I'd put five stocks at the top of the list.
Scotts Miracle-Gro (SMG 0.13%) is the cannabis industry's go-to supplier for gardening products. Cannabis producers in all of the states that have been mentioned are likely to buy from Scotts' Hawthorne Gardening subsidiary, which focuses on the cannabis market.
I think that Innovative Industrial Properties (IIPR +0.17%) is another ancillary cannabis company that should profit in several of the hottest pot markets. IIP is a real estate investment trust (REIT) that provides real estate capital to medical cannabis operators, usually through sale-leaseback deals. The company currently owns properties in 14 states, including 4 of the 5 hottest markets in 2019.
Several pure-play marijuana stocks are poised to profit in these hot markets. Trulieve Cannabis (TCNNF 3.42%) absolutely dominates the medical cannabis market in Florida. It has also expanded into California, Connecticut, and Massachusetts.
My view is that Cresco Labs (CRLBF 4.10%) and Green Thumb Industries (GTBIF 5.03%) stand out as two multistate cannabis operators that are also solid picks. Both companies already operate in several of the hottest markets mentioned earlier and continue to expand. If other states emerge as the top growth opportunities, Cresco and GTI will almost certainly target those markets, too.
