Investing in Marijuana Stocks

Green Thumb ranks among the largest cannabis companies in the U.S. It operates more than 100 retail cannabis dispensaries and 20 manufacturing facilities across 14 states.

The company has been profitable on an annual basis since 2020. It continues to deliver revenue growth and maintains a strong balance sheet even with headwinds in the economy and cannabis industry. Green Thumb should have plenty of growth potential over the long term as the U.S. cannabis market expands.

For now, Green Thumb's shares can only be bought and sold on over-the-counter (OTC) markets in the U.S. However, if federal cannabis restrictions are lifted, the stock could be listed on major U.S. stock exchanges. This would almost certainly be a huge catalyst for Green Thumb.

Trulieve Cannabis is the largest cannabis retailer in the U.S. It operates 225 retail cannabis stores in eight states with 15 processing facilities in six states.

The company dominates the market in its home state of Florida. It also claims market-leading positions in Arizona and Pennsylvania. Support for legalizing recreational marijuana failed to achieve the required 60% threshold in Florida's 2024 elections. However, with almost 56% of the state's voters favoring legalization, Trulieve could still have a significant growth opportunity if the state legalizes recreational marijuana in the future.

Like Green Thumb, Trulieve's shares can currently only be traded on OTC markets in the U.S. The stock will likely be a big winner if federal marijuana reforms are made that allow U.S. stock exchanges to list the shares of cannabis companies that operate in the U.S.

U.S. cannabis companies can't easily secure capital from banks or financial institutions since marijuana remains illegal at the federal level. Innovative Industrial Properties (IIP) helps solve the cash shortage for growing marijuana companies. It buys properties owned by U.S. medical cannabis operators and leases the properties back to them. The sale to IIP provides the cannabis operator with much-needed cash, and the lease agreements create a steady revenue stream for IIP.

Innovative Industrial Properties has grown significantly in recent years and now owns more than 100 properties in 19 states. The company continues to generate solid revenue and earnings powered by its sale-leaseback business model, even with some of its tenants facing financial challenges. Because IIP is organized as a real estate investment trust (REIT), it returns at least 90% of its taxable income to shareholders.

In some ways, IIP wouldn't be helped as much by federal cannabis reform as other companies. Its shares already trade on the New York Stock Exchange (NYSE). If traditional banking services were available to U.S. cannabis operators, IIP could face increased competition. However, federal reforms would likely cause the U.S. cannabis market to expand -- which should work in IIP's favor.

Quest Diagnostics might be a surprising pick to include in a list of marijuana stocks. It's one of the world's largest providers of laboratory testing services.

How does Quest tie in with the cannabis industry? The widespread legalization of marijuana in states across the U.S. is driving increasing demand for drug testing in the workplace. Quest offers drug testing services and is certified by the U.S. Department of Health and Human Services for federally mandated drug testing of workers in some safety-sensitive fields.

Quest could be an attractive stock for more risk-averse investors who want to profit from the legalization of cannabis. It has a long track record of success and is consistently profitable.

5. Turning Point Brands

The marijuana industry is expected to expand at a compound annual growth rate of 34% through 2030, and many investors are seeking to profit. As states and entire countries decriminalize or legalize cannabis and/or its components, there are growing opportunities for entrepreneurs and existing companies. This is especially true with the U.S. Drug Enforcement Administration (DEA) moving to reclassify marijuana from a Schedule 1 controlled substance (no accepted medical use and a high potential for abuse) to Schedule 3 (drugs that have moderate to low potential for physical and psychological dependence).

As with any nascent industry, there are also plenty of investment risks. Whether you're a first-time investor or a seasoned veteran, it pays to understand how this industry works. This guide will get you up to speed quickly and includes our picks for the top marijuana stocks.

1. Green Thumb Industries

2. Trulieve Cannabis

3. Innovative Industrial Properties

4. Quest Diagnostics

Turning Point Brands is a leader in supplying smoking accessories and oral tobacco. Its products include Zig-Zag rolling papers, Clipper lighters, and Stoker's and Beechnut tobacco products.

The company has especially significant growth opportunities with the legalization of cannabis in the U.S. Turning Point Brands estimates an addressable market of around $200 million in the alternative market for headshops and cannabis dispensaries.

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