In this Marijuana Market Update, I share three cannabis stocks that rate well on my Cannabis Power Rating system.
Let’s see why these companies deserve a spot in your portfolio.
3 Cannabis Stocks With Bright Futures (SWM, SOLCF, TLLTF)
My Cannabis Power Rating system looks at cannabis stocks and rates them against each other using stock price, momentum and stock value.
Here’s how three stocks rate on our system:
As you can see, Schweitzer-Mauduit International (NYSE: SWM), Sol Global Investments (OTC: SOLCF) and TILT Holdings Inc. (OTC: TLLTF) all score in the top 5% overall.
Let’s see why I think these are strong considerations for your portfolio.
Schweitzer-Mauduit International (NYSE: SWM)
We’ll start with Schweitzer-Mauduit International.
For those familiar with the Money & Markets Cannabis Watchlist, I recommended Schweitzer-Mauduit in September 2020, and the company performed well for us.
The Georgia-based company produces rolling papers used for both tobacco and cannabis. It markets a low-ignition paper designed to extinguish when not actively smoked.
From 2017 to 2020, Schweitzer-Mauduit’s total annual revenue was mostly flat — ranging between $982.1 million and $1.07 billion.
However, in 2021, the company’s revenue grew almost 30% on strong sales following the height of the COVID-19 pandemic.
Revenue is projected to reach $1.52 billion this year and $1.57 billion in 2023 — a 46.3% increase in total revenue from 2020.
SWM’s Decline
Due to headwinds in the broader cannabis market, SWM has struggled in the last 12 months.
Now, SWM is close to crossing above its 50-day simple moving average and has tested higher highs and higher lows in the last few weeks. It rates a 98 overall, with a 97 on momentum and a 75 on value — it has better price-to ratios than its peers.
Its price-to-earnings ratio is 19 compared to the industry average of 21, but its price-to-book is 1.5 compared to the industry average of 3.13.
I have high hopes for SWM and think it can rebound nicely from a rough 2021.
Sol Global Investments (OTC: SOLCF)
The Toronto-based investment firm is focused on the U.S. biopharmaceutical and cannabis industries. We don’t have a strong forecast of total revenue for the company, but looking back, we can see a definite trend.
SOL had negative total annual revenue in 2019, but it grew to $109.1 million in 2020. Through August 31, 2021, the company reported annual revenue of $311 million — a 185% increase from the previous year.
I see a different path for its stock price over the last 12 months.
SOLCF Was Flat Through Most of 2021
Unlike SWM, Sol traded flat for a large part of 2021. Investors were waiting to see what it would do.
There was a downturn in December — coinciding with weakness in both the broader market and cannabis market.
However, the stock price is finding some momentum this month — moving up 20% off its 52-week low and climbing higher.
Overall, Sol rates a 96 with a score of 70 on momentum (but that is going higher) and a bullish 98 on value. It trades with a price-to-earnings ratio of 0.39 compared to its industry average of 22.6. Its price-to-book value is 0.24 compared to 3.6 for the industry average.
This is another company with a strong future.
TILT Holdings Inc. (OTC: TLLTF)
TILT Holdings is based in Phoenix, where it cultivates and sells cannabis, and electronic and non-nicotine devices. It operates in the U.S., Canada, Israel, Mexico, South America and the European Union.
TILT struggled out of the gate with total revenue in 2018 but registered a 4,100% jump from 2018 to 2019.
It raised its total revenue to over $205 million in 2021, and projections suggest the company will bring in more than $315 million by 2023 — a 53% increase from 2021.
That’s a massive jump!
TLLTF Is on the Upswing
The stock price saw some ups but more downs in 2021 — falling 68.2% off its 52-week high.
However, in recent weeks, the stock has climbed 50% up from its January low. It is also trading well above its 50-day simple moving average.
TILT scores a 95 overall, but just a 63 on momentum. Since momentum is backward-looking, I project that metric score only to go up as we have seen strong upward movement in the price.
The company rates a 96 on value, trading with a price-to-book ratio of 0.4 compared to its peer average of 1.6. TILT’s price-to-sales ratio is 0.6, while the industry average is 4.5.
The Takeaway for These Cannabis Stocks
All three of these companies have broad exposure to the cannabis industry — from investing in rolling papers to cannabis cultivation.
These cannabis stocks all show signs of life in a downward market and have the potential for even more upside.
Where to Find Us
Coming up this week, we’ll have more on The Bull & The Bear podcast, so stay tuned.
Make sure you subscribe to our YouTube channel and get notified each and every time we post a new video.
We have a lot of great weekly video features on our channel, including:
- Ask Adam Anything — Where I get to sit down with chief investment strategist Adam O’Dell and ask him any question (from you or me) and get his insights into the stock market.
- Investing With Charles — Green Zone Fortunes co-editor Charles Sizemore and I talk about all things related to stocks and the economy, including comparing stocks to give you the best investment advice.
- The Bull & The Bear — Our weekly podcast where I show you the trends and analysis that moves the market.
All of these series are on our YouTube channel.
Safe trading,
Matt Clark, CMSA®
Research Analyst, Money & Markets
Matt Clark is the research analyst for Money & Markets. He is a certified Capital Markets & Securities Analyst with the Corporate Finance Institute and a contributor to Seeking Alpha. Prior to joining Money & Markets, he was a journalist and editor for 25 years, covering college sports, business and politics.
