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 Jazz Pharmaceuticals plc (NASDAQ:JAZZ) 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 biopharmaceutical scientist in their lab, studying a newly-diagnosed therapy-related acute myeloid leukemia. .
Jazz Pharmaceuticals plc (NASDAQ:JAZZ)
Number of Hedge Fund Holders: 38
Topping our list of Best Weed Stocks to Buy is Jazz Pharmaceuticals plc (NASDAQ:JAZZ), a global biopharmaceutical company with a focus on oncology and neuroscience. Its $7.2 billion acquisition of GW Pharmaceuticals in 2021 was a great sign of the growing legitimacy and increased receptivity of cannabis-based drugs in the pharma industry. With that purchase, JAZZ – which had focused primarily on sleep medications and oncology – also augmented its neuroscience portfolio.
JAZZ has been able to consistently increase its revenue for the last four years, from $2.36 billion in 2020 to $3.83 billion in 2023, with the company moving from loss to profitability last year. The Ireland-based company earned a revenue of almost $902 million in the Q1 of 2024, up 1.3% from the same quarter in 2023. However, it still reported a net loss of $14.62 million against a previous net profit of $69.42 million, mainly due to the high operating expenses. The company explained that most of these expenses went toward supporting strategic initiatives for its commercial business and that it expects these investments to positively impact revenue as the year progresses.
Although JAZZ recently witnessed a setback after its drug, suvecaltamide, failed to meet the primary endpoint in phase 2b trial, big positive news in the last quarter came from Xywav, a medication used to treat cataplexy or excessive daytime sleepiness.
Renée Galá, President and COO of JAZZ announced in the company’s Q1 earnings call transcript:
“There were approximately 9,900 narcolepsy patients taking Xywav exiting the first quarter, an increase of 375 patients from the prior quarter. Given the increased use of patient support programs, revenues for the quarter do not fully reflect these patient additions. We believe patient numbers are the best indicator of the long-term value and durability of this product and expect that revenues will be more aligned with patient numbers going forward as newly transitioned patients revert to being fully covered by their insurance providers.”
Things are also looking positive for Zanidatamab, a targeted treatment option for HER2-positive biliary tract cancer (BTC), as the FDA recently accepted the company’s application and granted Priority Review, shortening the review period to six months. And although approval is not guaranteed, JAZZ believes that the drug has the potential to generate a significant commercial opportunity of more than $2 billion.
The stock of Jazz Pharmaceuticals plc (NASDAQ:JAZZ) was held by 38 hedge funds at the end of Q1 2024 in the IM database, with the largest stake of 1.43 million shares held by Polaris Capital Management, valued at over $172.5 million.
Overall JAZZ ranks 1st 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 JAZZ 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 JAZZ 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.
