Making the Grade

Top 10 Pot Stocks Ranked by 2019 EPS Estimates

In today’s Making the Grade, we’re looking at the most fundamental of fundamentals: projected earnings.

Cannabis investors know that revenue is there. That’s easy.

But what Wall Street wants is profits.

This isn’t what it’s been getting from young cannabis companies – both Canadian and American. They’re ramping up production, distribution and marketing – in other words, spending to grow.

So losses are widening. Skyrocketing costs are more than offsetting revenue growth.

And those ever-increasing negative earnings per share (EPS) are ruining the mood.

But I believe this will pass.

It’s similar to the ramp-up in costs we see from beer companies prior to summer barbecue season. Both production and marketing costs surge to meet and create demand. And the profits are felt in the quarters that follow.

Now we’re waiting for that payoff.

And as investors, we want to see the sticky green stuff transform into the paper kind.

Until then, my team and I looked at which pot stocks are expected to report positive earnings for the year, where we saw a definite trend forming for American domination.

Not Your Average Pot Stock

No surprise… The list isn’t War and Peace.

It’s short and sweet.

The industry average EPS estimate for 2019 is a loss of $0.12.

But here are the 10 pot stocks that are projected to do considerably better than that…

Top 10 Cannabis Stocks

At the top of the chart is Innovative Industrial Properties (NYSE: IIPR).

This cannabis real estate investment trust is a favorite of mine. I recommended this to the inner circle of one of my services last year. And it’s up more than 125% since.

It’s also the only cannabis company that pays a dividend. And with nearly $2 per share in earnings this year, expect that payout to increase in the quarters ahead.

Second on the list is U.S. multistate operator (MSO) Ayr Strategies (OTC: CBAQF), formerly known as Cannabis Strategies Acquisition Corp. After a series of acquisitions, it’s plowing headfirst into the American market.

Then we have Canadian licensed producer (LP) Cronos Group (Nasdaq: CRON) and Florida-based MSO Trulieve Cannabis (OTC: TCNNF) in the top five. The Nevada-focused Flower One Holdings (OTC: FLOOF) also makes the top 10.

MSO Cresco Labs (OTC: CRLBF) and LP OrganiGram Holdings (Nasdaq: OGI) are also expected to see positive EPS this year.

And finally, the two largest U.S. CBD retailers, Charlotte’s Web Holdings (OTC: CWBHF) and CV Sciences (OTC: CVSI), are expected to report profits in 2019. As is the extraction company, CLS Holdings USA (OTC: CLSH).

Zeroing In on America

There are some telling tidbits for investors in this top 10.

First, even though Canada legalized adult-use nationwide last October, only two LPs make our list.

Meanwhile, three of the five pot stocks projected to be the most profitable this year are American MSOs. And the two largest publicly traded CBD retailers are in the top 10.

In total, eight of the companies are U.S.-focused.

Which demonstrates my view that investors should be zeroing in on American companies, as well as concentrates, oils and extraction.

Finally, the most profitable business is real estate. As the green revolution spreads across the country, companies are going to need growing space. And this is where investors can tap into cannabis dividends.

I’ll leave you with this…

There’s a Wall Street saying, “Money follows earnings.”

Meaning the most profitable companies will ultimately reward shareholders with the biggest gains.

If you believe this, then the top 10 cannabis companies listed above are projected to earn the most in 2019.

That’s an ideal place to start.

Here’s to high returns,

Matthew