In this article, we will take a look at the 11 most undervalued pot stocks to buy according to hedge funds. To see more such companies, go directly to 5 Most Undervalued Pot Stocks To Buy According To Hedge Funds.
The marijuana industry is the US is progressing towards legal acceptance by the day. Pot stocks rose in December after President Joe Biden signed the Medical Marijuana Research Bill into law. The new law will affect the research processes for the development of marijuana products.
However, 2022 wasn’t a good year for many marijuana stocks. The euphoric rise in cannabis stocks experienced after the pandemic was nowhere to be seen last year as demand fell and companies had to tackle legal and structural challenges. For example, in California, wholesale prices in the industry fell as much as 95% since the state voted to legalize cannabis in 2016.
The Marijuana Industry Outlook
Analysts believe the marijuana industry will experience growth on the back of medical and recreational benefits of the product. According to Bloomberg, Cowen analyst Vivien Azer believes that legal cannabis sales in the US can grow at a double digit CAGR even without federal legalization. The analyst reportedly believes this growth will be driven by “incremental state level changes.”
The Bloomberg report also cited a note from Cantor Fitzgerald analyst Pablo Zuanic, which said large multi-state cannabis companies like Curaeaf Holdings and Green Thumb Industries could be top performers. The note said small cannabis companies could be “squeezed out” amid price deflation and “stretched out balance sheets.”
However, the same report had a bullish comment about small pot stocks. According to the report, BTIG analyst Jonathan DeCourcey thinks small cannabis stocks could be positioned for growth because of their cheaper valuations.
Mordor Intelligence expects that the cannabis market can post a CAGR of 15.4% from 2023 through 2028. The report said that the cannabis industry’s growth has been fueled by continued adoption of legal, medical or recreational cannabis in countries all over the world. Mordor’s report said North America, which it believes dominates the market, is estimated to the fastest-growing region.
America and Canada aren’t the only countries taking steps to legalize and embrace cannabis. The report from Mordor Intelligence said that Chile, Australia, Colombia, Germany, Greece, Israel, Italy, the Netherlands, among many others, are starting to legalize cannabis for medicinal purposes.
Our Methodology
For this article we scanned Insider Monkey’s database of 920 hedge funds’ holdings and picked top 11 pot stocks that have PE ratios under 20 or P/S ratio between 1 and 2 (for loss-making companies) as of February 6. The list is ranked in ascending order of the number of hedge fund investors as of the end of the third quarter of 2022.
Most Undervalued Pot Stocks To Buy According To Hedge Funds
11. SNDL Inc. (NASDAQ:SNDL)
Price/Sales (TTM): 1.43
Number of Hedge Fund Holders: 1
SNDL Inc. (NASDAQ:SNDL), previously known as Sundial Growers, is a Canadian company that operates and sells cannabis products. SNDL Inc. (NASDAQ:SNDL) is also known for its inhalable marijuana products, including flowers, pre-rolls, and vapes. SNDL Inc. (NASDAQ:SNDL)’s price/sales ratio stands at 1.43 as of February 6. In November, SNDL Inc. (NASDAQ:SNDL) posted third quarter results. SNDL Inc. (NASDAQ:SNDL)’s revenue posted remarkable growth amid a rise in its cannabis retail segment. Net revenue in the quarter jumped about 1,500% on a YoY basis. On the other hand, Liquor Retail revenue saw a 1% rise in the period. Adjusted EBITDA in the quarter grew by 74% in the quarter on a YoY basis.
10. HEXO Corp. (NYSE:HEXO)
Price/Sales (TTM): 0.42
Number of Hedge Fund Holders: 3
HEXO Corp. (NYSE:HEXO) is a Canadian cannabis company that sells adult-use and medical products, and cannabis beverages under different brand names. As of the end of the third quarter of 2022, 3 hedge funds tracked by Insider Monkey reported owning stakes in HEXO Corp. (NYSE:HEXO). Among the most notable hedge funds having stakes in HEXO Corp. (NYSE:HEXO) are Sander Gerber’s Hudson Bay Capital Management ($2.15 million stake) and Jim Simons’ Renaissance Technologies ($383,000 stake).
9. Clever Leaves Holdings Inc. (NASDAQ:CLVR)
Price/Sales (TTM): 1.08
Number of Hedge Fund Holders: 6
Clever Leaves Holdings Inc. (NASDAQ:CLVR) is a Florida-based company that sells pharmaceutical-grade cannabinoids. Clever Leaves Holdings Inc. (NASDAQ:CLVR) operates about 1.8 million square feet of greenhouses. Last year, Clever Leaves Holdings Inc. (NASDAQ:CLVR) launched its second medical cannabis product in Germany. Clever Leaves Holdings Inc. (NASDAQ:CLVR) also said it plans to increase exports from its Colombian facilities by the third quarter of 2022. In November, Clever Leaves Holdings Inc. (NASDAQ:CLVR) posted third-quarter GAAP EPS of -$0.48, missing estimates by $0.31. Revenue in the quarter fell 18.1% to total $3.3 million, missing estimates by $2.2 million. Adjusted EBITDA in the third quarter came in at -$5.4 million, better than -$6 million posted in the same quarter in 2021.
A total of 6 hedge funds tracked by Insider Monkey reported having stakes in Clever Leaves Holdings Inc. (NASDAQ:CLVR) as of the end of the third quarter of 2022. Among the notable hedge funds having stakes in Clever Leaves Holdings Inc. (NASDAQ:CLVR) are Thomas Steyer’s Farallon Capital ($1.5 million stake) and Jim Simons’ Renaissance Technologies ($344,000 stake).
8. Aurora Cannabis Inc. (NASDAQ:ACB)
Price/Sales (TTM): 1.71
Number of Hedge Fund Holders: 9
Aurora Cannabis Inc. (NASDAQ:ACB) is one of the most notable cannabis names in the market. Year to date Aurora Cannabis Inc. (NASDAQ:ACB) has gained about 17% as of February 6. In December, Aurora Cannabis Inc. (NASDAQ:ACB) said it repurchased $76.1 million principal amount of its convertible senior notes at a total cost, including accrued interest, of $73.8 million in cash. The purpose of the transaction was to reduce debt and annual cash interest costs. Aurora Cannabis Inc. (NASDAQ:ACB) also reiterated its forecast of achieving adjusted EBITDA profitability by the end of 2022.
As of the end of the third quarter of 2022, 9 hedge funds tracked by Insider Monkey reported owning stakes in Aurora Cannabis Inc. (NASDAQ:ACB). The total worth of these stakes was about $47 million. The biggest stakeholder of Aurora Cannabis Inc. (NASDAQ:ACB) is Jim Simons’ Renaissance Technologies which owns a $5.1 million stake in the firm.
7. Innovative Industrial Properties, Inc. (NYSE:IIPR)
Forward P/E as of February 6: 17.91
Number of Hedge Fund Holders: 12
Innovative Industrial Properties, Inc. (NYSE:IIPR) is a REIT that provides real estate capital for the cannabis industry. It ranks 7th in our list of the most undervalued pot stocks to buy according to hedge funds. As of the September quarter of 2022, 12 hedge funds reported owning stakes in Innovative Industrial Properties, Inc. (NYSE:IIPR), compared to 16 funds in the previous quarter. According to Yahoo Finance, Innovative Industrial Properties, Inc. (NYSE:IIPR)’s PE ratio (TTM) stands at 17.91. It is a high dividend stock, with a dividend yield of over 7% as of February 6.
Innovative Industrial Properties, Inc. (NYSE:IIPR)’s third quarter revenue saw impressive growth thanks to its acquisition and leasing of new properties. For the quarter, Innovative Industrial Properties, Inc. (NYSE:IIPR)’s adjusted FFO per share came in at $2.13, beating estimates of $1.89. Revenue in the quarter came in at $70.9 million, beating estimates of $68.4 million.
6. WM Technology, Inc. (NASDAQ:MAPS)
Price/Sales (TTM): 0.47
Number of Hedge Fund Holders: 15
WM Technology, Inc. (NASDAQ:MAPS) is a California-based tech company that provides software solutions to the cannabis industry. Its Weedmaps marketplace allows people to search for cannabis products from retailers and brands.
As of the end of the third quarter of 2022, 15 hedge funds reported owning stakes in WM Technology, Inc. (NASDAQ:MAPS). The net worth of these stakes was about $27 million. The biggest stakeholder of WM Technology, Inc. (NASDAQ:MAPS) was Richard Mashaal’s Rima Senvest Management which owns a $12 million stake in the company.
In November, WM Technology, Inc. (NASDAQ:MAPS) stock fell after the company posted Q3 results and a weak Q4 guidance. In the third quarter WM Technology, Inc. (NASDAQ:MAPS)’s revenue fell by a low double-digit percentage.
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Disclosure: None. 11 Most Undervalued Pot Stocks To Buy According To Hedge Funds is originally published on Insider Monkey.
