If you love a good bargain, now is the time to take a closer look at cannabis stocks.
Much like the broader stock market, cannabis stocks have been battered by coronavirus.
The Alternative Harvest ETF (MJ) just hit a new 52-week low. Take a look at the 2-year chart below.
That’s the bad news. Here’s the good news.
The recent sell-off has created a rare opportunity. Today I am going to share four reasons it’s a good time to buy cannabis stocks.
4 Reasons It’s a Good Time to Buy Cannabis Stocks
#1. The S&P 500 Is the Most Oversold in 5 Years
Cannabis stocks have been struggling because of weakness in the broader stock market. That’s why I expect any stability or strength in the S&P 500 to be good for cannabis stocks. On that note, the S&P 500 is the most oversold it has been in the last five years. The relative strength index (RSI) is a technical indicator that measures when a stock is overbought or oversold.
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The RSI is signaling that the S&P 500 is by far the most oversold it has been since 2015. The last time the S&P 500 was this oversold was the financial crisis of 2009, setting the stage for one of the longest bull markets in history. Take a look at the S&P 500 below – this is a 5-year chart.
#2. The Cannabis Sector Is the Most Oversold It’s Ever Been
Much like the broader stock market, cannabis stocks have been struggling. However, that has created a rare opportunity. The relative strength index (RSI) on the Alternative Harvest ETF (MJ) just hit a 2-year low. For investors who love a good bargain and love buying low, this is an important signal. It tells me that cannabis stocks are due for a big bounce.
#3. Cannabis Sales Spiked on Coronavirus
While many industries are seeing sales plummet because of coronavirus, cannabis sales are hitting new records. Here are some more details from the hollywoodreporter.com.
The Sherbinskis dispensary on Fairfax, California, which has partnered with Post Malone in the past, is having its best week ever in sales and delivery is busier “than ever before,” the shop reports. As for Caliva (Jay-Z is its chief brand strategist), its delivery business is seeing double-digit growth in March so far. “We have seen an increase in our delivery services across all of our locations, with record-breaking sales over the past two weeks,” says president Steve Allan.
#4. 12 US States Going Legal in 2020?
2020 is shaping up to be a huge year for the US cannabis industry. Up to 12 states could be voting to legalize medical or recreational cannabis this year. Here’s a cool map from mjbizdaily.com.
As you can see, there are plenty of reasons to be optimistic about the cannabis industry and cannabis stocks. In fact, all factors considered, this looks like a great time to buy low.
How to Play the Trend?
One way to play the trend is with Canopy Growth (CGC), the world’s largest cannabis company with a market cap of $4 billion. Get the next trade alert for CGC.
Canopy is headquartered in Canada, but this is a global cannabis company with operations in the US, Germany and South America.
Canopy just appointed a new CEO who is making a big impact. He is cutting costs, closing unused production capacity and shedding unprofitable deals. Look for all these moves to help Canopy expand its margins and move into profitability.
In the meantime, Canopy recently hit a new 52-week low as the broader stock market plunged to its own 52-week low.
In the long run, the big dip looks like a great opportunity to buy low.
The Big Picture
Coronavirus has been wreaking havoc on the broader stock market and cannabis stocks. However, after a series of steep declines, this looks like one of the best times to buy cannabis stocks in the last few years.
Author Michael Vodicka owns shares of Canopy Growth Corp (CGC, WEED).
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.
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