3 Reasons It’s Not Too Late to Invest in Cannabis Stocks

2020 has been a great year to own technology stocks.

The NASDAQ 100 (QQQ) has gained 30% this year and many tech stocks such as Amazon (AMZN) and Apple (AAPL) traded into new all-time highs.

It makes sense. Technology is one of the few sectors that has benefited from the global quarantine as billions of consumers spend more time online.

However, while technology stocks have delivered big returns this year, the real champion of 2020 is the cannabis sector.

Cannabis stocks are quietly having a great year. A group of early industry leaders has delivered big gains so far in 2020.

  • Curaleaf Holdings (CSE: CURL, OTC: CURLF) is up 45% in 2020 and up 245% from its Covid-19 low.
  • Green Thumb Industries (CSE: GTII, OTC: GTBIF) is up 65% in 2020 and up 284% from the Covid-19 low.
  • Innovative Industrial Properties (NYSE: IIPR) is up 66% in 2020 and up 163% from the Covid-19 low.

Take a look at Green Thumb in the 2020 chart below.

These gains were driven by a few key factors.

  • Cannabis stocks had a terrible year in 2019 and were oversold.
  • The cannabis industry was recession-proof during COVID-19.
  • Sales are booming in 2020.

The strong performance has been great for current cannabis shareholders. However, for investors new to the sector it has created a dilemma. Buying a stock trading at or near the 52-week high can be intimidating. After all, isn’t the goal to buy low and sell high?

3 Reasons That It’s Not Too Late to Invest in Cannabis Stocks

Despite the big gain in 2020, it’s not too late to invest. Cannabis stocks should benefit from three powerful catalysts directly on the horizon – and it looks like the sector is setting up for another big rally.

The U.S. is Quietly on the Verge of a Cannabis Revolution

A total of eight states have recently legalized or could be legalizing cannabis within the next six months.

After legalizing in 2016, Maine began selling recreational cannabis with first-day sales coming in at $250,000.

On November 3, four U.S. states will be voting on legalization – New Jersey, Arizona, South Dakota, and Montana.

In addition to these four states, Pennsylvania governor Tom Wolf (D) just said he wants the state to go legal as soon as possible in order to make up for lost tax revenue.

New York Governor Andrew Cuomo just said he also wants to legalize cannabis soon to make up for Covid-related tax losses. Early word is that New York wants to legalize by April, setting the stage for sales to begin in 2022 or even sooner.

And finally, Vermont Governor Phil Scott just announced he will allow legislation to legalize recreational cannabis in the state. Sales are expected to begin in 2022.

The population of these eight states is about 42 million, a wave of legalization would likely create millions of new cannabis consumers that should generate billions in annual sales. This is why the U.S. cannabis industry is expected to explode in the next four years.

Here are some more details from mjbizdaily.com.

Retail sales of medical and recreational cannabis in the United States are on pace to eclipse $15 billion by the end of 2020, an increase of approximately 40% over 2019 sales figures, according to exclusive projections from the 2020 edition of the Marijuana Business Factbook.

Total U.S. sales could rise as high as $37 billion by 2024, according to exclusive projections from the latest Factbook, which was released Monday at MJBizConNEXT Direct.

Canada Sales Just Hit a New Record High

After getting off to a slow start because of high taxes and competition from the black market, Canada’s cannabis market continues to grow. August sales hit a new monthly record of $186 million. Big picture, the Canadian legal cannabis market is headed in the right direction.

Canadian cannabis sales grow to nearly CA$245 million in August

Mexico is on the Fast Track to Legalize

Mexico will most legalize recreational cannabis by the end of the year. As we have seen, legal cannabis markets take years to develop. But updating laws and legalizing is the first step.

Here are some more details from marijuanamoment.com.

The Mexican Senate will likely vote on a bill to legalize marijuana within the next two weeks, the chamber’s majority leader recently said.

It’s not clear if the legislation will go through the committee process or straight to the floor given that tight timeline. Zara Snapp, a legalization activist with the Instituto RIA and the coalition #RegulacionPorLaPaz, told Marijuana Moment that advocates have similarly heard from senators that the plan is to quickly pass the proposal and they’re “hopeful” that’s the case.

Mexico going legal would be important for two reasons.

First, Mexico could easily grow into a multi-billion dollar cannabis market. New Frontier Data, a leading cannabis market research firm, predicts that Mexico’s annual cannabis sales would be between $1.8 billion and $2 billion.

Second, Mexico would join Canada as the second country out of three countries in North America to legalize recreational cannabis. If it happens, this would place additional pressure on the U.S. to legalize as the only remaining country in North America where recreational cannabis is illegal at the federal level.

The North American Cannabis Revolution is Just Beginning

Cannabis stocks should continue to benefit from a number of strong tailwinds.

The North American cannabis market is expanding rapidly with more U.S. states set to go legal, Mexico is on the cusp of legalizing recreational cannabis at the federal level and Canadian cannabis sales just hit a new monthly record.

Cannabis Stock Trades’ model portfolio is up 32% YTD as of yesterday’s close. We’ve spent the year building positions that will benefit from Mexico’s potential legalization, Canada’s growing sales, and big votes happening in the United States.

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Best,
Michael Vodicka
Editor, Cannabis Stock Trades


About the Author & Cannabis Stock Trades

Michael Vodicka is an equity analyst with more than 20 years of experience trading and investing. His research has been featured in some of the industry’s most respected publications. He has been investing and leading investors in the cannabis sector since 2013.

Mr. Vodicka brings his expertise and guidance to the members of Cannabis Stock Trades.

Join Cannabis Stock Trades for Mr. Vodicka’s exclusive analysis, trade alerts, and model portfolio.