Cannabis experienced a bit of a setback in 2021, with sales dipping in many major U.S. markets compared to the staggering results of the year prior, setting the stage for a new year of potential opportunity and uncertainty.
"This year will be a telling sign on the industry, as many are looking for the sector to find a bottom," said Brett Sifling, director of the financial planning advisory program "Get Invested" at Gerber Kawasaki Wealth and Investment Management.
As that search continues, 2022 investor strategies vary, with market leaders keeping an eye on various options. While some focus on the major names, others keep tabs on value buys, ETFs and limited license opportunities, among other avenues.
Here's what some of the market's leading investors and public company execs told Benzinga has attracted their attention in early 2022.
Consider Pot Stocks Large And Small
No strategy proved to be a prevailing path among sources. Instead, they offered a range of investment options to contemplate.
Smaller players and stocks moving under their averages have the attention of investors like Jeff Siegel and Alan Brochstein.
Siegel, the founder of Green Chip Stocks, considers Marimed Inc MRMD and Red White & Bloom Brands Inc RWBYF to be "massive bargains at the moment."
Brochstein, author of 420 Investor and founding partner of New Cannabis Ventures said, "There are a bunch of stocks that are way below the 150-day moving average, many of them in California." He expects them to bounce back.
Brochstein's 28-stock focus list Lowell Farms Inc LOWLF, Harborside Inc HBORF and Greenlane Holdings Inc GNLN as three stocks operating between -62.% and -66.8% of their moving average.
Some focused on larger players. Matt Hawkins, founder and managing partner at Entourage Effect Capital called MSOs and single-state operators "sound options for the new year."
"As legal markets either come online or mature, these established players will continue to expand their presence and drive consumer demand by introducing targeted products that appeal to their market's preferences," Hawkins said.
He added that the stocks that grab his attention tend to demonstrate a consistent ability to scale despite market volatility and "truly understand the nuances of each market they operate in."
ETFs are not out of the equation for investors in 2022.
Get Invested's Sifling said his firm prefers "to own a basket of these options," highlighting AdvisorShares Pure US Cannabis ETF MSOS for its management and seeming ability to scale quickly if federal legalization were to occur.
While ETFs are a focus, the firm also invests in single holdings, including Innovative Industrial Properties Inc IIPR and Trulieve Cannabis Corp TCNNF.
In other cases, investors are looking at state marketplaces rather than a company's size.
Leonard M. Tannenbaum, founder and CEO of AFC Gamma Inc AFCG, said, "We are excited about operators that have valuable licenses in limited license states that will provide a strong growth profile," listing Georgia, Texas and New York as states of interest.
Cautious Optimism In The New Year
This year, investors appear confident about the cannabis market but remain concerned over ongoing hurdles and pain points.
Tannenbaum expressed concerns about over-production in western states and Oklahoma and not enough legacy market regulations.
"Operators who follow the law and pay a great deal of taxes and obtain licenses should be protected," Tannenbaum said.
Brochstein said he is concerned about pricing environments in states like California, Florida and Pennsylvania. In California, many operators closed out 2021 by pleading with lawmakers for tax breaks as regulations and a growing illicit market continue to stunt the state's marketplace.
Brochstein also expressed excitement about continued market growth, especially in states like New Mexico, New Jersey and Connecticut.
Meanwhile, Siegel said he was enthusiastic about Midwest markets like Illinois and Michigan. "I think they've been underrepresented and undervalued for far too long."
Illinois broke its sales record in 2021, nearly reaching $1.4 billion. Michigan wrapped up its year with roughly $168 million in cannabis sales for December alone, totaling $1.7 billion in annual sales.
EEC's Hawkins expressed confidence as market excitement and concerns remain at high levels. He cited strong industry performance in Q3 as a positive sign. While the industry did grow in Q3, most MSOs saw slower, more modest single-digit growth during the period compared to Q2, according to MJ Biz Daily.
"Given the industry's current momentum, there will be a number of attractive investment opportunities in the public and the private markets," Hawkins concluded.
© 2022 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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