The marijuana sector is a fickle one. When things are going well, stocks soar to ridiculous heights and valuations that are completely unwarranted. But when investors are down on the space, it seems as though prices can't stop falling. Right now, we're seeing the latter -- and for investors who can see past the recent bearishness, that means some exciting opportunities to scoop up quality cannabis stocks at prices we haven't seen for several months.

If you're prepared to be patient with the marijuana industry, it's worth taking a closer look right now. Top cannabis producers Curaleaf Holdings (CURLF 3.98%) and Jushi Holdings (JUSHF 5.46%) are down more than 25% in the past three months while the S&P 500 index has been relatively strong, rising more than 5%. But these stocks won't stay down forever, and here's why loading up on them and other multistate operators (MSOs) could be a great move right now.

Two scientists working in a greenhouse.

Image source: Getty Images.

Legalization will happen, but investors have been jumping the gun

When the Democrats took control of the U.S. Senate in January, there was hope that significant marijuana reform would happen this year. CEO David Klein of Canadian-based marijuana producer Canopy Growth was so excited he projected that his company would enter the U.S. marijuana market in 2021. It was a bold prediction, and even calling it a long shot right now looks generous. Marijuana legalization is a complicated topic -- there have been 169 pages' worth of comments and feedback on Senator Chuck Schumer's (D-N.Y.) Cannabis Administration and Opportunity Act, which proposes federal legalization of the substance, just since it was revealed last month. Understanding all the issues marijuana companies and trade associations have raised will take significant time. To address all those issues will take even longer.

Legalization was always going to take a long time, and the problem is that cannabis investors (and CEOs) were simply too excited at the start of the year. The led to rising valuations for pot stocks during the early stages of 2021, then an eventual decline over the past few months when little progress on legalization had been made:

^SPX Chart

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Given that the bulk of the U.S. population is in favor of legalizing marijuana and dozens of states permit it for medical or recreational use, it does look to be just a matter of time before there is significant reform. Unfortunately, Schumer may have done the industry a disservice by being too aggressive in seeking legalization and significant changes; simply passing much-needed banking reform for the sector would have been a much easier win and given the industry something to point to as proof that changes are coming to make running a marijuana business easier and safer. 

The pendulum will eventually swing back, and these pot stocks could soar next year

Once there's discernible progress on federal marijuana reform, shares of pot stocks will undoubtedly surge. And given the high probability of that happening, now may be a prime time to start adding them to your portfolio. 

Curaleaf is the top MSO in the country, with $985 million in revenue over the trailing 12 months. At about $11 a share, the stock hasn't traded this low since November. And with management looking to expand its operations in New Jersey and New York -- two states that passed recreational marijuana reform earlier this year -- you can bet that Curaleaf will clear well over $1 billion in revenue next year. That, combined with any kind of progress on the marijuana legalization front, could make the stock a scorching-hot buy in 2022.

Jushi is another stock trading at similar lows that could possess significant upside. While the company is smaller than Curleaf (its revenue over the past 12 months totals just $147 million), it too will be a lot bigger in the near future. In September, the company completed an acquisition of marijuana company Nature's Remedy, which will allow it to enter the Massachusetts pot market. Jushi is also expanding its presence in Pennsylvania, having opened its 15th store in that state earlier this month. While Pennsylvania only permits medical marijuana use, it did expand access earlier this year. And with neighboring New York and New Jersey legalizing marijuana, lawmakers in Pennsylvania could feel pressured to follow suit or risk losing tax revenue from customers who choose to make the trip out of state to buy recreational pot. Progress in legalizing marijuana federally -- or even in the Pennsylvania market alone -- could be enough to get Jushi's stock soaring.

Many more options out there for investors

Jushi and Curaleaf are just a couple of examples of pot stocks that could be big winners next year. But they aren't the only options for cannabis investors. And if you can't decide, one option may be to buy shares of an exchange-traded fund like the AdvisorShares Pure US Cannabis ETF that holds positions in many MSOs.

There are many bad marijuana stocks out there that you should avoid, but there are also some promising opportunities in the sector that could generate great returns for your portfolio. Although sentiment is down on marijuana currently, it won't stay that way. And that's why growth investors should consider loading up on some of the top MSOs right now, including Curaleaf and Jushi.