'A generational wealth opportunity': 4 top Wall Street analysts share the cannabis stocks to buy now

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  • Analysts from top investment banks cover the US cannabis space.
  • They shared the top cannabis stocks to buy now.
  • A slew of states are legalizing marijuana, creating a big opportunity for investors.
  • See more stories on Insider’s business page.

Cannabis reform is one of the hottest topics in state legislatures and on Capitol Hill this year.

A trio of powerful Democrats, led by Senate Majority Leader Chuck Schumer, introduced a proposal to legalize marijuana federally on Wednesday, though it’s unlikely to become law.

Still a slew of states, including New York, have legalized cannabis this year, fueling the industry.

Investing in cannabis now is a “generational wealth opportunity,” according to Owen Bennett, a Jefferies analyst who recently began covering US cannabis companies. He said operators will benefit from the march of legalization and M&A.

As with any nascent industry, there are dozens of players — and it can be difficult to figure out which companies to bet on.

Wall Street analysts for the most part favor US cannabis companies, known as multi-state operators or MSOs, over their Canadian counterparts. The US companies, like Curaleaf and Green Thumb Industries, cultivate and sell marijuana in multiple states.

The industry is complex. MSOs aren’t able to list on major US stock exchanges, so they’re forced to trade on the Canadian Securities Exchange, and over-the-counter. As well, many institutions are locked out of the industry — meaning that these stocks are thinly traded relative to companies of a similar market value, and they have to contend with a high cost of capital, rapidly shifting regulations, and illicit market competition, among other roadblocks.

Still, Wall Street’s top cannabis analysts say there are companies that have separated themselves from the pack, based on their strong management teams and assets in lucrative state markets.

Now is a good time to buy, given the recent pullback in the sector, analysts from JMP Securities said in a Thursday note.

“[W]e view the valuation reset and the consolidation of gains as healthy, but at the same time, creating an attractive longer-term entry point,” the analysts said.

Here are the four stocks that analysts picked as their favorites to invest in now:

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