Cannabis Stocks Gain 6% in First Half of 2021

Cannabis stocks eked out a small gain in the first half of 2021. But the path to that small gain was quite bumpy.

The sector was on fire early in the year after the Democrats took the White House and both chambers of Congress. At one point in early February, the Advisor Shares US Cannabis ETF (NYSE: MSOS) was up more than 50%.

However, after hitting the new 52-week high, cannabis stocks fell into a bear market. After falling for most of the last three months, the Advisor Shares US Cannabis ETF closed the first half of 2021 with a 6% gain.

6-Month Chart Advisor Shares US Cannabis ETF (NYSE: MSOS)

Canadian cannabis stocks performed mostly the same, with the Canadian Marijuana Index gaining 6%.

The weakness that hit cannabis stocks was driven by two key factors.

  • Cannabis stocks saw huge gains in 2020 and that triggered a round of profit-taking that sent cannabis stocks into a bear market.
  • Uncertainty whether new cannabis legislation will pass in 2021.

Despite the volatile first half of the year, cannabis stocks are setting up for a strong performance in the second half of 2021. We see six powerful catalysts directly on the horizon, and that should give cannabis stocks a big boost in the next six months.

6 Powerful Catalysts in the Second Half of 2021

#1 – Cannabis Stocks Looking Bullish On The Chart

After the recent decline, cannabis stocks are looking bullish on the chart. The sector appears to be setting a long-term bottom that could represent an attractive entry point. You can see that in the chart below.

The Advisor Shares US Cannabis ETF (MSOS) has created a key level of support between $35 and $40, and shares have been rebounding from this key level of support. I expect shares to continue rebounding from this level and continue advancing in the second half of the year.

12-Month Chart Advisor Shares US Cannabis ETF (MSOS)

#2 – More U.S. States Going Legal

2021 has been a big year for more states going legal. In the first half of 2021, four more states have legalized recreational cannabis, including New York, New Jersey, Connecticut, and New Mexico.

Looking to the second half of 2021, more states should follow, including Pennsylvania and Rhode Island. With more states going legal, the U.S. cannabis industry should benefit from more sales growth in the second half of the year.

#3 – Amazon Will Lobby Congress For Legalization

Amazon made a big splash in the cannabis industry two weeks ago after announcing its support for federal cannabis legalization. Amazon wants to achieve this goal through the More Act, a cannabis bill currently in Congress that would essentially legalize cannabis at the federal level.

This is good news for the U.S. cannabis industry. Amazon is one of the most powerful and influential companies in the world with a strong history of achieving its goals. Amazon supporting legalization increases the probability that significant cannabis reform will pass in the next 12 months. If the More Act passes, I expect it to give cannabis stocks a big jolt higher.

#4 – Supreme Court Justice Clarence Thomas Calls For Cannabis Reform

The U.S. cannabis industry gained another powerful ally this week. U.S. Supreme Court Justice Clarence Thomas issued a statement calling for reform in federal cannabis laws.

This isn’t a game-changer, but it’s a solid step in the right direction. It signals that the highest-ranking lawmakers recognize how much the U.S. needs to update cannabis laws. And it also comes from one of the most conservative Justices, highlighting how cannabis reform is largely supported on both sides of the aisle. On both points, Justice Thomas’ statement increases the probability of significant cannabis reform in 2021.

#5 – High Potential For Cannabis Reform

Cannabis investors were disappointed in the lack of cannabis reform in the first half of 2021. But heading into the second half of the year I still see a strong probability for meaningful cannabis reform. There are multiple cannabis bills in Congress right now that would have a big impact on the U.S. cannabis industry, including the More Act and the Safe Act. There is support for both of these bills from both sides of the aisle and having Amazon lobbying in favor of the More Act strongly increases its probability of success.

#6 – U.S. Cannabis Sales Are On Fire

The U.S. cannabis industry is on fire. The industry leaders are delivering incredible sales growth that is virtually unmatched by any other industry. The recent quarterly earnings season revealed this.

Here are a few examples:

  • Growgen (GRWG) grew revenue by 173% from last year
  • Curaleaf Holdings (CURLF) grew revenue 170% from last year
  • Trulieve (TCNNF) grew revenue 106% from last year
  • Green Thumb Industries (GTBIF) grew revenue 95% from last year

The strong quarterly results show just how quickly the U.S. cannabis industry is growing right now.

And, moving forward, cannabis sales should continue to expand rapidly as more states go legal.

The Big Picture on the Second Half of 2021

Cannabis stocks still managed to eke out a small gain in the first half of 2021 despite the recent bear market.

Looking forward, that weakness has actually created a great opportunity. These periods of weakness have historically been attractive entry points in the past. In addition, I see six powerful catalysts that I expect to fuel cannabis stocks in the second half of 2021.


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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