From time to time, the stock market sees the effects of something called "sector rotation" -- basically, investors' waxing and waning interest in different business categories. For example, tech stocks got beat up after investors rotated into consumer discretionary names looking for a bit more security and stability following last year's big run-up.

Other sectors glow bright early, only to flame out quickly, leaving tremendous opportunities amidst the ashes. Cannabis stocks neatly fit this bill. The promise of marijuana legalization sent the industry soaring, only to see it tumble back to earth after the reality of regulation and taxation caused investors to realize profits could take longer than expected.

That doesn't mean investors should avoid the space. In fact, the two stocks below have been unfairly discarded by the market despite possessing enormous growth potential.

Person examining cannabis plant in field.

Image source: Getty Images.

1. Columbia Care

Multistate operator Columbia Care (CCHWF 3.06%) is an exampe of the market throwing the baby out with the bathwater. This marijuana stock is a fast-growing small cap moving quickly to establish itself as a go-to cannabis brand.

Columbia Care is licensed to operate in 18 of the 36 states that have legalized marijuana for either personal or medicinal use. It operates 99 dispensaries, runs 31 cultivation and manufacturing facilities, and has wholesale distribution in 13 markets, making it one of the largest vertically integrated MSOs around.

To achieve market dominance, Columbia is pursuing a two-pronged strategy, targeting growth by acquisition to achieve scale quickly and focusing on states where competition is legislatively limited. With only so many licenses to go around, a well-known brand could mean a leading operator in the market.

Shares of Columbia Care have fallen over 37% since the start of the year and are down nearly 50% from their February highs as investors have abandoned the cannabis space en masse. 

Analysts, though, see significant upside in Columbia Care's stock, with Cantor Fitzgerald setting a $5.50 price target on its shares. Other analysts also see huge potential, as the industry is expected to produce some $20 billion in annual sales. Marijuana's ever-greater acceptance in the U.S. is leading to ever-greater growth opportunities for businesses like Columbia Care, whose beaten-down stock is primed to benefit.

Technician administering CBD oil to patient.

Image source: Getty Images.

2. Trulieve Cannabis

Trulieve Cannabis (TCNNF -0.39%) is another MSO with differentiated levers it can pull to rise above the rest. First, it's primarily focused on operating in Florida, where it is the state's largest licensed medical marijuana provider (the state only allows medical cannabis at this time). It has the most locations and the greatest volume in the Sunshine State and boasts about a 50% share of the market.

And now it's looking to replicate that success by slowly branching out, having obtained licenses in seven additional states to sell premium-quality marijuana at dispensaries. It's piloting a new strategy in Massachusetts, where it is selling clones of its top-drawer cannabis to individuals, allowing them to grow their own version of Trulieve's plants. The testing phase of the program is limited to its Chocolope NewBerry Sativa strain, but if it's well received, Trulieve may introduce other strains and add more locations for purchase.

The narrowness of its initial growth allowed Trulieve to keep its operating costs down, making it a profitable venture for 14 consecutive quarters at last count -- a rare feat indeed among so many cannabis companies that run up mounting losses. Now it's expanding, through acquisitions if necessary, such as its pending purchase of fellow MSO Harvest Health & Recreation

It didn't come cheap, but Harvest's Arizona base gives Trulieve 15 more dispensaries that should capitalize on that state's legalization of recreational marijuana last year. Moreover, Harvest has a presence in Florida, too, further bolstering Trulieve's dominant presence there.

Shares are down 21% in 2021 (and off 50% from their February highs). But the company has support from Wall Street, which sees significant gains coming, making Trulieve Cannabis a discounted marijuana company that's ripe for the picking.