Cannabis stocks are lit — and the industry is looking to go higher with legalization
Everyone’s getting ready for US legalization of cannabis, including Ernie. On Feb. 9, two big announcements in the cannabis industry sent pot stocks higher:
- Tilray ($TLRY) announced a deal to supply medical cannabis in the UK — shares up 40%.
- Canopy Growth ($CGC) reported stronger than expected earnings and expects — shares up 13%.
Go where the fire is lit
In Nov, Biden’s victory set off a surge in cannabis stocks as chances of legalization increased under a Biden administration. But the bigger win came in Jan. when a Georgia vote gave Democrats control of both the House and Senate — giving Biden even more power to pass bills through — i.e. Cannabis legalization bills, which would have had little luck passing with Republican control.
In 2021 alone, Tilray’s stock is up 350%. But it’s not just Tilray, the whole cannabis industry is on fire with the cannabis ETF, ETFMG Alternative Harvest ($MJ), up 93% in 2021. But Tilray lacks one thing which could drag it down as states begin to legalize — a lack of US presence.
Ready, set, legalize
Medicinal cannabis is legal in 36 states but the drug is still illegal on a federal level — classified as schedule I drug, alongside heroin. A newly appointed Biden could be the person to push legalization through….
- Despite being against drugs for the majority of his political career, Biden stated in his 2020 election campaign that cannabis should be legalized in his 2020 election campaign.
- On Feb. 1, Democratic Senator Chuck Schumer announced his intentions to make cannabis decriminalization a key priority.
US legalization would also provide cannabis companies much needed access to banking services. US Banks aren’t currently allowed to provide banking services to cannabis companies — for fear of prosecution.
This forces cannabis companies to conduct the majority of their business in cash — increasing the risk of robbery and increasing additional costs to their business.
For investors… Legalization is setting off another fire
For the newly appointed President, vaccine distribution and stimulus packages take priority — but decriminalization likely isn’t far off.
Companies with a stronger US presence could benefit the most from legalization and these are the largest US cannabis companies by sales…
- Curaleaf ($CURLF) — $221m sales in 2019, growth of 246%.
- Green Thumb Industries ($GTBIF) — $216m sales in 2019, growth of 186%.
- Cresco Labs ($CRLBF) — $149m sales in 2019, growth of 326%.
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