In this article, we will take a look at the 5 most undervalued pot stocks to buy according to hedge funds. To see more such companies, go directly to 11 Most Undervalued Pot Stocks To Buy According To Hedge Funds.
5. Tilray Brands, Inc. (NASDAQ:TLRY)
Number of Hedge Fund Holders: 16
Forward P/E as of February 6: 7.80
Tilray Brands, Inc. (NASDAQ:TLRY) ranks 5th in our list of the most undervalued pot stocks to buy according to hedge funds. Of the 920 funds tracked by Insider Monkey as of the end of the third quarter of 2022, 16 hedge funds had stakes in Tilray Brands, Inc. (NASDAQ:TLRY), compared to 14 hedge funds in the previous quarter. The total worth of these stakes was about $34 million. One of the biggest hedge fund stakeholders of Tilray Brands, Inc. (NASDAQ:TLRY) among these funds was DE Shaw’s hedge fund which had a $9.3 million stake in the company.
In January, Tilray Brands, Inc. (NASDAQ:TLRY) launched new ritual-based cannabis products including Solei Slims and Solei CBN Softgels. Tilray Brands, Inc. (NASDAQ:TLRY) said that Solei Slims will be available in 10-packs of 0.4g pre-rolls, while the Solei Softgels will roll out in the form of 30-capsule bottles.
4. The Scotts Miracle-Gro Company (NYSE:SMG)
Number of Hedge Fund Holders: 29
Forward P/E as of February 6: 11.74
Though The Scotts Miracle-Gro Company (NYSE:SMG) is a lawn products seeds and pesticides company, it was one of the first entrants into the cannabis market. Back in 2011, talking to Wall Street Journal, The Scotts Miracle-Gro Company (NYSE:SMG) CEO Jim Hagedorn said:
“I want to target the pot market.. There’s no good reason we haven’t.”
Over the years The Scotts Miracle-Gro Company (NYSE:SMG) has made several investments in the Hydroponics space which have made the company one of the best cannabis stocks to buy today.
As of the end of the third quarter of 2022, 29 hedge funds tracked by Insider Monkey reported owning stakes in The Scotts Miracle-Gro Company (NYSE:SMG). The net worth of these stakes was over $128 million. The biggest stakeholder of The Scotts Miracle-Gro Company (NYSE:SMG) was Jean-Marie Eveillard’s First Eagle Investment Management, which owns a $67.3 million stake. The second biggest stakeholder of The Scotts Miracle-Gro Company (NYSE:SMG) was Ken Fisher’s Fisher Asset Management which has a $32 million stake in the firm.
Madison Funds made the following comment about The Scotts Miracle-Gro Company (NYSE:SMG) in its Q4 2022 investor letter:
“Stock selection was the poorest for us in this sector. Two stocks in particular – Hain Celestial (HAIN) and The Scotts Miracle-Gro Company (NYSE:SMG) – while big winners for us in 2020 and 2021, hurt the portfolio in 2022.
While both companies were so-called COVID beneficiaries (businesses that benefited from consumers staying home and spending on their homes during COVID), we felt they possessed certain additional drivers that would maintain their fundamentals into 2022 and beyond.
Scott’s Miracle-Gro is arguably one of the great American franchises. The brand is synonymous with lawn care and pest control, has a dominant market share (~60%) with historically-impressive ~30% cash flow margins, and has the country’s largest Cannabis supply business. Scotts’ core business saw a significant windfall during COVID lockdowns. Lawn and garden care is not a growth business, and SMG dominance does not allow for much incremental gain in market share. However, our thesis was that even in a reopening scenario where lawn and garden businesses would revert to the mean, the cannabis market was poised for years of growth as more states legalized recreational use.
What we missed was the highly inefficient structure of the U.S. cannabis market. Currently, California, Colorado, and Michigan have the biggest and most mature markets. However, over the course of the last few years, several very large states and regions have voted to legalize recreational use, including New York, New Jersey, and Connecticut. The fly in the ointment has been Oklahoma, which is a medical marijuana state. Although recreational use is still prohibited, licenses to grow the crop were granted in Laissez Faire fashion to anyone willing to buy one. Oklahoma began to grow and cultivate the crop far in excess of their medical marijuana demand. That excess supply bled into grey markets across the country, devastating pricing for growers in other states. This glut put a near complete stop to capital spending on grow operations. With no new or incremental facilities coming on, Scotts’ Hawthorne business was cut in half from its peak in F21. This, of course, had a devastating effect on the stock.”
3. Jazz Pharmaceuticals plc (NASDAQ:JAZZ)
Number of Hedge Fund Holders: 43
Forward P/E as of February 6: 9.23
Jazz Pharmaceuticals plc (NASDAQ:JAZZ) is one of the most popular cannabis stocks among elite money managers. Jazz Pharmaceuticals plc (NASDAQ:JAZZ) is a pharma company that is focusing immensely on cannabis-related products. Jazz Pharmaceuticals plc (NASDAQ:JAZZ) made headlines in 2021 after announcing plans to buy GW Pharmaceuticals for a whopping $7.2 billion. GW is behind EPIDIOLEX, the first FDA-approved prescription cannabidiol (CBD) to treat seizures associated with Lennox-Gastaut syndrome (LGS), Dravet syndrome, or tuberous sclerosis complex (TSC), in patients 1 year of age or older.
Insider Monkey’s database of 920 hedge funds’ holdings shows that 43 hedge funds entered into the fourth quarter of 2022 with Jazz Pharmaceuticals plc (NASDAQ:JAZZ) shares in their portfolios. The net worth of the stakes of these hedge funds was $1.2 billion. The biggest stakeholder of Jazz Pharmaceuticals plc (NASDAQ:JAZZ) among these hedge funds was Bernard Horn’s Polaris Capital Management which owns a $196 million stake in Jazz Pharmaceuticals plc (NASDAQ:JAZZ).
2. Altria Group, Inc. (NYSE:MO)
Number of Hedge Fund Holders: 47
Forward P/E as of February 6: 28.99
One of the biggest tobacco companies in the world, Altria Group, Inc. (NYSE:MO) makes it to the list of the most undervalued pot stocks to buy because the company is an active investor in the space. Altria Group, Inc. (NYSE:MO) on its website says it supports a science-based federal framework for all cannabis products. Altria Group, Inc. (NYSE:MO) also participates in the Coalition for Cannabis Policy, Education, and Regulation (CPEAR). Altria Group, Inc. (NYSE:MO) made headlines back in 2019 when it invested about $1.8 billion in Canadian cannabis company Cronos to buy a 45% ownership stake. However, last year, Altria Group, Inc. (NYSE:MO) notified Cronos Group that it irrevocably gave up its warrant to purchase further shares of Cronos.
As of the end of the third quarter of 2022, 47 hedge funds tracked by Insider Monkey had stakes in Altria Group, Inc. (NYSE:MO). The biggest stakeholder of Altria Group, Inc. (NYSE:MO) during this period was Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital which owns a $383 million stake in the company.
1. Pfizer Inc. (NYSE:PFE)
Number of Hedge Fund Holders: 77
Forward P/E as of February 6: 8.05
Pfizer Inc. (NYSE:PFE) made it to our list of undervalued pot stocks because the company entered the cannabis space when it bought Arena Pharmaceuticals last year for $6.7 billion. Arena Pharmaceuticals had a pipeline dedicated to cannabinoid-type therapeutics. Analysts believe Pfizer Inc. (NYSE:PFE) could expand its presence in the lucrative cannabis market in the future as legal structure around cannabis gets more visibility.
Pfizer Inc. (NYSE:PFE) is a strong dividend payer and the stock’s PE ratio stands at 8.05 as of February 6. Pfizer Inc. (NYSE:PFE) is also one of the most popular stocks among hedge funds. Of the 920 funds tracked by Insider Monkey, 77 hedge funds reported owning shares in Pfizer Inc. (NYSE:PFE) at the end of the third quarter of 2022.
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