Marijuana is now legalized in some form in 35 states and the District of Columbia—medically, recreationally, or both. Canada legalized cannabis across the country in 2018, five years after Uruguay did. As such, investors are scrambling to get a piece of an industry that has the potential to grow, with sales expected to reach as high as $47 billion by 2025, according to Arcview Group.

Because there's still a lot of speculation about the industry, developers and providers tend to have stocks that trade over-the-counter (OTC) with small market capitalizations. This means investors have to bear the brunt of all the risks associated with penny stocks. And the marijuana industry can still live or die at the whims of law enforcement—some states still consider the drug an illegal substance.

With many companies newly introduced to the market and trading at low valuations, penny stocks can be an easy and optimal opportunity on which investors can capitalize. We've provided a list of the top-performing marijuana penny stocks below that trade across all market exchanges—with penny stocks generally characterized as trading at a value of up to $5. The list is compiled using a one-year return, providing insight into the sector and sub-sector where these companies are active in their business operations.

The Bottom Line

The potential for capital appreciation in the cannabis industry given the widespread legalization occurring is exponential. The industry seems to be steadily transforming and evolving, with legalization in Canada and a growing number of states increasing their marijuana acceptance. What was once essentially a black-market sector is now becoming more mainstream to all types of investors.

But with the industry still in its infancy, however, investors can find many marijuana stocks for approximately $1 per share—but like all penny stocks, they're susceptible to manipulation and fraud by promoters and corporate insiders. But given their strong underlying fundamentals and integrated business operations, the companies above could be among some of the most likely candidates to emerge and gain a stronger foothold across the industry as a whole.