Stocks move in cycles and right now there is a clear cycle emerging in the cannabis sector.
This cycle is simple to understand and easy to follow, but incredibly powerful.
Groundbreaking cannabis legislation hits the wire and a group of cannabis stocks soar.
This cycle was on display again last week on the most important day in the history of the cannabis industry.
On January 1, California legalized cannabis, giving birth to a $4 billion industry virtually overnight.
The legislative breakthrough sent US cannabis stocks are surging. For example, Potnetwork Holdings (OTC: POTN), a US-based cannabis company that specializes in cannabinoid infused consumer products, is up more than 300% in the last four weeks.
As you can see, early investors were rewarded handsomely for buying ahead of the curve.
If you missed out on the big rally, don’t worry. It’s not too late to cash in on California.
Cannabis Sales Expected to Explode to $4 Billion in Three Years
California is already the largest cannabis market in the world. This west coast giant’s legal and illegal cannabis market did around $8 billion in sales in 2016, with 75% of that total coming from illegal sales.
Legalizing recreational is expected to quickly chip into illegal sales and grow into a $4 billion annual market within a few years, from basically $0 today.
That is a potential revenue and profit windfall for cannabis companies ready to capitalize.
This should be a strong tailwind for US cannabis stocks for the next two years as the industry continues to expand.
Cannabis Stocks are Getting Billions in Free Advertising
California’s recreational cannabis industry has gone viral. Cannabis has been one of the top trending stories in 2018. That has been great for the cannabis sector because it is attracting a whole new class of potential investors.
That’s the biggest reason billions in new capital flowed into cannabis stocks in the first few weeks of the year. Investors that have never been willing to give this sector a chance are getting interested in cannabis stocks as the industry gains credibility.
Those two powerful reasons are why I am bullish on US cannabis stocks right now.
This is the perfect time to invest.
The sector just emerged out of a nasty bear market and has major momentum.
This looks like a long-term bottom to me and the beginning of a new bull market in US cannabis stocks, all being triggered by California.
Below is a list of six US cannabis stocks that are already cashing in on California’s new recreational program.
1. Kush Bottles (KSHB)
Headquartered: Santa Clara, CA
Market Cap: $336M
About: Kush Bottles sells packaging products to the US cannabis industry.
2. Terra Tech (TRTC)
Headquartered: Irvine, CA
Market Cap: $272M
About: Terra Tech owns a line of dispensaries in California and Nevada under the brand name Blum.
3. Innovative Industries Properties
Headquartered: San Diego, CA
Market Cap: $117M
About: Innovative Property Resources leases cannabis greenhouses to cultivation companies looking to ramp production.
4. Grow Generation (GRWG)
Headquartered: Denver, CO
Market Cap: $114M
About: Growgeneration operates more than a dozen retail stores in Colorado and California that sell hydroponic and organic gardening supplies to cannabis growers.
5. Americann (ACAN)
Headquartered: Denver, CO
Market Cap: $70M
About: Americann (ACAN) is shooting to become one of the largest cannabis growers on the East Coast with its ambitious plans to build a 1 million square foot cannabis greenhouse in Massachusetts.
6. Solistek (SLTK)
Headquartered: Carson, CA
Market Cap: $68M
About: Solistek sells specialty lighting equipment to the cannabis industry.
RISKS TO CONSIDER: Cannabis is still illegal on the federal level in the US. That makes US cannabis stocks vulnerable to legal risk and uncertainty.
ACTION TO TAKE: Look for California’s new recreational market to drive sales and lift shares into all-time highs by the end of the year.
Disclaimer: Michael Vodicka owns shares of POTN, KSHB, and TRTC.