There's a new marijuana bull in town. In early July, Jefferies Financial Group (JEF 1.57%) analyst Owen Bennett initiated coverage with strong buys on seven -- count 'em, seven -- cannabis stocks. Clearly brimming with enthusiasm, he characterized the sector overall as presenting "a generational wealth opportunity for investors."
In this segment from Motley Fool Live recorded on July 16, longtime Fool contributor Eric Volkman and healthcare and cannabis bureau chief Corinne Cardina take a brief look at those seven stocks, touching on how accurate those buy recommendations might be.
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Corinne Cardina: Let's bring it home by talking about if any pot stocks are really standing out like a buy today.
Eric Volkman: OK, well, an investment bank called Jefferies, for those of you familiar, they definitely think so. Earlier this month they issued a research report which was really, really bullish. One of the most bullish reports we've ever seen on pot stocks, in which they initiated coverage and recommended buys on no less than seven stocks.
All these were American stocks as opposed to Canadian. They were very heavily slanted toward retail. Trulieve (TCNNF -5.95%) was among them. Apparently they're not bothered by the travails of the CEO's husband. Jefferies also likes Curaleaf (CURLF -2.56%) as a buy, Cresco Labs (CRLBF -4.76%), Green Thumb (GTBIF -4.33%), TerrAscend (TRSSF -5.17%), Columbia Care (CCHWF -9.05%) and Ayr Wellness (AYRW.F -5.67%). Some of those names might be familiar, some of them not.
Again, they're all retail and basically the analyst, a gentleman named Owen Bennett, interestingly, he doesn't -- like a lot of bullish pot analysts -- predicate this on possible legalization. He doesn't think Federal decriminalization will happen before 2026 in fact.
Basically, it's going to be a perfect storm of organic growth as more states flip the switch to recreational pot and the greater attraction of weed stocks from institutional investors, which can really move a stock's price once the funds start to get involved, the hedge funds and the official institutional investors. He believes as I do that there's going to be more mergers and acquisitions particularly when and if stock prices go up because again companies can use their shares for purchases.
So I think it's a fairly good call. It might be a little overly optimistic. I wouldn't say I'm crazy about all those names. Out of them, while I like aspects of all those companies, I would say the ones particularly to keep an eye on are Trulieve which despite whatever we just talked about (the legal troubles of the CEO's husband) is still fundamentally very solid, still growing, still profitable, which is very rare for marijuana stocks.
Ayr Wellness is another interesting play. I interviewed the CEO and he had some interesting things to say about strategy. He's also a veteran finance guy which is sorely needed in marijuana as it's typically unprofitable. I also like Columbia Care. That's an up-and-comer. Columbia Care and Ayr Wellness are kind of under-the-radar stocks. I think because they are ambitious, they're growing, they're making a lot of interesting moves in high-potential markets, I would take a second look if I were an investor.
