(Click on image to enlarge)

I’m not a stoner but I do like to smoke marijuana every now and then to unwind. And my sense is that more and more people would say the same as marijuana continues to become more socially acceptable and legalized. At the same time, the marijuana stocks as represented by the MJ ETF are the most unpopular and cheapest they’ve ever been. It’s time to take a closer look.

Because I’m not an expert in the industry, I prefer to buy the broad basket of stocks (37) held by the MJ ETF rather than try to pick individual winners. However, to get a sense of valuations, let’s take a look at MJ’s largest holding (8.51%), Tilray (TLRY).

TLRY has a $2.8 billion market cap. In the four quarters just ended today (February 28, 2022), I estimate that TLRY will have ~$600 million in revenue and ~$50 million adjusted EBITDA. So it’s trading for ~5x revenue and ~50x adjusted EBITDA. While by no means cheap, I believe that’s as cheap as TLRY has ever been. My assumption is that TLRY’s valuation is representative of the industry as a whole.

If my assumption is correct, the marijuana stocks are as cheap as they’ve ever been, hated and no one is talking about them. While this is a speculative play, I think MJ is worth a shot here. What are you smoking?