S&P 500   4,397.94
DOW   34,265.37
QQQ   351.69
S&P 500   4,397.94
DOW   34,265.37
QQQ   351.69
S&P 500   4,397.94
DOW   34,265.37
QQQ   351.69
S&P 500   4,397.94
DOW   34,265.37
QQQ   351.69

Marijuana Stocks - Beginners Guide to Investing in Marijuana

Due to changing laws and regulations, marijuana is becoming legal in more states in the U.S. and in more countries all over the world. With the rapid growth in this industry, you may be wondering whether to add some marijuana stocks to your portfolio. Before investing in marijuana stocks, there are a few things to know.  How to invest in marijuana stocks.

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CompanyCurrent PricePE RatioMarket CapVolumeAverage VolumeIndicator(s)
22nd Century Group
N/A$335.23 million2.78 million2.45 million
Corbus Pharmaceuticals
N/A$58.48 million1.15 million767,886News Coverage
Cara Therapeutics
24.39$638.84 million497,802401,114

Marijuana Stocks - Beginner’s Guide to Investing in Marijuana

As you can see, there’s a lot to consider. The decision to invest in marijuana stocks ultimately depends on the needs of the individual investor. If you choose to invest in marijuana stocks, use caution. While there is a lot of money to be made in the marijuana industry as a whole, this doesn’t mean that all marijuana stocks are a good investment. As with any other investment, it’s important to educate yourself and do your research so that you can make a wise investment decision.

Should I Invest in Marijuana Stocks?

In the United States, the marijuana business is booming, thanks to the legalization of marijuana in many states. Nine states and the District of Columbia have now decriminalized either recreational marijuana or medical marijuana. And as legalization occurs in more states, cannabis sales have continued to increase. In the United States alone, sales of legal marijuana are projected to reach 23.4 billion in revenue by 2022.

The growth of the marijuana industry and continued legalization is not limited to the United States. Cannabis laws are changing all over the world. In 2013, Uruguay legalized weed. More recently and closer to home, Canada legalized weed for recreational use in 2018 (marijuana legalization for medical use occurred in 2001). Marijuana revenue reached $12 billion in 2018, according to ArcView Market Research and BDS Analytics. This number is only expected to grow as even more countries across the world are choosing to legalize or decriminalize marijuana. Globally, legal spending is expected to hit $57 billion a decade from now, according to ArcView Market Research and BDS Analytics.

An industry growing at this pace, and with this much money involved, provides lucrative opportunities for investors to make a profit. As with any new industry, however, many investors lack access to reliable information and therefore can make uninformed, emotional decisions. Taking the time to learn about this new and growing industry is essential for achieving financial success in this industry. As with any investment, buying stocks in the marijuana industry come with risks, opportunities, and regulations. Marijuana stocks carry an additional amount of risk due to the constantly shifting regulatory and legal environment—it is still illegal under federal law. But as part of a diversified portfolio, marijuana stocks can be a great investment.

How to Invest in Marijuana Stocks

Before investing in marijuana stocks and deciding which marijuana stocks to watch, you should first understand the different types of marijuana products that are available on the market.

Marijuana and hemp are both cannabis products. Marijuana naturally contains Tetrahydrocannabinol (THC). THC is the primary psychoactive component of marijuana, and it is what causes users to experience a “high” when they smoke or ingest marijuana. On the other hand, hemp is also a cannabis product, but it contains little to no THC and therefore cannot cause a psychoactive reaction. When thinking about cannabis stocks, it’s helpful to understand the difference between hemp stocks and marijuana or weed stocks.

One hemp product that you’ve likely heard a lot about is cannabidiol, which is often referred to as CBD. Though marijuana contains CBD, most CBD products are extracted from hemp. Since it lacks THC, hemp was legalized nationally in the United States in 2018. The use of hemp instead of the marijuana plant ensures that the CBD products do not have a psychoactive effect on users.

When it comes to marijuana, the two main categories are recreational and medicinal. Many companies fall under the umbrella of medical cannabis stocks. There is medical marijuana for legal smoking, but there are also a growing number of FDA approved drugs that use marijuana or substances found in marijuana. The FDA approved a drug called Epidiolex in 2018 that treats rare forms of epilepsy. Epidiolex is a CBD based drug and is the first FDA approved CBD drug on the market. The FDA has also approved three THC based drugs. These THC based drugs have been approved for the treatment of some of the side effects of chemotherapy, specifically nausea and vomiting. An important note on these THC based drugs is that all three use a synthetic form of THC, as opposed to THC from marijuana plants.

How to Buy Marijuana Stocks

Marijuana stocks are not limited to companies that grow marijuana. The marijuana industry includes companies that are involved in all aspects of the cannabis business. The areas these companies are involved with include pharmaceuticals research, horticulture, and a variety of different ancillary businesses.

The growers may distribute their marijuana to customers, or they may distribute it to retail stores who then distribute it to customers. There are also pharmaceuticals and biotech companies whose role is to study the effects of marijuana and to create new and improved marijuana strains, marijuana products, and medicines derived from marijuana. Finally, there are ancillary companies who provide and create products and services to support the marijuana industry.

Understanding the roles of different companies is important. It allows you to evaluate different companies prior to purchasing stock in that company. Choosing which marijuana stocks to invest in is similar to choosing any other stock. You should evaluate the senior management of the company, the company’s plan and potential to grow the company, how the company compares to the competition, and the quality of the financials of the company—specifically, its profitability and the strength of its balance sheet.

When reviewing the financials of a marijuana company, it’s helpful to understand a few things about the production costs of marijuana. For marijuana products, there are two types of production costs: The “all-in” cost is the total cost of a gram of marijuana, from start to finish. In contrast, the “cash cost” per gram does not include some expenses, such as packaging or amortization. Understanding this difference can help you conduct an accurate comparison of different companies.

Where to Buy Pot Stocks

Most marijuana stocks are trading over the counter (OTC) as opposed to on major stock exchanges. If you choose to invest in OTC marijuana stocks, you should use extra caution and do an appropriate amount of research prior to investing. OTC stocks have an added layer of risk. Unlike companies listed on major stock exchanges, OTC stocks don’t have to meet certain requirements. OTC stocks aren’t required to regularly file financial statements or maintain minimum market caps. These requirements are meant to help investors make more informed decisions about their investments and minimize the risk of major price fluctuations caused by buying and selling the stock. However, they don’t guarantee the safety of an investment.

Almost all marijuana stocks have historically been traded exclusively OTC, but that trend is changing. Today, more marijuana stocks are now trading on the NASDAQ. Interestingly, some Canadian companies trade on Canadian stock exchanges but are available only OTC in the United States.

When it comes to the location of the marijuana companies you choose to invest in, you may want to consider Canada, where marijuana has been fully legalized. When investing in Canadian pot stocks, it’s important to understand how extensive the international operations of the company are and the distribution process of the company.

It is likely that Canada’s supply may soon outpace demand. This could lead to a supply gut in the Canadian marijuana market. This is why you should always review a company’s international operations before investing in Canadian marijuana stocks. Canadian companies that have already established a presence outside of Canada have a much better chance of avoiding supply issues.

Marijuana Stocks That Pay Dividends

Dividends are a way for shareholders to take part in the profits of a company. When companies pay out dividends, they give a certain amount of money to each person who owns stock in the company. This means that you can make money by simply owning the stock. You can then choose to either reinvest your dividends or have the money deposited into your bank account.

As you can see, stocks that pay dividends can be incredibly appealing investments. When comparing stocks that pay dividends, make sure to compare dividend yield and not just the price of the dividend. What is dividend yield? This is an important concept to understand. A dividend yield is calculated by dividing the current annual dividend (per share) by the current stock price.

Dividends are often associated with large, well-established companies. The more you pay in dividends, the less you are investing in the growth and expansion of your company. Since many marijuana companies are newer, they need to focus and emphasis on growth. This means that any extra money is often better suited to be reinvested in the company instead of paid out to shareholders. However, since the marijuana industry is still quite young, you may be surprised to learn that there are actually some marijuana stocks that pay dividends. These stocks allow you to both invest in a rapidly growing market, while also earning passive income in the form of dividends.

An important note on dividends: Though dividends may be appealing and do offer some great advantages, use caution. Just because a stock pays dividends does not necessarily mean that the stock is a good investment. Make sure to evaluate marijuana stocks holistically instead of only focusing on stocks that pay dividends.

Marijuana Companies to Invest In

Whether you’re looking to invest in the best growth stocks, or you’re only interested in the best cheap stocks to buy, you can likely find something that meets your needs in the marijuana market. If you decide to invest in marijuana stocks and are looking for companies that also pay dividends, you have a few options. Three companies that have recently paid some of the highest dividends in the marijuana industry are Altria Growth, Molson Coors Brewing, and Scotts Miracle-Gro.

Altria Growth (NYSE: MO)

Altria pays one of the highest dividends in the stock market. Altria’s business has been historically focused on tobacco products. Due to the decline in the tobacco industry, Altria moved from tobacco to marijuana. In late 2018, Altria spent $1.8 billion purchasing a 45% stake in Cronos Group, which is a marijuana producer based out of Canada.

Molson Coors Brewing (NYSE: TAP)

Miller Lite and Coors are both beer brands of Molson Coors Brewing Company. Though the company is best known for its beer, it has a joint venture with Canadian marijuana producer, HEXO, to create beverages infused with cannabis for the Canadian market.

Scotts Miracle-Gro (NYSE: SMG)

The company known for its gardening has heavily invested in ancillary services in the marijuana industry. The company has made it clear that it is not a grower or producer of marijuana and does not invest in companies that are growers or producers of marijuana.

Best Marijuana Stocks

The best marijuana stocks for you will depend on what you’re looking to gain and how much risk you’re able to take. Since not many marijuana stocks are traded on the NASDAQ, your options are relatively limited if you only want to trade on Wall Street. There are a few options worth considering, however. Three of the top stocks to watch are Aurora Cannabis (NYSE:ACB), HEXO (NYSE:HEXO), and CannTrust Holdings (NYSE:CTST).

Aurora Cannabis (NYSE:ACB)

Aurora is a Canadian based cannabis producer. According to its projected fourth-quarter results, the company is on track to grow rapidly in the next quarter. There’s also reason to believe that Aurora may have a partnership deal in the works.


Does this name sound familiar? If so, that’s because it’s the Canadian cannabis company that has a joint venture with Molson Coors Brewing, which was one of the companies mentioned above for paying out dividends. HEXO is working with Molson Coors Brewing to produce a cannabis beverage to be sold in Canada.

CannTrust (NYSE:CTST)

Admittedly, CannTrust has had a rough 2019. News broke that the company was using unlicensed growing rooms, the CEO was fired, and to top it all off, millions of dollars’ worth of marijuana was returned due to issues with the unlicensed growing rooms. So why is it one of the best marijuana stocks? The company seems to be turning itself around. And due to its rough 2019, the stock is currently trading at a much lower price than earlier this year. In fact, CannTrust is one of MarketBeat’s 52 week low stocks. That means that as long as no other troubling news comes out, you could purchase this stock now at a comparatively low price.

CBD Stocks

Marijuana isn’t legal at the federal level in the United States. If you prefer not to invest in marijuana, there are other options available for investing in the cannabis industry. Cannabis investing can include a portfolio focused on ancillary support and services, or it can focus on hemp products. One of the major hemp products on the market right now is CBD. CBD is extracted from hemp, which is legal in the United States. CBD does not get users “high” since it does not contain THC. This means that you can invest in legal cannabis products without actually investing in marijuana. Since hemp became legal in 2018, the number of CBD products in the United States has skyrocketed. There are CBD pills and supplements, as well as CBD lotions and gels. There are even CBD bath bombs which can provide a relaxing and healing soak in the tub.

Though the CBD market is far from stable, it’s less volatile than marijuana stocks, since there is less legal uncertainty. There are plenty of cannabis companies that produce both marijuana and CBD products, but there are also companies that work exclusively with CBD. Keep in mind that even though CBD is legal in the United States, many lucrative CBD stocks are still in Canada.

Are Marijuana Stocks a Good Investment?

The marijuana industry is similar to any new industry—there is a lot of potential, but also a lot of risk. It’s wise to use extra caution when investing in marijuana stocks. It’s easy to get caught up in new and exciting industries and make emotion-based decisions. Just look at the dot com bubble of the early 2000s. The internet had become mainstream and investors began buying up any stock even remotely connected to the web.

As we now know, just because the internet grew, did not mean every company connected with it did, too. Marijuana is likely to be similar. The marijuana industry has a lot of potential to be a good investment, but that does not mean that the same is true for any and every marijuana stock. Make sure you do your homework and learn about the industry and the company prior to investing.

Cannabis stocks do carry extra risk. While there’s no way to predict the future of any investment, predicting the marijuana industry is especially difficult. First, there are the changing laws. This makes it incredibly difficult to predict the future legal status of marijuana. Secondly, there’s little historical data to help inform decisions. For this reason, investors should tread carefully in the marijuana space. The constantly changing environment means that it’s even more difficult to make accurate predictions about the future of a stock. For this reason, marijuana stocks are not long-term investments to buy and hold. If you’re investing in individual stocks, these investments require constant and consistent monitoring.

Should a Stock Market Investor Buy Marijuana Stocks?

As part of a diversified portfolio, marijuana stocks can be a great investment. However, due to the constantly shifting regulatory nature of the marijuana industry, investing in marijuana does come with an extra layer of risk. Diversification is always important, but in such a constantly changing, high-risk environment, it’s especially important.

If you plan to invest in marijuana stocks, you’ll need to do your homework. You may also be able to minimize your risk by investing in a company who has connections to marijuana but is not exclusively marijuana stocks, such as Scotts Miracle-Gro (NYSE: SMG). The core piece of Scotts Miracle-Gro's business is still gardening, but the company also provides support services in the marijuana industry.

It’s important to make informed decisions before investing in cannabis stocks. Do the necessary research to understand the different types of legal cannabis products on the market. Keep an eye for marijuana stocks that pay dividends, but don’t let dividends be the only deciding factor.

Investors who wish to minimize their risks may find it preferable to avoid investing in individual marijuana stocks. Instead, investors may choose to invest in a mutual fund that, in turn, invests in many different marijuana stocks. Since marijuana stocks carry additional risk, they should not be the sole investment in your portfolio or even a large part of your portfolio. But done correctly, investing in marijuana stocks is a good way to diversify your portfolio as this exciting industry continues to grow.


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