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Could Trulieve Be a Millionaire-Maker Stock?

By David Jagielski - Apr 28, 2021 at 7:14AM

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The company is coming off a strong year, and the future looks even more promising.

Growing your portfolio to reach $1 million is a great target for investors. And investing in a high-growth sector like cannabis can be a solid strategy for maximizing your returns and potentially realizing that goal. But can you really make that much from a cannabis investment, and if so, how much will you need to invest to make that a reality?

Below, I'll answer those questions by using top multi-state operator Trulieve Cannabis (TCNNF 1.23%) as an example and looking at how much you could make from investing in the stock. Over the past year, its shares have soared 300%, outperforming the S&P 500 (which is up just 47%) by a wide margin. 

Cannabis greenhouse.

Image source: Getty Images.

Let's start with the returns you'll need to get to $1 million

If you have a high net worth and have already invested $500,000, getting to $1 million will feel good, but it will be easier to do than if you were starting with less. Context is important here, so I'm going to look at an initial investment of no more than $100,000. Assuming you are in this for the long haul, these are the annual returns you will need (on average) to get to $1 million if you hold on to your initial investment for 25 years:

Investment Compound Annual Growth Rate Needed
$10,000 20.23%
$25,000 15.90%
$50,000 12.73%
$75,000 10.92%
$100,000 9.65%

Now, before you think that a 20% compound annual growth rate (CAGR) is no sweat given how well the market has been performing over the past year, consider that's the rate that Warren Buffett's Berkshire Hathaway has averaged over the past five-plus decades. Earning those kinds of returns over a long period would mean you are consistently outperforming the markets (and doing as well as the billionaire investor). I wouldn't suggest that you can get to $1 million by investing $10,000 in any stock over a 25-year period, regardless of how promising the industry may be. While it is possible, it would be a best-case scenario that would likely involve a lot of luck or significant risk.

Can Trulieve continue to outperform the market?

One of the things Trulieve has going for it is the rapid growth it has been generating. On March 23, the company posted its fourth-quarter and full-year results; for the period ending Dec. 31, sales of $168.4 million were up 111% year over year. In the third quarter, its growth rate was 93%. And in the two periods prior to that, its top line surged by at least 109%. All that growth is fueling lots of excitement for Trulieve as it and other pot stocks benefit from more markets opening up and states passing marijuana legislation.

A recent forecast from MarketsAndMarkets projects that the global cannabis market will be worth more than $90 billion by 2026, growing at a CAGR of 28% until then. Longer-term growth projections will be difficult, since a lot depends on how marijuana legalization plays out. Although a Pew Research survey found more than 90% of Americans are in favor of some form of legalization, that doesn't guarantee that the federal government will make that happen anytime soon. President Joe Biden has only gone so far as to talk about potentially decriminalizing marijuana, not legalizing it outright.

However, it is probably safe to assume that sometime over the next decade, the government will likely legalize pot. And assuming that Trulieve remains a big player in the industry, outperforming the market shouldn't be a problem; the company has separated itself from its peers by consistently posting profits. In 2020, its net income of $63 million grew by 19% to make up 12% of revenue. Rival and top cannabis producer Curaleaf Holdings incurred a hefty loss of $61.7 million last year, only 8% smaller than the $67.2 million loss it reported in 2019, and that's with the company growing its top line by 184%.

Will investing in Trulieve make you a millionaire?

If you are investing more than $50,000 into Trulieve, then getting to $1 million seems well within the realm of possibility given the industry's rapid growth and the potential the pot stock has over the long term. A CAGR of about 13% does appear reasonable, especially if the company has a few more years like the past one, during which it more than doubled in value. However, investing less than that and expecting to average returns of 16% or higher is likely less of a realistic goal.

David Jagielski has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares) and Trulieve Cannabis Corp. The Motley Fool recommends the following options: long January 2023 $200.0 calls on Berkshire Hathaway (B shares), short January 2023 $200.0 puts on Berkshire Hathaway (B shares), and short June 2021 $240.0 calls on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.

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Stocks Mentioned

Trulieve Cannabis Stock Quote
Trulieve Cannabis
TCNNF
$13.15 (1.23%) $0.16
Berkshire Hathaway Inc. Stock Quote
Berkshire Hathaway Inc.
BRK.A
$452,697.25 (1.66%) $7,395.26
Berkshire Hathaway Inc. Stock Quote
Berkshire Hathaway Inc.
BRK.B
$301.55 (1.71%) $5.08
Curaleaf Holdings, Inc. Stock Quote
Curaleaf Holdings, Inc.
CURLF
$6.05 (1.24%) $0.07

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

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