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Best cannabis stocks by performance: Will weed stocks get high in 2023?

By Mensholong Lepcha

Edited by Georgy Istigechev


Updated

Scientist testing medical marijuana
What is the outlook for cannabis-related stocks in 2023? – Photo: janiecbros / Shutterstock.com

Cannabis stocks have gained outsized investor attention in recent years due to the rapid pace of marijuana legalisation in the US and Canada.

The industry provides investors with exposure to one of the world's fastest-growing markets, with the cannabis sector expected to grow exponentially if more nations legalise the drug.

Do you want to invest in cannabis stocks? This article will introduce you to the best publicly traded cannabis-related stocks ranked by performance in 2022, and brief you on the latest industry developments and market outlook.

What is the cannabis industry?

The cannabis industry refers to the cultivation, production, consumption, and regulation of cannabis and related products.

Marijuana is a plant known for its psychoactive properties. The plant has been used for recreational and spiritual purposes and in traditional herbal medicines for centuries.

The growth of the cannabis industry has been stymied due to the plant’s status as a prohibited substance in most countries. According to the World Drug Report, cannabis is the most widely-used drug in the world – over 4% of the global population aged 15 to 64 used the drug in 2020.

More recently, regulators have warmed up to the easing restrictions on marijuana usage. In 2013, Uruguay became the first country to legalise recreational marijuana. Canada followed in 2018, legalising the private sale of recreational marijuana.

In the US, 23 states have legalised the recreational use of marijuana, according to a report by US News published in mid-December 2022. On the federal level, cannabis is still classified as a Schedule I drug – a drug with “no currently accepted medical use and a high potential for abuse”, according to the US Drug Enforcement Administration (DEA).

Alongside booming recreational use, the global cannabis industry is working on unlocking the plant’s medicinal potential. The use of cannabis in treating chronic pain, nausea, neurological disorders, and epilepsies is being researched.

The two main natural compounds extracted from cannabis plants are cannabidiol (CBD) and tetrahydrocannabinol (THC). According to the FDA, CBD does not cause intoxication that comes from THC.

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Marijuana reform

The biggest news for the cannabis industry in 2022 came from US President Joe Biden’s office, when the White House called for “Marijuana Reform” on 6 October 2022.

President Biden announced the pardon of all prior federal offences for the simple possession of marijuana, urging State governors to do the same for state offences related to marijuana possession.

The reform also called for the US Secretary of Health and Human Services and the Attorney General to review marijuana’s status as a Schedule I drug.

“Too many lives have been upended because of our failed approach to marijuana. It’s time that we right these wrongs,” noted President Biden.

New markets

New York opened its first legal dispensary for recreational marijuana in December 2022. More dispensaries are expected to open with 36 licenses already issued by authorities and an additional 139 licenses yet to be published.

In January 2022, New York State Governor Kathy Hochul announced the creation of a $200m public-private fund to provide capital and startup financing to cannabis entrepreneurs.

On the international stage, Thailand became the first Asian nation to decriminalise cannabis in June 2022, giving life to a booming weed tourism industry almost overnight.

Cannabinoid medicines

On the medicinal front, there are several cannabinoid-based pharmaceuticals that have been approved by regulators and are available in a number of countries. 

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Epidiolex, an oral CBD solution, became the first drug to contain an active ingredient derived from cannabis to be approved by the FDA in 2018 for the treatment of seizures associated with two rare and severe forms of epilepsy.

The FDA has also approved synthetic-THC drugs Marinol and Syndros for therapeutic uses in the US for treating anorexia associated with weight loss in AIDS patients. 

Nabilone used to treat nausea and vomiting associated with cancer chemotherapy and nabiximols used to treat muscle spasticity are other approved cannabinoid-based drugs in the market, according to the World Drug Report 2022.

Best cannabis stocks by performance in 2022

This article will focus on the top marijuana stocks by market performance in 2022. The mentioned stocks are constituents of Solactive’s North American Cannabis Index, an index that tracks the performance of a basket of publicly listed North American companies in the marijuana industry.

Cannabis stocks suffered a miserable year in 2022 as exuberance from legalisation in Canada and several US states quickly faded. A difficult macroeconomic environment of rising interest rates and high inflation also affected market sentiment, which led to equity bear markets in several regions across the world.

According to data from Investing.com, only one of 31 constituents on the North American Cannabis Index posted a positive return in 2022. There were eight companies that posted losses of over 80% in 2022. 

The following are the top 10 constituents of Solactive's North American Cannabis Index listed by returns in 2022. Half the companies on the list are traded on Canadian exchanges, while the other half are traded on either the NYSE and Nasdaq.

  • Jazz Pharma (JAZZ) – Biopharmaceutical – Up 21.6% in 2022 

Jazz Pharmaceuticals, a broader pharmaceutical corporation that recently acquired an interest in the cannabis industry through its acquisition of GW Pharmaceuticals in 2021, proved to be the only firm that posted a positive return on the North American Cannabis Index in 2022.

Live JAZZ Stock Price Chart

The following nine constituents posted negative returns:

  • Valens (TSX: VLNS) – Cannabinoid product maker – down 28% in 2022
  • AFC Gamma (AFCG) – Cannabis industry lender – down 30.6% in 2022
  • Cronos Group (CRON) – Cannabinoid product maker – down 39.5% in 2022
  • Charlotte's Web (TSX: CWEB) – Hemp extract company – down 43% in 2022
  • OrganiGram Holdings (TSX: OGI) - Indoor-grown cannabis producer - down 50.4% in 2022
  • Curaleaf (CNSX: CURA) – Cannabinoid products maker – down 50.9% in 2022
  • Innovative Industrial Properties (IIPR) – Cannabis industry-focused real estate investment trust – down 59.3% in 2022
  • Green Thumb Industries (CNSX: GTII) – Cannabinoid products maker – down 61.1% in 2022
  • Tilray Brands (TLRY) – Cannabinoid products maker – down 63.6% in 2022

Cannabis industry outlook

According to cannabis industry research firm BDSA, most mature cannabis markets have been reporting slow growth since the second half of 2021. Cannabis firms are seeing “depleted margins due to significant declines at wholesale", the firm added, while economic factors, such as high inflation, also affected the market.

In its Cannabis Markets Snapshots published in October 2022, BSDA wrote:

“While the hockey-stick sales growth that we have seen from cannabis markets in past years seems to be coming to an end, mature cannabis markets still have huge potential for brands and retailers who take a thoughtful approach to their given market.”

In a separate note covering pricing compression published in late December 2022, BDSA stated:

“With cannabis consumer participation higher than it’s ever been, and new legal markets opening every year, the cannabis industry remains one of the fastest growing and most dynamic industries worldwide. Still, ongoing challenges impacted growth in 2022, and the realities of a tough macro-economic climate plus growing pains in a maturing industry are creating a more complex growth trajectory for cannabis in 2023.”

Meanwhile, analysts at Jefferies saw President Biden’s initiative to review marijuana’s Schedule I status as a positive, saying:

“From an investment perspective, despite the very attractive long-term fundamental outlook, US cannabis multiples have been largely depressed because of its Schedule 1 status. As a result, major exchanges won't list these names and the vast majority of institutions won't invest due to fear of federal prosecution.”

If you are interested in investing in the best cannabis stocks in 2023, remember that past performance does not guarantee future returns.

Always conduct your own due diligence before trading, looking at the latest news, technical and fundamental analysis, and a wide range of commentary. This article should not be used as a one-stop shop in your research of cannabis stocks to invest in.

There are no guarantees. Markets are volatile. Remember, never trade more money than you can afford to lose.

FAQs

What are the fastest-growing cannabis companies?

Jazz Pharma (JAZZ) was the top-performing stock in 2022 on Solactive’s North American Cannabis Index.

Do cannabis stocks have a future?

The cannabis market could grow exponentially if more nations legalise the drug. As of January 2022, cannabis was legalised in a handful of regions, including Canada, Uruguay and several US states.

However, markets – especially nascent markets like the cannabis industry – are highly volatile. Always do your own due diligence before trading or investing. And never trade or invest more than you can afford to lose.

Is it time to invest in cannabis?

If you are interested in investing in cannabis stocks in 2023, remember that past performance does not guarantee future returns. Always conduct your own due diligence before trading by looking at the latest news, technical and fundamental analysis, and a wide range of commentary. And never invest or trade more than you can afford to lose.

Markets in this article

AFCG
AFC Gamma, Inc.
9.39 USD
0.01 +0.110%
CRON
CRON
2.40 USD
0.03 +1.280%
IIPR
IIPR
119.05 USD
0.53 +0.450%
JAZZ
Jazz Pharma
109.10 USD
0.4 +0.370%
TLRY
Tilray Inc (Extended Hours)
1.79 USD
-0.06 -3.300%

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