The Four Best CBD Stocks to Buy for 2021
The cannabis legalization movement could propel these four CBD stocks ahead next year.
Over the last several weeks, U.S. CBD stocks have been on a tear.
Since President-elect Joe Biden’s historic win in November, some of the biggest names in publicly-traded cannabidiol (CBD) companies have gained tremendous momentum and are on pace to end the year on a high.
This extraordinary rush is happening because of several factors.
For starters, the president-elect’s win is seen as a big step towards legalization across the country. In fact, Joe Biden promised to “decriminalize the use of cannabis and automatically expunge all prior cannabis use convictions” in his Plan for Black America, which was released this spring. Although the 2018 Farm Bill legalized hemp nationwide (which is the form of cannabis used to produce CBD products), many states have refused to recognize its legality and have continued to arrest people for possession of the non-psychoactive substance.
The cannabis legalization efforts also got a major boost when five additional states passed cannabis legalization measures on November 4, 2020.
Today there are 15 states, two territories and Washington, D.C., that have legalized recreational cannabis, while 34 states and two territories allow medical marijuana.
And in early December, in another stunning victory, the House of Representatives voted in favor of removing marijuana from the federal Controlled Substances Act, which boosted CBD stocks even higher.
With all of these catalysts set to open up new markets and supercharge the cannabidiol industry, 2021 is now shaping up to be a great year for U.S. CBD stocks, with some market analysts predicting a long-awaited price breakout of up to 30%-40%.
However, some companies are expected to perform better than others.
So to help you navigate this red-hot sector, here’s a look at 4 of the best CBD stocks for 2021.
- GW Pharmaceuticals (NASDAQ:GWPH)
- Charlotte’s Web Holdings (OTC:CWBHF)
- Curaleaf Holdings, Inc. (OTC:CURLF)
- Village Farms International, Inc. (NASDAQ:VFF)
GW Pharmaceuticals (NASDAQ:GWPH)
Founded in 1998, GW Pharmaceuticals plc (NASDAQ:GWPH) is the biopharmaceutical company behind cannabidiol (CBD) product EPIDIOLEX.
Commercialized in the U.S. by its U.S. subsidiary Greenwich Biosciences, EPIDIOLEX is an oral CBD solution that is used to treat seizures in patients with Lennox-Gastaut syndrome (LGS), Dravet syndrome, or tuberous sclerosis complex (TSC). Because seizures can often present in early childhood, the drug is prescribed to very young patients that are one year of age and older. In Europe, the trade name for the drug is EPIDYOLEX®
GW also markets and sells Sativex® (delta-9-tetrahydrocannibinol and cannabidiol in the EU; nabiximols in the US), which is an oromucosal spray that contains the principal cannabinoids delta-9-tetrahydrocannibinol (THC) and cannabidiol (CBD), as well as specific minor cannabinoids and other non-cannabinoid components. It was developed for the treatment of spasticity associated with multiple sclerosis and spinal cord injury and is currently under late-stage clinical programs in order to get approval from the FDA.
In addition, GW also has a deep pipeline of additional cannabinoid product candidates with some products currently in clinical trials for autism and schizophrenia.
After a dismal 2018 in which GW reported revenue of $12.7 million and a net loss of $295.2 million, things began looking up.
After the approval of EPIDIOLEX, 2019 revenues soared to $311.3 million and in the first 3 quarters of 2020, the company’s revenues were $379 million.
GW is still losing money, but their losses have shrunk considerably. 2019 net loss was $9 million and the first 3 quarters of 2020 total net loss was $29 million.
With the recent spike in its share price, investors are betting that 2021 will be the year that GW turns things around and begins generating a profit.
Charlotte’s Web Holdings (OTC:CWBHF)
Founded by the Stanley Brothers and based in Boulder, Colorado, Charlotte’s Web Holdings, Inc. (OTC:CWBHF) is the market leader in the CBD wellness space. Their products are distributed through more than 22,000 retail locations, select distributors, and online through the company’s website at www.CharlottesWeb.com.
The company produces products for a variety of categories including CBD oil tinctures (liquid products), CBD gummies (sleep, stress, inflammation recovery), CBD capsules, CBD topical creams and lotions, as well as CBD pet products for dogs. Their family of brands include Charlotte’s Web™, CBD Medic™, CBD Clinic™, and Harmony Hemp.
Charlotte’s Web recently reported a solid quarter. Highlights include:
- Consolidated revenue increased 0.4% to $25.2 million vs. Q3-2019 and increased 17% vs. Q2-2020, marking a return to consecutive quarter growth
- Direct-to-Consumer (“DTC”) eCommerce sales increased 27.5% year-over-year and contributed 66.3% of Q3 revenue
- Gross profit of $15.2 million, or 60.3% of consolidated revenue
- $65.9 million cash and $128.6 million working capital on September 30, 2020
With this latest return to consecutive quarters of revenue growth, CWBHF is on track for a much better performance in 2021.
Curaleaf Holdings, Inc. (OTC:CURLF)
Founded in 2010 and headquartered in Wakefield, Massachusetts, Curaleaf Holdings, Inc. (OTC:CURLF) is a vertically-integrated, leading U.S. cannabis company that cultivates and processes cannabis and is also a provider of consumer cannabis products. It offers oils for vaporizing, cartridges, concentrates, tinctures, mints, capsules, edibles, and flower pods. The company also provides hemp-based CBD products.
Curaleaf currently operates in 23 states with 96 dispensaries, 23 cultivation sites and over 30 processing sites, and employs over 3,000 team members across the United States.
CURLF recently reported a record quarter. Some highlights include:
- Record Pro Forma Revenue of $215.3 Million
- Record Managed Revenue of $193.2 Million, up 164% and in Line with Company Guidance
- Record Year-to-Date Managed Revenue of $419.6 Million
With one of the strongest balance sheets in the industry, record growth over the last year, and a long runway ahead, Curaleaf is well-positioned to have a very strong 2021.
Top CBD Stock #4:
Village Farms International, Inc. (NASDAQ:VFF)
Of the 4 companies on this list, Village Farms International, Inc. (NASDAQ:VFF) is the only one that is currently profitable.
It is one of the largest and longest-operating greenhouse growers in North America, and is leveraging its decades of experience in large-scale, low-cost intensive agriculture and as a vertically integrated produce supplier to pursue high-value, high-growth plant-based Consumer Packaged Goods opportunities in cannabis and CBD in North America and selected markets internationally.
In Canada, VFF recently acquired the remaining 41.3% of the British-Columbia-based Pure Sunfarms, and now owns 100% of one of the single largest cannabis operations in the world, the lowest-cost greenhouse producer, and one of the best-selling brands. Pure Sunfarms has generated profitability for seven consecutive quarters.
In the U.S., subject to compliance with all applicable U.S. federal and state laws, Village Farms is pursuing a strategy to become a leading developer and supplier of branded and white-labeled CBD products targeting “big box” and other major retailers and consumer packaged goods companies, and with one the largest greenhouse operations in the country, is well positioned for the potential federal legalization of high-THC cannabis.
Internationally, Village Farms is strategically targeting selected, nascent, legal cannabis and CBD opportunities with significant long-term potential, with an initial focus on the Asia-Pacific region through its investment in Australia-based Altum International.
According to its latest quarterly report, VFF reported sales of $122.7 million and net income of $4.6 million. For the nine months ended September 30, 2019, VFF had sales of $111.5 million and net income of $9.5 million.
Because of VFF’s strong earning power, 2021 is likely to be another excellent year for the company.
Top Three CBD Stocks to Watch Closely in 2021
There’s a lot of overlap between CBD stocks and pot stocks. Which, of course, makes perfect sense. The cannabis plant has scores of active chemical compounds in it. One of them is delta-9-tetrahydrocannabinol (THC). This is the compound that gets stoners… stoned.
The other big one is cannabidiol (CBD). This compound has no psychoactive properties. But there are a whole lot of potential health benefits. Now, marijuana producers have no need to weed out the CBD. However, companies focusing on CBD do have to keep out the THC if they want to sell their products over the counter. But it’s not terribly difficult if the CBD is derived from industrial hemp – which, unlike marijuana, is not a controlled substance.
To complicate matters even further, the Food & Drug Administration hasn’t compiled a whole lot of information on CBD. So it lingers in a state of near-limbo… due, if nothing else, to its close proximity to THC. It’s not quite legal. But based on how easy it is to find CBD products at the local pharmacy, grocery store and coffee shop, it’s obviously not illegal either. However, its legal status can depend on which state you live in.
Here’s how that works…
In 2018, President Trump signed the Agriculture Improvement Act. This is better known as the 2018 Farm Bill. In that act, there was a section that removed hemp from the Controlled Substances Act. Thanks to that bill, CBD – which can be extracted from hemp – was deemed legal on the federal level. The bill actually targeted the agricultural aspect, though. Compounds extracted from hemp – à la CBD – aren’t privy to the same complete green light as hemp itself. So CBD operates in a mixed jurisdictional realm.
Warning: More Politics & Science Ahead
The federal government won’t arrest folks for growing hemp anymore. Extracting CBD or possessing it isn’t a federal crime anymore either. Well, as long as there’s less than 0.3% THC content. But not all states see eye to eye with the feds. Some states still want to see more evidence of the benefits and lack of drawbacks. And in some states, CBD remains blacklisted.
But here’s a big feather in the cap of CBD. The Food & Drug Administration has approved a CBD product to treat Lennox-Gastaut syndrome. It’s also been approved to treat Dravet syndrome. To paraphrase, it’s been proven to help those suffering from certain types of epilepsy.
When Greenwich Biosciences received approval for its epilepsy drug, Epidiolex, it was initially considered a controlled substance… simply because it was derived from marijuana. But when the company requested it be removed from the controlled substances list, the Drug Enforcement Agency (DEA) agreed. This was a big deal because it was the first time the DEA removed any type of cannabis compound from Schedule 1. And this could prove to be a tipping point.
Regardless of what the FDA says, studies have shown that CBD can help to treat insomnia and anxiety and even act as an antidepressant. It has also helped those dealing with chemotherapy and can treat acne. Nonetheless, not everyone remains sold on the prospect of CBD. And at least part of the problem is bad actors.
The FDA had to warn folks to stop claiming CBD could cure the coronavirus. Also, it probably can’t fix “dryness and frizz” in hair or prevent it from turning gray. That’s the kind of claim the FDA is looking out for. And more importantly, we know at this point that it can do some positive things. And here are three companies proving it…
Three CBD Stocks Worth Investing In
- GW Pharmaceuticals (Nasdaq: GWPH)
- Charlotte’s Web Holdings (OTC: CWBHF)
- CV Sciences (OTC: CVSI)
We’ll start with the big one. GW has essentially built its future and reputation on prescription CBD products. It’s the parent company of Greenwich Biosciences – the maker of Epidiolex. It has also received approval of its Sativex therapy in several countries. This treatment is a cannabis-extracted spray containing CBD. It’s used to treat multiple sclerosis.
Even right now, as some of its therapies remain in limbo, GW stock is pricey. But it’s proven to be insulted from the price swings of the marijuana market. The company also has an impressive pipeline of therapies in the works… and approval of any of them could send this CBD stock skyrocketing.
Charlotte’s Web Holdings
Charlotte’s Web Holdings can be viewed as the bellwether of the CBD industry. If CBD sales are on the rise, this CBD stock will be one of the first to indicate it.
The company recently acquired the topical treatment manufacturer Abacus Health Products with the intention of increasing its product line. The plans have already paid off, with sales up 17%. And increasing product lines should only help the company’s bottom line. This Colorado-based company has deals with major retailers, including Kroger (NYSE: KR), The Vitamin Shoppe and CVS (NYSE: CVS). Once the FDA clears up the regulatory uncertainty surrounding CBD food products, you can expect this CBD stock to soar.
This company has two distinct segments: consumer products and drug development. The consumer products one is straightforward. It focuses on manufacturing, marketing and selling CBD products. On the other hand, the pharmaceutical division is constantly trying to push the needle and develop novel CBD-based therapeutics. But the company already has the top-selling hemp-derived CBD oil on the market.
CV Sciences’ PlusCBD Oil was the first supplement to receive “generally recognized as safe” (GRAS) status. And the company continues to grow its product line. The company is in the midst of developing synthetic CBD-based medicine and is pursuing FDA approval for drugs. But again, once regulations around CBD are relaxed, this CBD stock is expected to see a major bounce.
The Bottom Line on CBD Stocks
Bills have been introduced to amend the Federal Food, Drug and Cosmetic Act and its regulations of hemp-derived CBD. The best guess as to why they haven’t moved forward is that Congress got distracted by the pandemic. But they should be picked up again. If the FDA finally gets out of the way, these CBD stocks are going to be major beneficiaries.
Unfortunately, for now the prospects of this budding industry are still tied up in politics. And the FDA’s approval (or lack thereof) can change the trajectory of these stocks quickly.
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Read next: Best Marijuana Stocks List for 2021 (With 10 Investing Opportunities)
About Matthew Makowski
Matthew Makowski is a senior research analyst and writer at Investment U. He has been studying and writing about the markets for 20 years. Equally comfortable identifying value stocks as he is discounts in the crypto markets, Matthew began mining Bitcoin in 2011 and has since honed his focus on the cryptocurrency markets as a whole. He is a graduate of Rutgers University and lives in Colorado with his dog, Dorito.