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Forget about sundial producers: these 3 cannabis stocks are much better buys

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If you take the push to legalize cannabis in the US and mix Robinhood traders on Reddit bulletin boards and the current trend of blowing up cheap penny stocks, you get Producers of sundials (NASDAQ: SNDL). The sundial has become the flavor of the day for day traders, and the battered stock jumped 500% in 2021 before settling recently in a 340% gain.

SNDL chart

SNDL given by YCharts

However, here on Fool.com, we are investors, not traders. As we’ve seen recently, other heavily shorted stocks pumped by investors from Reddit have surged dramatically, only to crumble and burn when momentum runs out.

Yet the truth is that there is a real cause for excitement in the cannabis space. According to MarketsandMarkets, the global legal cannabis market is expected to more than quadruple over the next six years, from $ 20 billion to $ 90 billion.

But most of that growth will not come from the sundial, or even most Canadian pot inventory. Instead, here are three much better US stocks that are far superior and well worth your investment today.

A young woman holds a cannabis leaf in a field of cannabis plants.

Image source: Getty Images.

Trulieve, Cresco Labs, green thumb

If you really want to invest in a business for the long term, and not just trade a ticker with the hope of some quick cash, you need to look at the fundamentals. This means growth in revenues, margins and defensibility.

Three of the most profitable and fastest growing US multi-state operators (MSOs) are Trulieve (OTC: TCNNF), Cresco Laboratories (OTC: CRLBF), and Green thumb industries (OTC: GTBIF). Check out how these all-star pot stocks have performed over their last few quarters against the modest sundial:

Most recent quarter

Cresco Laboratories

Green thumb industries

Trulieve

Producers of sundials

Increase in income

323%

131%

92.8%

(54.1%)

Gross margin

51.6%

55.3%

75%

(134.4%)

Adjusted EBITDA margin

33.9%

33.9%

49.5%

(34.3%)

Data sources: Cresco Labs, Green Thumb Industries, Trulieve, and Sundial Growers, SEC filings.

A real difference, isn’t it? Obviously, some believe that Sundial’s stock price at $ 2.08 at the time of writing means it is “cheap.” However, the company currently has a market cap of $ 3.1 billion – not exactly small, or much less than Cresco’s $ 6 billion market cap, Green Thumb’s $ 8 billion market cap, or Green Thumb’s $ 8 billion market cap. Trulieve’s market capitalization of $ 5.6 billion.

Big differences in performance and value, explained

The difference between a Canadian producer like Sundial and US multi-state operators has a lot to do with where they are located.

These highly profitable US operators operate specifically in friendly states that have either limited licenses or regulations that help limit competition to early players. For example, Trulieve dominates the Florida medical market, where there are limited licenses as well as regulations that require vertical integration for all dispensaries. This means that only large companies with the financial clout to invest in the growth, transformation and construction of retail facilities can compete.

Green Thumb operates in 12 markets, particularly in its home state of Illinois and Pennsylvania, two highly regulated and limited license states. Cresco is also active in these states and is also targeting the giant California market through wholesale operations. Although California is a more difficult market, it is also the largest cannabis market in the world, where Cresco’s wholesale strategy could work.

This is a much more favorable environment than Canada, which has been plagued by regulatory blockages in the deployment of retail stores, which has led to a thriving black market. A much smaller market than the United States, the country has also been plagued by oversupply, causing prices to collapse.

But U.S. stocks are harder to buy than Canadian producers like Sundial

One of the explanations for why investors keep buying sundials from clearly much better companies in the United States is that these American companies are still trading over-the-counter, or not on the major exchanges. because marijuana is still illegal in the United States

However, this technical blockage doesn’t mean you should throw your lot with an overvalued company just because you can trade it on certain brokers. And if and when cannabis becomes legal in the United States, which seems to be a matter of “when” and not “if”, one can bet that there will be a considerable demand for the stocks of these American MSOs.

If your online broker doesn’t allow you to trade over-the-counter stocks like US cannabis companies, there are alternatives. For example, AdvisorShares Pure US Cannabis ETF (NYSEMKT: MSOS) is an actively managed exchange-traded fund allocated to U.S. cannabis companies, with large positions in the aforementioned stocks. It is also available on the NYSE Arca exchange and available to trade on the popular Robinhood discount brokerage, which generally does not allow shares to be traded over-the-counter.

Either way, cannabis investors should be aware that if there is a real opportunity for growth here, they should be careful about which companies they choose and in which markets. The difference with your wallet could be rags or riches.

ThisaThe article represents the opinion of the author (s), who may disagree with the position of “official” recommendation ofaMotley Fool premiumaconsultation service. We are colorful! Examinationan an investment thesis – even one of our own – helps usaI will think criticallyaon investmentand make decisions that help us become smarter, happier,aricher nd.



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