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Should You Invest in Cannabis Stocks in 2022? - YouTube
Channel: The Motley Fool
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marijuana stocks took a major hit in
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2021 and with federal legalization of
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recreational cannabis still on the fence
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in the u.s many cannabis companies are
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not living up to investors expectations
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while some investors are tapping out of
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the pop market could 2022 be an
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opportunity to tap in
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hi i'm denz with the motley fool i spoke
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with keith spikes about the different
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challenges and opportunities in the
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world of cannabis and the cannabis
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industry and what to expect in 2022 as
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the pot industry continues to expand and
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grow cannabis stocks initially soared
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early in the year in 2021. for example
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canadian cannabis producer sundial
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growers emerged as a meme stock and it
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skyrocketed more than 500 percent
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by mid february
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and then everything fell apart so what
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what happened well first of all vaccines
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helped but the pandemic didn't end of
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course and we had the spread of new
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coronavirus variants there was the delta
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variant and now the omicron variant the
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canadian cannabis industry experienced
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some really significant supply demand
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imbalances that kind of mess things up
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there the valuations of cannabis stocks
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in general really just seem to have
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gotten ahead of the market realities and
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we just saw a big downturn in most
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cannabis stocks after the beginning of
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last year now going into 2022 the
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political dynamics really don't give a
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lot of reason to be overly optimistic
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about near-term changes to federal
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cannabis laws
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and of course cover 19 cases continue to
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hit record highs in many areas due to
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the omicron variant and unfortunately
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for investors many of these challenges
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that caused cannabis stocks to plunge
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last year are still present while most
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cannabis companies have failed to live
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up to certain expectations there are a
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few pot stocks that have stood out and
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seized the opportunity of expansion and
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growth which pot stock stood out to you
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the most yeah dez there really are still
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some great opportunities with cannabis
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stocks even after the pretty much
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abysmal returns overall last year now i
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will say that canadian cannabis stocks
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such as canopy growth and sundial
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growers they're probably not going to
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perform as well
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they can't jump into the u.s marijuana
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market yet and it's probably not going
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to happen as quickly as many investors
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had hoped that restriction really limits
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the growth prospects for these canadian
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pot stocks at least over the near term
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but the sell-off in 2021 really has
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given some u.s cannabis stocks really
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attractive valuations i'll point out too
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particularly cresco labs shares trade at
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less than 2.5 times trailing 12-month
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sales this company is already profitable
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it expects strong growth in 2022 i think
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this is a stock that investors really
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should take a hard look at another u.s
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multi-state operator air wellness is
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even cheaper than cresco air shares
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trade below 2.4 times sales which is
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really low and unlike canadian companies
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such as canopy growth air already
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generates positive adjusted ebitda as
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you were mentioning earnings before
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interest taxes depreciation amortization
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and this company also continues to see
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robust growth so i think those are two
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u.s stocks that investors really should
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take a look at and it's also important
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to note dez that there were some
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cannabis stocks that did quite well last
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year some delivered tremendous gains
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and they still have solid prospects for
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this year a case in point would be
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innovative industrial properties this
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stock has beaten the overall market for
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five consecutive years its shares soared
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nearly 44
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last year
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all innovative industrial properties
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needs to do to keep up those winning
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ways is just to find more cannabis
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properties to buy and lease back to
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operators i don't think that's going to
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be a very difficult task for iip to
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achieve this year
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what factors do you think should be
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considered for those who are considering
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investing in the cannabis industry today
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well let me just first say that some
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investors are better off staying away
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from cannabis stocks i mean let's just
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be realistic and honest here right the
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you know if if you're a risk-averse
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investor you're not going to like pot
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stocks uh they're very risky and and we
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were talking about some of the
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challenges from 2021 have not faded away
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and so most of these cannabis stocks
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aren't going to appeal to investors who
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can't tolerate
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pretty high levels of risk
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i would also say
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that investors should stay away from
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most of the canadian cannabis stocks at
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least for now my view is that the
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headwinds that are facing these stocks
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especially that inability to enter the
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u.s cannabis market that's going to
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probably continue to hamper their
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performances so i think for the most
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part the canadian stocks are probably
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best to avoid at least for now on the
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other hand aggressive investors who are
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willing to take on relatively high
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levels of risk should be able to find
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some bargains and some really great
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stocks in the u.s cannabis sector i
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would definitely put air and cresco in
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that group and i also think long-term
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investors can still win big time by
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buying strong ancillary stocks such as
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innovative industrial properties now i
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will say dez there's no guarantee that
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2022 is going to bring smooth sailing
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for cannabis stocks whether u.s or
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canadian stocks in general it probably
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won't but i do think that there are some
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cannabis stocks that could be in a great
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position to navigate these steel
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treacherous waters and deliver pretty
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solid returns for investors both this
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year and over the long run
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