We are experiencing some temporary issues. The market data on this page is currently delayed. Please bear with us as we address this and restore your personalized lists.
Is Cronos Group Inc. (CRON) the Best Marijuana Stock to Buy According to Hedge Funds?
The United States of America is the country that consumes the most weed in the world. As we mentioned in our article – 30 Cities with the Highest Weed Consumption in the US – the American legal cannabis industry fared well in 2023 as legal sales across the 38 states that allow some form of regulated marijuana reached $28.8 billion, a 10.3% increase from the previous year. After an eventful 2024, the industry is expected to flourish even further. According to a report from the wholesale marketplace LeafLink, retail sales of cannabis reached a record $2.8 billion in October 2024, up 6.2% from last year. The data revealed that America’s total retail cannabis sales for this year are expected to be in the proximity of $32.6 billion.
The US legal weed industry also added 22,952 new jobs last year – a sign that the national business climate has somewhat stabilized following the turmoil of the previous two years. According to the 2024 Vangst Jobs Report, there were over 440,445 jobs supported by legal cannabis nationwide as of early 2024, an increase of 5.4% from 2023.
Perhaps this year’s most positive news for the country’s legal cannabis sector came in April, when the Drug Enforcement Agency announced that it would act on the Biden administration’s call to 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 marked 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 loosen quite a few restrictions around it and add fresh arguments for supporters of ballot measures seeking to legalize cannabis in states where it is still illegal. The process is lengthy and complex and will stretch well into the next year, but as the DEA finalizes its review, stakeholders from across the industry are closely monitoring developments.
Another encouraging development came in the form of a tweet from President-elect Donald Trump, in which he expressed support for a recreational cannabis legalization ballot initiative in his home state of Florida. He also backed up the marijuana industry’s access to the banking system and the ongoing federal cannabis rescheduling process. Whether this support will actually translate into action when Trump takes office for his second term remains to be seen.
However, 2024 ended with a slightly sour taste in the mouth of America’s cannabis stakeholders, as Florida’s cannabis legalization ballot measure failed to pass, despite historic levels of funding and a rigorous advertising campaign. This was a major blow to the industry as the Sunshine State was expected to become a $6 billion cannabis market by 2026, had Amendment 3 succeeded in meeting the required 60% threshold.
The setback inevitably impacted cannabis stocks, which witnessed a downturn following the news of the rejection. Amplify Alternative Harvest ETF, the first US ETF to target the global cannabis sector has fallen by over 31.6% since November 4, closing at $2.27 on December 24, 2024.
As of the writing of this article, 24 states have legalized recreational weed in America, in addition to the District of Columbia. However, possessing or selling marijuana remains a crime under federal law, punishable by prison time and fines.
Methodology:
To collect data for this article, we scanned Insider Monkey’s database of 900 hedge funds and picked the top 11 companies operating in the cannabis sector with the highest number of hedge fund investors. When two or more companies had the same number of hedge funds investing in them, we ranked them by the revenue of their last financial year instead. Following are the Best Marijuana Stocks According to Most Hedge Funds.
At Insider Monkey we are obsessed with 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 close up of cannabis plants growing in an outdoor facility, symbolizing the product of the cannabinoid company.
Ranking at number 3 in our list of the Best Marijuana Stocks is Cronos Group Inc. (NASDAQ:CRON), a Canada-based cannabinoid company engaged in the cultivation, manufacture, and marketing of cannabis and cannabis-derived products for both medical and adult-use markets. A noteworthy aspect of the company is its close association with Altria Group, a giant in the tobacco industry that maintains a 41% stake in Cronos that it acquired in 2019.
Cronos Group Inc. (NASDAQ:CRON)’s revenue increased by a significant 38.8% to reach $34.4 million in Q3 2024. What’s more is that most of this growth came from the company’s increasing market share in Canada, reflecting its sustainable nature. Also, Cronos has managed this growth while reducing operating expenses by $3 million year-over-year (adjusted for non-cash impairments), significantly improving EBITDA from -$15 million to -$6 million. This comes after the company had already reported a notable 46% YoY increase in net revenue in Q2, highlighting its strong growth trajectory.
It needs to be mentioned that Cronos Group Inc. (NASDAQ:CRON) still hasn’t been able to turn any annual net profit over the last 4 years, despite improving its revenue consistently. Hence, the company’s recently renegotiated supply agreement with GrowCo marks a strategic shift that positions it to lower production costs materially.
Cronos Group Inc. (NASDAQ:CRON) also announced recently that its brand Spinach has become the best-selling cannabis brand in Canada, according to HiFyre Retail Analytics for August 2024. Launched in November 2018, Spinach ranks first in both edibles and flower categories. Mike Gorenstein, Chairman, President, and CEO of Cronos Group Inc. (NASDAQ:CRON) stated:
“It’s no surprise to us that Spinach® has secured its position as the number one cannabis brand in Canada, with our focus on elevating the adult consumer experience playing a key role in our success. The Spinach® brand has redefined the cannabis market, creating products that enhance shared moments with friends, and we’re thrilled by the overwhelming support from adult consumers. We’re grateful for their loyalty and enthusiasm, as we continue to lead the industry. Our emphasis on quality, innovation, and groundbreaking product development remains steadfast, with even more innovative offerings on the horizon under the Spinach® brand.”
Cronos Group Inc. (NASDAQ:CRON) ended Q3 with an industry-leading balance sheet with $862 million in cash and cash equivalents – significantly exceeding its current market capitalization – and additional value in loan receivables and real estate assets, with no debt obligations.
Overall CRON ranks 3rd on our list of the best marijuana stocks to buy according to hedge funds. While we acknowledge the potential of CRON as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CRON but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
