Is Chicago Atlantic Real Estate Finance, Inc. (REFI) the Best Marijuana Stock to Buy According to Hedge Funds?

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We recently compiled a list of the 10 Best Marijuana Stocks To Buy According to Hedge Funds. In this article, we are going to take a look at where Chicago Atlantic Real Estate Finance, Inc. (NASDAQ:REFI) stands against the other marijuana stocks.

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The United States of America is the country that consumes the most weed in the world. As we mentioned in our article – 30 Cities with the Highest Weed Consumption in the US – the American legal cannabis industry fared well in 2023 as legal sales across the 38 states that allow some form of regulated marijuana reached $28.8 billion, a 10.3% increase from the previous year. After an eventful 2024, the industry is expected to flourish even further. According to a report from the wholesale marketplace LeafLink, retail sales of cannabis reached a record $2.8 billion in October 2024, up 6.2% from last year. The data revealed that America’s total retail cannabis sales for this year are expected to be in the proximity of $32.6 billion.

The US legal weed industry also added 22,952 new jobs last year – a sign that the national business climate has somewhat stabilized following the turmoil of the previous two years. According to the 2024 Vangst Jobs Report, there were over 440,445 jobs supported by legal cannabis nationwide as of early 2024, an increase of 5.4% from 2023.

Perhaps this year’s most positive news for the country’s legal cannabis sector came in April, when the Drug Enforcement Agency announced that it would act on the Biden administration’s call to reclassify marijuana from a ‘Schedule I’ drug, which includes heroin and LSD, to a less tightly regulated ‘Schedule III’ drug, which includes ketamine and some anabolic steroids. The decision marked a major policy shift by the federal government and while it would neither make the substance legal nor decriminalize it on a federal level, it would loosen quite a few restrictions around it and add fresh arguments for supporters of ballot measures seeking to legalize cannabis in states where it is still illegal. The process is lengthy and complex and will stretch well into the next year, but as the DEA finalizes its review, stakeholders from across the industry are closely monitoring developments.

Another encouraging development came in the form of a tweet from President-elect Donald Trump, in which he expressed support for a recreational cannabis legalization ballot initiative in his home state of Florida. He also backed up the marijuana industry’s access to the banking system and the ongoing federal cannabis rescheduling process. Whether this support will actually translate into action when Trump takes office for his second term remains to be seen.

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However, 2024 ended with a slightly sour taste in the mouth of America’s cannabis stakeholders, as Florida’s cannabis legalization ballot measure failed to pass, despite historic levels of funding and a rigorous advertising campaign. This was a major blow to the industry as the Sunshine State was expected to become a $6 billion cannabis market by 2026, had Amendment 3 succeeded in meeting the required 60% threshold.

The setback inevitably impacted cannabis stocks, which witnessed a downturn following the news of the rejection. Amplify Alternative Harvest ETF, the first US ETF to target the global cannabis sector has fallen by over 31.6% since November 4, closing at $2.27 on December 24, 2024.

As of the writing of this article, 24 states have legalized recreational weed in America, in addition to the District of Columbia. However, possessing or selling marijuana remains a crime under federal law, punishable by prison time and fines.

To collect data for this article, we scanned Insider Monkey’s database of 900 hedge funds and picked the top 11 companies operating in the cannabis sector with the highest number of hedge fund investors. When two or more companies had the same number of hedge funds investing in them, we ranked them by the revenue of their last financial year instead. Following are the Best Marijuana Stocks According to Most Hedge Funds.

At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

The skyline of a major metropolitan center, dotted with commercial real estate properties.

Number of Hedge Fund Holders: 6

Next on our list of the Best Marijuana Stocks is Chicago Atlantic Real Estate Finance, Inc. (NASDAQ:REFI), a market-leading commercial mortgage REIT utilizing significant real estate, credit, and cannabis expertise to originate senior secured loans primarily to state-licensed cannabis operators in limited-license states in the United States.

Chicago Atlantic Real Estate Finance, Inc. (NASDAQ:REFI) had a strong Q3 2024, reporting revenue of $14.16 million, a 4.6% YoY increase, and beating the analysts’ estimates by over $265,000. Net income also grew by 19% YoY to reach $11.2 million. The company ended the quarter with $362.3 million in total loan principal across 29 companies with an average yield of 18.3%.

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Chicago Atlantic Real Estate Finance, Inc. (NASDAQ:REFI) recently declared a regular Q4 dividend of $0.47 per share, plus a special cash dividend of $0.18 per common share. The special dividend is required for the company to comply with the country’s federal income tax rules for REITs. The firm has chosen to be taxed as a commercial mortgage real estate investment trust (REIT), so it isn’t required to pay corporate taxes. This allows it to distribute 90% of its taxable income to stockholders, making it a great option for investors looking for a regular income.

Also in October, Chicago Atlantic Real Estate Finance, Inc. (NASDAQ:REFI) secured a $50 million unsecured term loan with a fixed interest rate of 9% and received an investment-grade BBB+ rating from Egan-Jones, giving it liquidity of over $75 million to fund new investments.

Shares of Chicago Atlantic Real Estate Finance, Inc. (NASDAQ:REFI) were held by 6 hedge funds in the IM database at the end of Q3 2024, with Two Sigma Advisors holding the largest stake of 188,400 shares, valued at over $2.92 million.

Overall REFI ranks 9th on our list of the best marijuana stocks to buy according to hedge funds. While we acknowledge the potential of REFI as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than REFI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.