We recently compiled a list of the 10 Best Marijuana Stocks To Buy According to Hedge Funds. In this article, we are going to take a look at where Advanced Flower Capital Inc. (NASDAQ:AFCG) stands against the other marijuana stocks.
The United States of America is the country that consumes the most weed in the world. As we mentioned in our article – 30 Cities with the Highest Weed Consumption in the US – the American legal cannabis industry fared well in 2023 as legal sales across the 38 states that allow some form of regulated marijuana reached $28.8 billion, a 10.3% increase from the previous year. After an eventful 2024, the industry is expected to flourish even further. According to a report from the wholesale marketplace LeafLink, retail sales of cannabis reached a record $2.8 billion in October 2024, up 6.2% from last year. The data revealed that America’s total retail cannabis sales for this year are expected to be in the proximity of $32.6 billion.
The US legal weed industry also added 22,952 new jobs last year – a sign that the national business climate has somewhat stabilized following the turmoil of the previous two years. According to the 2024 Vangst Jobs Report, there were over 440,445 jobs supported by legal cannabis nationwide as of early 2024, an increase of 5.4% from 2023.
READ ALSO: Top 12 Oil and Gas Stocks to Invest in According to Hedge Funds
Perhaps this year’s most positive news for the country’s legal cannabis sector came in April, when the Drug Enforcement Agency announced that it would act on the Biden administration’s call to reclassify marijuana from a ‘Schedule I’ drug, which includes heroin and LSD, to a less tightly regulated ‘Schedule III’ drug, which includes ketamine and some anabolic steroids. The decision marked a major policy shift by the federal government and while it would neither make the substance legal nor decriminalize it on a federal level, it would loosen quite a few restrictions around it and add fresh arguments for supporters of ballot measures seeking to legalize cannabis in states where it is still illegal. The process is lengthy and complex and will stretch well into the next year, but as the DEA finalizes its review, stakeholders from across the industry are closely monitoring developments.
Another encouraging development came in the form of a tweet from President-elect Donald Trump, in which he expressed support for a recreational cannabis legalization ballot initiative in his home state of Florida. He also backed up the marijuana industry’s access to the banking system and the ongoing federal cannabis rescheduling process. Whether this support will actually translate into action when Trump takes office for his second term remains to be seen.
However, 2024 ended with a slightly sour taste in the mouth of America’s cannabis stakeholders, as Florida’s cannabis legalization ballot measure failed to pass, despite historic levels of funding and a rigorous advertising campaign. This was a major blow to the industry as the Sunshine State was expected to become a $6 billion cannabis market by 2026, had Amendment 3 succeeded in meeting the required 60% threshold.
The setback inevitably impacted cannabis stocks, which witnessed a downturn following the news of the rejection. Amplify Alternative Harvest ETF, the first US ETF to target the global cannabis sector has fallen by over 31.6% since November 4, closing at $2.27 on December 24, 2024.
As of the writing of this article, 24 states have legalized recreational weed in America, in addition to the District of Columbia. However, possessing or selling marijuana remains a crime under federal law, punishable by prison time and fines.
Methodology:
To collect data for this article, we scanned Insider Monkey’s database of 900 hedge funds and picked the top 11 companies operating in the cannabis sector with the highest number of hedge fund investors. When two or more companies had the same number of hedge funds investing in them, we ranked them by the revenue of their last financial year instead. Following are the Best Marijuana Stocks According to Most Hedge Funds.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A high-rise office building with exterior illuminated in the company’s colors, symbolizing the company’s presence in the financial industry.
Advanced Flower Capital Inc. (NASDAQ:AFCG)
Number of Hedge Fund Holders: 6
Advanced Flower Capital Inc. (NASDAQ:AFCG) provides financial services to the cannabis industry, including real estate loans and loan underwriting. The Florida-based company offers direct and bridge loans ranging from $10 million to $100 million, which are crucial for an industry growing quickly but facing severe banking and financing issues.
Advanced Flower Capital Inc. (NASDAQ:AFCG) reported distributable earnings of $0.35 per share in Q3 of 2024, beating the Wall Street Analysts’ estimate of $0.34 per share. Over the last four quarters, the company has surpassed consensus EPS estimates twice. Moreover, the company recently declared a quarterly dividend of $0.33 per share for the quarter ending December 31, 2024. Notably, the company’s current dividend policy is to pay between 85% and 100% of distributable earnings over the year.
Advanced Flower Capital Inc. (NASDAQ:AFCG) now operates as a pure-play cannabis mortgage REIT and has already exceeded its $100 million origination target for the year, reaching $116 million in total new originations by the end of Q3. Additionally, the company has made substantial progress exiting, restructuring, or securing significant paydowns on several key loans since last year, leading to approximately $150 million in capital repaid and allowing it to redeploy that capital into new vintage deals with attractive risk-adjusted returns.
Advanced Flower Capital Inc. (NASDAQ:AFCG) ended the third quarter with total assets of $366.6 million, including cash and cash equivalents of $122.2 million, which included $60 million drawn on its line of credit that was subsequently repaid in full on October 1, 2024. Its line of credit provides it with up to $60 million in available funds that can be drawn as needed.
At the end of Q3 2024, 6 hedge funds tracked by IM held shares of Advanced Flower Capital Inc. (NASDAQ:AFCG) with a total stake value of $7.34 million, up 266% from the previous quarter.
Overall AFCG ranks 10th on our list of the best marijuana stocks to buy according to hedge funds. While we acknowledge the potential of AFCG as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than AFCG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
