Nobody, not even those living under a rock, are unaware of the current election cycle, with a new president set to be elected this November. With plenty of anticipation around what a Democrat versus Republican-led White House would mean for the economy, House and Senate elections will also play a big role in determining which specific policies can be enacted over the coming four years. There’s obviously simply too much uncertainty to place any sort of bets as to what will take place ahead of time, though investors in certain sectors appear to be doing their best to price in the odds of one party winning or another.

Specific sectors could see the biggest moves post-election, with cannabis investors eagerly awaiting the results of this contest. That’s generally because Democratic lawmakers have historically been much more favorable to this sector’s interests, advancing various bills that have reclassified cannabis as a less harmful substance, with increasing support for cannabis’ more widespread usage as at least a therapeutic candidate in the medical space.

Interestingly, Republican candidate for president Donald Trump has voiced support for easing marijuana restrictions. On Truth Social, Trump advocated ending arrests for minor marijuana use and proposed reclassifying marijuana to Schedule III. He also promised to work with Congress on safe banking laws for state-legal cannabis businesses if elected.

So, this sector has seen some signs of life once again. Let’s dive into three stocks that could see some big volatility around November, and why I think these are the three stocks that could lead the way higher out of the election if positive rhetoric picks up in this space.

Key Points About This Article:

• The upcoming presidential election in November is creating significant volatility in certain sectors, with cannabis companies exhibiting high levels of volatility recently.
• These three stocks could be the biggest beneficiaries of pro-cannabis policies put forward by either party.
• If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.

Curaleaf Holdings (CURLF)

As one of the top multi-state operators in the U.S. cannabis space, Curaleaf Holdings (OTC:CURLF) has been a top pick of mine in this sector for some time. Unfortunately, that hasn’t been a good pick for long-term investors, with the stock down considerably from its peak, and down 30% over the past 12 months. 

Much of this has to do with continued concerns around profitability in the cannabis sector, with Curaleaf among the major MSOs that continue to post losses. Now, Curaleaf’s losses have been relatively muted compared to its peers. But for investors seeking profitability in this space, or at least a pathway to profitability, this is a company that has yet to perform on this metric alone.

That said, the company did report a 23% adjusted EBITDA margin for Q1 and 24% in the previous period. With a price-to-sales ratio of 2.4-times, the stock appears to be fairly priced, with significant upside potential, particularly if investor confidence in the cannabis sector improves.

Curaleaf’s management team continued to highlight the need for consolidation in the cannabis industry due to financial inefficiencies. Despite Curaleaf’s revenue exceeding $1.3 billion last year and its rapid growth over three years, its losses have accelerated. But if the company can consolidate its position in the domestic U.S. market, and a positive regulatory environment is on the horizon, this is a company that could certainly be on the path to profitability many investors are seeking in this difficult to value sector. 

Green Thumb Industries (GTBIF)

Green Thumb Industries (OTC:GTBIF) is another major U.S. cannabis operator that many investors regard as one of the best operators in this space. Unlike the majority of cannabis firms out there, Green Thumb is profitable, and currently trades around 37-times trailing earnings. That’s not cheap, but it’s certainly not expensive for those who believe in the long-term potential of this space. 

Impressively, Green Thumb has consistently turned a profit since 2020. Managing 92 stores across 14 states, the company saw an 11% revenue increase in Q1. Despite a slim profit margin, with a net gain of $3.4 million last year, it outperformed competitors like Verano Holdings and Curaleaf, which reported losses of $12.5 million and $20.9 million, respectively.

Green Thumb Industries also announced a $50 million share buyback program this past quarter, building on a previous $73.3 million buyback. Starting September 23, 2024, the company aims to repurchase up to 10.57 million shares, showcasing its strong balance sheet and strategic cash use. This move clearly reflects the company’s confidence in their capital efficiency potential amid improving market conditions.

For those seeking hard-to-find profitability in this sector, Green Thumb remains a standout option, and its share price reflects this sentiment. At the time of writing, GTBIF stock is flat on a year-over-year basis, which is pretty darn good compared to industry benchmarks.

Trulieve Cannabis (TCNNF)

Last but not least, we have Trulieve Cannabis (OTC:TCNNF). The cannabis retailer has been on a roll over the past year, and is one of the best-performing stocks on this list. Up more than 85% on a year-to-date basis, these kind of returns are worthy of inclusion on the list in my view. And while risks remain prevalent in the retail space, the fact that Trulieve continues to grow its footprint and gain market share in this sector could bode well for long-term investors who believe the regulatory environment in the cannabis sector will turn more favorable in the near-term. 

Trulieve recently reported its Q4 and full-year 2023 results which showcased a 7% revenue drop to $1.13 billion and a net loss of $527 million (adjusted to $70 million). Those results certainly didn’t knock the ball out of the park for many investors. However, the company did report strong cash flow with $202 million from operations and $161 million in free cash flow. This highlights Trulieve’s operational efficiency and liquidity, crucial for its future in the capital-heavy cannabis industry.

The company also reported a 52% GAAP gross margin and $589 million in gross profit for the year. SG&A expenses were cut by $61 million to $386 million. Thus, this is a company that’s dialing in its focus on efficiency, and the market is clearly rewarding these endeavors.

As the company continues to grow, while improving its cash flow generation capabilities, this is a cannabis stock I think could have a lot further to run from here.

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