The cannabis investment landscape continues to shift in 2024, with ancillary cannabis companies emerging as the most resilient and promising segment of the market. While volatility persists across American and Canadian cannabis operator indices, ancillary stocks have demonstrated consistent strength, reflecting investor preference for businesses less exposed to plant-touching risks.
According to the latest index data from New Cannabis Ventures, ancillary cannabis stocks led sector gains in September, continuing their dominance in a year that has seen uneven performance across the board. As the industry awaits key federal developments—including potential rescheduling of cannabis by the DEA—ancillary players may be best positioned to weather uncertainty and capitalize on long-term growth.
A Look at the Three Key Cannabis Stock Indices
New Cannabis Ventures tracks three primary equity benchmarks: the American Cannabis Operator Index, the Ancillary Cannabis Index, and the Canadian Cannabis LP Index. Each reflects the performance of different segments of the North American cannabis market.
Ancillary Cannabis Index: 2024’s Clear Standout
Ancillary cannabis companies—those that provide products, services, or technology to the cannabis industry without directly handling the plant—have proven to be the strongest performing sub-sector in 2024.
September 2024 Highlights:
- The Ancillary Cannabis Index rose 4.0%, closing at 16.12.
- The index is now up 20.5% year-to-date, outperforming both plant-touching operator indices.
- This follows strong gains in March and July, with a minor pullback in April and August.
Despite a sharp decline in 2022 and a modest dip in 2023, ancillary cannabis stocks have rebounded sharply. While the index remains down nearly 84% from its inception in March 2021, recent trends suggest a more sustainable recovery.
Top and Bottom Performers in September:
- Best performer: Scotts Miracle-Gro (NASDAQ: SMG), up 22.2%
- Worst performer: WM Technology (NASDAQ: MAPS), down 12.1%
Looking ahead to October, Ispire Technology (NASDAQ: ISPR) and Leafly (NASDAQ: LFLY) are set to rejoin the index, while WM Technology will be removed due to underperformance.
Why Ancillary Stocks Are Attracting Investors:
Ancillary companies typically face fewer regulatory constraints and are less exposed to state-by-state cannabis licensing issues. Many operate in ancillary verticals like:
- Equipment manufacturing
- Data analytics
- Packaging and logistics
- Software and technology platforms
These companies can scale more easily and access traditional capital markets, making them more attractive during periods of policy uncertainty.
American Cannabis Operator Index: A Volatile Climb
The American Cannabis Operator Index, which tracks U.S.-based multistate operators (MSOs), delivered a strong performance in September, rising 8.5% to 15.13. This rebound followed a difficult August, when sentiment dropped due to the DEA’s delayed action on rescheduling cannabis—a key policy decision that has kept institutional investors on the sidelines.
Year-to-Date Performance:
- The index is down 1.4% in 2024 despite its September rally.
- A high in April was followed by weakness in May through August before bouncing back.
- The index has regained some ground from its all-time low set in August 2023.
September’s Notable Stock Movers:
- Top performer: Trulieve (OTC: TCNNF), rising 40.2%
- Worst performer: Ascend Wellness (OTC: AAWH), falling 13.1%
Index Changes:
Two companies, Grown Rogue (OTC: GRUSF) and Jushi Holdings (OTC: JUSHF), will exit the index in October due to low trading volume, reducing the number of members to 10.
Sector Challenges:
Despite operational progress, MSOs continue to face obstacles such as:
- Limited access to banking and credit
- State-by-state compliance burdens
- Competitive pricing pressure and market saturation in mature states
- Lack of federal tax reform (particularly IRC Section 280E)
While investor sentiment can quickly shift with policy developments, MSOs remain in a holding pattern, awaiting a clear signal on federal reform or rescheduling before institutional capital can flow in more meaningfully.
Canadian Cannabis LP Index: Still Searching for a Bottom
The Canadian Cannabis LP Index was the only major cannabis index to post a decline in September, falling 3.8% to 53.03. The index continues to struggle amid weak consumer demand, persistent oversupply, and ongoing financial challenges across licensed producers.
Year-to-Date Performance:
- The index is down 12.9% in 2024, following declines of 16.2% in 2023 and 62.8% in 2022.
- Canadian LPs remain far below their 2018-2019 highs, with many trading at pennies per share.
September’s Key Movers:
- Aurora Cannabis (TSX: ACB): –2.6%
- Canopy Growth (TSX: WEED): –7.7%
- Cronos Group (TSX: CRON): –1.3%
- Organigram (TSX: OGI): –1.2%
- Tilray Brands (TSX: TLRY): +4.8%
Index Composition:
Only five of the nine companies in the index closed above C$1.00 at the end of September. Two companies fell below C$0.25, indicating sustained investor pessimism.
Adastra Holdings (CSE: XTRX) has exited the index for October due to a low share price.
Outlook for Canadian LPs:
Canadian producers face fierce price compression, export uncertainty, and limited growth opportunities in their domestic market. Companies are attempting to reposition through:
- International expansion (particularly into Europe and Australia)
- Diversification into non-cannabis segments like beverages or CBD wellness
- Strategic M&A activity and operational consolidation
However, without significant changes to consumer behavior or regulatory frameworks, Canadian LPs may continue to underperform relative to their U.S. and ancillary counterparts.
Broader Market Trends and Takeaways
1. Ancillary Stocks Are Leading for a Reason
The continued outperformance of the Ancillary Cannabis Index highlights the resilience of companies that support—but do not directly touch—the plant. These firms benefit from broader industry growth without being subject to the same regulatory bottlenecks.
2. MSOs Show Potential But Remain Range-Bound
American cannabis operators are seeing occasional rallies, but performance remains choppy amid regulatory inertia and tax burdens. Companies that are improving margins and expanding strategically may outperform peers, but broad sector growth likely hinges on rescheduling or SAFE Banking legislation.
3. Canadian LPs Struggle to Regain Investor Confidence
After years of overvaluation and oversupply, Canadian LPs are still in recovery mode. With little domestic growth and tough global competition, only the most agile and diversified companies are likely to rebound in the near term.
Final Thoughts
September 2024 reinforced a growing theme in cannabis investing: resilience comes from diversification and strategic positioning, not just from holding licenses. Ancillary businesses are proving that supporting infrastructure and innovation can outperform cultivation and retail during periods of policy uncertainty and financial tightening.
For investors and operators alike, the focus should now shift to companies with strong balance sheets, operational discipline, and exposure to growth markets—regardless of whether they handle the plant directly.