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 Tilray Brands, Inc. (NASDAQ:TLRY) 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 laboratory with white-coated technicians carefully measuring out cannabis extracts.
Tilray Brands, Inc. (NASDAQ:TLRY)
Number of Hedge Fund Holders: 14
Tilray Brands, Inc. (NASDAQ:TLRY) boasts the number one cannabis market share in Canada, the leading market share by revenue in Germany, and it also distributes medical cannabis in 20 countries around the world.
In Tilray’s Q3 of 2024, which ended February 29th, the company reported revenue of $188.3 million, around 30% more than a year earlier. However, analysts were expecting a revenue $198.3 million, as the company has benefited from a boost in earnings due to recent acquisitions. The company also significantly reduced its loss to just $82.1 million compared to a massive $1.2 billion a year ago. A cheap pot stock to buy now, TLRY was held by 14 hedge funds at the end of Q1 2024, with a collective stake value of over $14.7 million.
Irwin Simon, the chairman and CEO of Tilray Brands, stated the following in the company’s Q3 2024 earnings call transcript:
“In the U.S., Tilray has multiple options and, in particular, is well positioned to benefit from the federal legalization of medical cannabis as a result of rescheduling. Yes, we believe that the rescheduling of cannabis from Schedule I to Schedule III in the U.S. would provide a path for Tilray to sell pharmaceutical-grade medical cannabis in the U.S. subject to doctor prescriptions.”
This is a different strategy from what MSOs are doing today. We believe there’s an opportunity to supply medical cannabis products from our existing operations into the U.S. for medical purposes. Further, in the event of a future federal adult-use and medical cannabis legalization in the U.S., we believe Tilray is well positioned to immediately leverage its strong global leadership position, know-how, and strategic strengths across operations, distribution, and brands to sell THC-infused products across its robust distribution network and sales channels in the U.S.”
As a result of the rescheduling announcement by the US Justice Department on May 16th, Tilray saw its share price move up by 6.3%. A day later, the company announced that it had filed for the sale of up to $250 million worth of its common stock through an at-the-market equity program. Tilray Brands, Inc. (NASDAQ:TLRY) plans to use proceeds from the sale to fund acquisitions or investments, including potential purchases of assets in the U.S. ‘in order to capitalize on expected regulatory advancements or expansion opportunities’.
TLRY has also made significant efforts to diversify and is now the 5th largest craft beer business in the U.S. after it agreed to acquire eight beer and beverage brands from Anheuser-Busch InBev for an undisclosed amount last year. Moreover, earlier this year, Tilray’s Breckenridge Distillery celebrated the wins of World’s Best Finished Bourbon, America’s Best Finished Bourbon, and Icons of Whisky Campaign Innovator of the Year: Highly Commended at the 2024 World Whiskies Awards. So it comes as no surprise that TLRY is also included in our list of the 10 Best Alcohol Stocks to Buy Now.
Overall TLRY ranks 3rd 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 TLRY 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 TLRY 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.