Overall, 2021 was a horrible year for cannabis investors. Despite the wave of legalization in states across the nation, optimism about cannabis falling off the Schedule I list, and greater legalization fronts in other nations across Europe and North America, it was an ugly performance.
If we look at the performance of cannabis stocks over the last year, the numbers are grave. For example, GrowGeneration Corp. (NASDAQ:GRWG) shares are off 67.5% since the start of the year. Aurora Cannabis (NASDAQ:ACB) has plunged 42% since the start of the year.
And shares of Tilray Inc. (NASDAQ:TLRY) are off nearly 90% from February 2021 highs. But let’s take a step back. With this significant drop across the board, it’s time to be contrarian and start to look for buying opportunities. I’m outlining my top pick right now.
If you’re going to speculate on cannabis, at least do it the right way. We look at this world through the lens of profitability, takeover potential, and existing strength on the market. For my money, the lone cannabis stock I’d like to own is cannabis operator Trulieve Cannabis Corp. (OTC:TCNNF).
As of Nov. 15, 2020, the company owns 155 dispensaries in 11 states. With 14 straight quarters of profitability, the company has vertically integrated with one goal in mind: Broad legalization in the United States.
As 2022 begins, Trulieve is waiting for Congress to take action. In today’s political climate, there are multiple bills on the table that might lead to greater legalization across the United States and Europe. Politicians in New Hampshire have filed six new bills that would potentially legalize cannabis next year. Meanwhile, Forbes reports that Germany, Italy, Portugal, Luxembourg, and Switzerland are all exploring potential legalization efforts.
Even though Trulieve doesn’t have a foothold in these markets (at least not yet), legalization efforts will spur investor and speculative capital once again. Now, Trulieve is a Canadian company, but it has found its success here in the United States over the last decade.
Trulieve in the U.S.
Trulieve is a large, multi-state cannabis operator. Founded in Florida, the company aims to become one of the largest cannabis retailers in the nation. Although it represents 20% of the physical real estate in Florida, the company owns about 50% of the Florida medicinal market. That’s an incredible starting point.
There are a few things that really stand out in Trulieve. Aside from the incredible marketshare in Florida, a state with the fourth-largest population in the nation, Trulieve also holds licenses to operate in California, Nevada, Massachusetts, Pennsylvania, Massachusetts, Georgia, Colorado, Arizona, Maryland, Connecticut, and West Virginia. I anticipate that its footprint will continue to expand across the country.
Second, the company’s insiders represent a huge stake of shareholders. In fact, there’s no true record of informed sales of stock by executives. These owners are “in it to win it.” That level of confidence in the long-term future should give investors significant optimism. Even when the stock pulled back in 2021, insiders loaded up on the stock. In September, we saw informative purchases by the Chief Financial Officer, the Chairman and CEO, the President, and other executives.
Over the Counter Only?
Finally, here’s a really important metric that few investors ignore. As I noted, the company is based in Canada. Shares are listed over the counter at the moment under the ticker TCNFF. The company has not joined an exchange like the Nasdaq or NYSE. This is important because many other competitors are already trading on these exchanges here in the United States.
However, Trulieve started the process of being deemed a U.S. domestic issuer under United States securities laws. That means it must meet SEC reporting requirements (which started this year). This could signal that the company plans to list on U.S. exchanges in the months ahead. Uplisting on the NASDAQ or NYSE would be a major step for the company as it would likely be added to a wealth of exchange-traded funds and other funds that trade baskets of stocks.
Right now, Trulieve has an average price target on Wall Street of $66.30. That represents a potential upside of nearly 160%. I’m a little more conservative than this upside. I think that Jefferies’ latest price target of roughly $47.55 is more in line with expectations. Even at $45 per share, that would be a 76% gain by the end of 2022.