We recently compiled a list of the 8 Best Pot Stocks to Buy. In this article, we are going to take a look at where GrowGeneration Corp. (NASDAQ:GRWG) stands against the other pot stocks.
The history of the cannabis industry is riddled with changes and conflicting legislation. The international media has played an important role in shifting perspectives about marijuana and drug use. Today, we are watching the slow and steady change of mainstream opinion to consider cannabis one of the more harmless – and probably even potentially beneficial – drugs still considered largely illegal. As perspectives change, we can expect the laws to eventually follow suit.
Global Cannabis Industry:
As we mentioned in our article – 20 Cities with the Most Expensive Weed in the World – the global cannabis market was valued at $47.32 billion in 2022, and is projected to grow from $57.18 billion in 2023 to $444.34 billion by 2030, growing at a CAGR of 34% during the forecast period.
Marijuana legalization is gaining momentum around the globe, driven primarily by the increasing recognition that the product may have a range of legitimate medicinal benefits and therapeutic applications. It is the most widely cultivated, trafficked, and consumed drug worldwide.
Easing Federal Restrictions:
It was announced on the 16th of May that the US Justice Department has officially proposed a new rule that would 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 marks 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 recognize the medical uses of cannabis and acknowledge that it has less potential for abuse than the many more harmful drugs. The change would also open more doors to conduct research on marijuana.
Another significant benefit of the reclassification is that it could add fresh arguments for supporters of ballot measures seeking to legalize cannabis in states where it is still illegal. An example of this is Florida, where voters will decide on a constitutional amendment allowing recreational weed this November.
But perhaps the ones benefiting the most from this change are cannabis companies, which after the rescheduling would no longer have to follow tax provisions under a rule called 280E, which prevents them from taking standard business tax deductions.
Although the rescheduling is far from the federal legalization that the cannabis industry is so desperately waiting for, it is a step in the right direction. As a result, several marijuana stocks and pot ETFs posted solid gains following the announcement.
Methodology:
To collect data for this article, we scanned Insider Monkey’s database of 920 hedge funds and picked the top 8 companies operating in the cannabis industry with the highest number of hedge fund investors. When two companies had the same number of hedge funds investing in them, we ranked them by the revenue of their last financial year instead.
Why are we interested in 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 farmer placing an accessory into a hydroponic system, filled with a nutrient-rich growing media.
GrowGeneration Corp. (NASDAQ:GRWG)
Number of Hedge Fund Holders: 9
Next up on our list of the Best Cannabis Stocks to Invest in 2024 is GrowGeneration Corp. (NASDAQ:GRWG), which claims to be America’s largest hydroponic store and organic garden center supplier selling hydroponic supplies, commercial grow lights, and more. It currently operates 46 retail grow-supply locations across 18 states, including distribution centers and e-commerce websites.
GRWG reported revenue of $47.9 million in Q1, versus $56.8 million in the first quarter of last year, representing a YoY decline of approximately 16%. Net loss also increased to over $8.8 million from $6.1 million last year. However, the company reported that its same-store sales are showing positive growth YoY and that its operating costs are at an all-time low, which it believes is a turning point in its financial performance. Moreover, the Colorado-based firm is planning to close more stores in 2024 and increase its B2B and e-commerce operations, where the demand is higher. It is expanding its supply chain distribution versus opening up more stores and also recently opened a new 100,000-square-foot distribution warehouse in Ohio. Earlier this month, GRWG announced plans to launch a B2B marketplace called The HRG B2B Portal, meant to be a one-stop destination for all hydroponic product needs across various categories. Analysts from Wall Street have maintained a Moderate Buy position on the stock of GrowGeneration Corp. (NASDAQ:GRWG), with an average price target of $3.58, representing an upside potential of 57.71%.
Among the 9 hedge funds that held stock of GRWG at the end of Q1 2024, D E Shaw held the largest stake of 641,417 shares, valued at over $1.8 million.
Overall GRWG ranks 7th on our list of the best pot stocks to buy. You can visit 8 Best Pot Stocks to Buy to see the other pot stocks that are on hedge funds’ radar. While we acknowledge the potential of GRWG as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than GRWG 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.
