As more Americans embrace legalized marijuana sales, the rapidly expanding cannabis industry has gone from an obscure niche to a massive profit-making opportunity. The industry racked up nearly $7 billion in sales last year[1] and is expected to grow manifold as legalization extends from medicine to recreational use.

In the meantime, marijuana investments are expected to be risky and highly speculative. If you’re looking to buy cannabis stocks, the following list of companies offer the biggest bang for your buck in terms of past performance and future potential.

AbbVie Inc. (ABBV)

With its FDA-approved Marinol drug already on the market, AbbVie is miles ahead of its competition in the field of medicinal marijuana. The Illinois-based company employs more than 28,000 people and generates billions in annual revenue, offering investors a source of stability in a market undergoing rapid change. Marinol is a synthetic THC product that is delivered orally to patients experiencing nausea during chemotherapy. It is also used to treat patients with AIDS that are suffering from a loss of appetite. Marinol is currently listed as a Schedule III drug by the FDA.

ABBV stock currently trades around $60. Though it has underperformed the market over the past 12 months, it has gained more than 75% over the last five years and has a market cap that is fast approaching the $100 billion mark. At the time of writing, the company boasts a dividend yield of 4.24%, which is more than four times the healthcare industry average.

Cara Therapeutics (CARA)

In the field of medicinal marijuana, Cara Therapeutics is a biopharmaceutical company focused on commercializing pain medication and other products that target the body’s peripheral nervous system. Its list of treatments under development includes I.V. CR845, a Phase III clinical drug used to treat postoperative pain in adults.[2] The company has an extensive portfolio of cannabis-based drug treatments, as well as multiple agreements in Asia to bring its products to market.

Following a flash crash in early October, CARA’s stock price has nearly tripled. With a market cap of just over $400 million, the company is still prone to volatility. But investors currently see it as a potential home run for its multiple product offerings and breakthrough in markets outside the United States. CARA trades just below $15 a share at the time of writing.

Scotts Miracle-Gro Company (SMG)

Scotts Miracle-Gro Company proves you don’t have to be a weed grower to be considered a viable marijuana investment. That’s because the cannabis value chain extends far beyond cannabis-based products to include companies involved in manufacturing and selling garden equipment used in the cultivation of pot.

With brand names like Scotts, EZ Seed, EverGreen and Turf Builder, SMG has quickly become the darling of the legal marijuana industry. The stock soared 47% last year on route to new record highs in the wake of successful legalization campaigns across several U.S. states.

Scotts has acquired several specialty fertilizer companies over the past two years and has increased its production of lighting and hydroponics equipment.[3] There’s nothing ambiguous about the company’s plan to dominate the marijuana value chain for the foreseeable future. A yield of 2.16% and seven consecutive years of dividend growth add to SMG’s growing investment appeal. The company’s stock is currently trading below all-time highs.

The stocks on this list offer a mixture of stable growth, diversification and speculation for investors looking to enter marijuana stocks in 2017. With California and several other states voting to legalize recreational weed, capital flows to the sector will likely expand for the foreseeable future. Currently, medicinal marijuana companies offer the biggest opportunity for growth, especially as cannabis-based cancer treatments move through clinical trials and onto the market.

 

[1] Arcview Market Research.

[2] MarijuanaStocks.com. Focus List.

[3] Jack Kaskey (October 12, 2016). “Scotts Miracle-Gro Surges as Market’s Darling for Legal Pot.” Bloomberg.

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