I Like These Cannabis Stocks

Cannabis stocks have soared, and I am cautious. Yes, rescheduling could go through, and, yes, it could make things much better for the stocks, including the ones about which I am cautious. There are plenty that I suggest avoiding, but today I want to talk about a few that I really like.

Cannabis Stocks Have Soared

There is no good benchmark for the cannabis sector that is widely followed. I created an index more than a decade ago that is a good benchmark in my view, but it is not widely followed! The New Cannabis Ventures Global Cannabis Stock Index, which is rebalanced quarterly and currently has 23 members, is up 2.5% year-to-date. While this doesn't sound exciting, it has soared 40.4% in Q3 and 32.5% in August.

I follow 19 stocks closely at 420 Investor on my Focus List, and the average return of these stocks has been +63% in August and +25.6% year-to-date:

Cannabis Stocks Are Still Down a Lot

While cannabis stocks have lifted sharply, they are down over longer periods of time. The Global Cannabis Stock Index peaked recently in February 2021, closing at 92.48. At 7.05, it has declined by 92.4%. This plunge has been when stocks have been doing very well. The S&P 500 has rallied by 64.4% since then, not including dividends.

In 2024, cannabis stocks plunged late in the year to end down, with the Global Cannabis Stock Index ending at 6.88, down 15.2%. In 2023, it lost 16.4% after a stunning loss of 70.4% in 2022. In 2021, it lost 26.0%. 2020 was the last year that it rallied, rising 5.2%.

Something Big May Be Happening

The big spike started with a lot of talk and some action in July. I can point to the action: Inflows into AdvisorShares Pure US Cannabis ETF (MSOS), which had 132.125 million shares outstanding on 6/30. This was up 1.2% year-to-date at the time, but down from 136.825 million earlier in the year. Now, it has 166.525 million shares outstanding, which is up 27.5% year-to-date.

On August 8th, after the stock market had closed, the Wall Street Journal published an article about how the Trump Administration was considering rescheduling cannabis, something that press conference on Monday the 11th confirmed. I detailed these two events when I warned on 8/12 that readers should reduce exposure to cannabis stocks. That article explains potential cannabis rescheduling.

There has not been an update by the Trump Administration or anyone. I wrote a follow-up article on 8/16 warning investors to be careful with cannabis stocks, and I shared my perspective there on all 19 stocks on my Focus List. Since then, the Global Cannabis Stock Index has rallied slightly.

Two Cannabis Stocks That Make Sense to Me

In that article a week ago, I did say good things about both of the stocks I am highlighting today:

I have reduced Innovative Industrial Properties (IIPR) somewhat (now 16.1%, which is still way more than its percentage in the GCSI at 3.1%), and WM Technology (MAPS) is now 20.4% (index holds 3.9%).

IIPR is down big year-to-date and fell apart at the end of 2025. I have followed the company since it went public in 2016. The stock is down a lot from its all-time high set in late 2021, but it is up a lot from its IPO:

The stock bottomed recently on April 9th near $45, and it tested that level this month, posting a new many-year closing low of $45.83 on 8/8, the day before the potential rescheduling news hit. On 8/10, I published a piece at Seeking Alpha commending its low valuation. Here is the summary of that article:

When I wrote that article, my position size was 20% of the model portfolio and my only cannabis REIT. I now own another one too. IIPR has increased 19.8% since 8/8, while the other one has gained only 5.1%.

MAPS has gained 20.1% since 8/8, but it is down a ton since it peaked in early 2021:

While this long-term chart makes it hard to see, MAPS posted an all-time low in 2023 and then a higher low in 2024. Late last year, management submitted a bid for the stock of $1.70, but that big was formally terminated in June. I never expected the insiders to buy the stock and had no position in it early in the year. Earlier today, Seeking Alpha published my article that explains why I think the stock could more than double. The target that I shared a year out ($2.15) is actually not quite double the price, but I think that it is conservatively formed. Here is the summary of that piece:

So, that last point is important, as many people are overly invested in that large ETF, which is up now a lot recently and year-to-date. I have a lot of reasons to not like MSOS! The main ones are lack of diversification and also an unimpressive portfolio manager and team. Here are some charts of the two cannabis stocks that I do like compared to MSOS:

So, quarter-to-date and year-to-date, MSOS is far outpacing the two stocks that I discussed here and that I like a lot right now.

MSOS is very liquid and is widely followed. It makes sense that traders and perhaps investors would jump aboard. Again, it may keep going up! Of course, if 280E sticks around or is replaced by another tax, it is likely to tumble.

Investors should look at longer time-periods than year-todate in my view, and I see three key dates for cannabis investors: 11/05/24 (the elections, where Florida voters failed to pass adult-use legalization in the state), 04/30/24 (the peak and also the day that the DEA reported that it was considering rescheduling cannabis) and 08/29/23 (when Biden's Department of Health & Human Services revealed that it had recommended that the DEA reschedule cannabis from Schedule 1 to Schedule 3):

The pop in MSOS is clear here, but it is still down. IIPR is down more, but it revealed some terrible news late in 2024. MAPS is up, but it was really cheap at the time, which was prior to that $1.70 bid.

Since the peak, all are down, with MSOS down the most. It was very overdone then.

Going back to ahead of the whole rescheduling theme, MSOS is up, while the other two are down. From the end of 2021, they are all down about the same:

Conclusion

I am a big fan of cannabis legalization and spend a lot of time and effort getting to better understand the cannabis industry and the publicly traded stocks. I believe that cannabis should be fully legalized (and properly regulated), and I do support cannabis moving from Schedule 1 to Schedule 3 or higher. Things cold be moving in this direction, but I know that 280E going away is not yet a done deal.

Investors who assume things lose when their assumptions prove to be incorrect. I have been sharing ideas about the best cannabis stocks to buy with my subscribers for more than a dozen years with my model portfolio. The current model portfolio, restarted when I shifted away from Badzinga to Seeking Alpha, has lost 23.2% since doing so on 12/31/22. Is that bad? I don't think so. the model portfolio has rules to which I adhere, including a maximum of 20% cash, and I do try to remain diversified. My goal is to beat the Global Cannabis Stock Index, which has lost 27.4% since 12/31/22.

If one KNOWS that 280E taxation will be ending, there are different ways to invest in cannabis than I am currently suggesting. I don't know if it is or isn't, and I believe that my current model portfolio will continue to go up more over time than the sector or to go down less. Here is my current model portfolio's exposure table relative to the index:

I have discussed 2 of the 6 stocks that are in the model portfolio in this article and am happy to answer any questions about IIPR or MAPS here. I wish everyone the best!