Pay Attention to the SAFE Banking Act & These 5 Stocks

Updated on December 11, 2019

The US cannabis industry is on the verge of a fundamental transformation as a game-changing piece of legislation is close to rocking the canna-banking world.

In early April, US Senators Jeff Merkley (D-OR) and Cory Gardner (R-CO) reintroduced the Secure and Fair Enforcement (SAFE) Banking Act in the US Senate.

Under current laws, federally insured banks such as JP Morgan (NYSE: JPM), Bank of America (NYSE: BAC), Wells Fargo (NYSE: WFC) and Citibank (NYSE: C) are forbidden from offering their services to businesses in the cannabis sector.

Current restrictions have created a huge problem for cannabis companies. It prevents them from accessing basic banking services like checking and savings accounts, lines of credit, and commercial loans while forcing them to handle dangerous amounts of cash.

The SAFE Banking Act would solve this problem, essentially making it legal for big, federally-backed US banks to offer their services to the cannabis industry.

“[Under the SAFE Banking Act] Federal banking regulators would be prohibited from sanctioning banks for working with state-compliant cannabis businesses or terminating their services, taking action on loans granted to those businesses or limiting a depository institution’s access to the Deposit Insurance Fund.

The bill would also protect ancillary businesses that work with the cannabis industry from being charged with money laundering and other financial crimes. Further, the legislation requires the Financial Institution Council to develop guidance to help credit unions and banks understand how to legally serve cannabis businesses.”

Cannabis Business Times – April 15, 2019

If this bipartisan bill with over 20 red and blue cosponsors passes, it would solve the second biggest problem for the cannabis industry behind federal legalization. This could set off an explosive move for US cannabis stocks.

Will the SAFE Banking Act Even Pass?

Cannabis proponents are pushing hard to move this bill along. While some may question if it can get the necessary votes, I think the probability of passing is high for three reasons:

1 – The House version of the bill was already approved by the House Financial Services Committee last month and has 165 cosponsors.

2 – The Senate version of the SAFE Banking Act also has bipartisan support with 20 cosponsors representing both sides of the aisle.

Treasury Secretary Steven Mnuchin, one of the most powerful players in the US federal banking game, recently called for legislation to address the banking issues weighing on the cannabis industry.

“There is not a Treasury solution to this. There is not a regulator solution to this,” said Mnuchin. “If this is something that Congress wants to look at on a bipartisan basis, I’d encourage you to do this. This is something where there is a conflict between federal and state law that we and the regulators have no way of dealing with.”

3 – The cannabis industry is no longer a polarizing issue.

A recent poll from the PEW Research Center shows that 61% of Americans, both Republican and Democrat voters, now support cannabis legalization.

If the SAFE Act passes, and I expect it to by the end of the year, it could send certain US cannabis stocks soaring. That means that the time to invest is right now – before the average Joe figures out how big this event really is and prematurely drives up the stock prices.

However, despite the incredible opportunity directly on the horizon, investors should be warned that not all US cannabis stocks will have the same momentum.

Which Stocks Will See The Biggest Move If the SAFE Banking Act Passes?

While many stocks may see positive moves if the SAFE Banking Act passes, I believe that the biggest opportunities will come from the cannabis stocks that possess these four key traits.

  • Largest cannabis companies in the industry
  • Vertically integrated
  • Multi-state operations
  • Expanding internationally

Not only will these stocks have the best footing for growth, but the stocks with these traits also have the greatest need for banking reform.

I think the stocks below check all the boxes – they are the largest and most powerful cannabis companies with a vertical model, multi-state reach, are expanding into new international markets, and have a great need for better banking access.

Cresco Labs (CRLBF)

Market Cap: 708M
Average Volume: 363,942
YTD $ Change: -14.02%

Cresco is also one of the largest cannabis companies in the US and a direct play on Illinois’ goal to legalize recreational cannabis in 2019. The company’s global headquarters are in Chicago. Cresco operates three cultivation and processing facilities in Illinois and five dispensaries. Cresco also just closed the largest acquisition in the history of the US cannabis industry, investing $850 million in a California-based cannabis company that will place its branded products in more than 725 dispensaries.

Trulieve Cannabis Corp (TCNNF)

Market Cap: 1.3B
Average Volume: 232,468
YTD $ Change: 50.25%

Trulieve Cannabis Corp. is a major cannabis player and a direct play on Florida’s high-growth cannabis market. Trulieve recently scored a big legal victory that will enable it to expand from 27 dispensaries in Florida to 49, almost doubling their reach overnight. This expansion will help Trulieve build on its early market leadership in Florida and expand into other high-growth cannabis states such as California and Nevada.

Harvest Health & Recreation (HRVSF)

Market Cap: 693M
Average Volume: 332,834
YTD $ Change: -54.48%

Harvest has one of the largest footprints in the United States. From cultivation and manufacturing to in-house legal and HR teams, Harvest has a strong vertical model. The company now has licenses in 11 states and big plans to expand in 2020.

Acreage Holdings (ACRGF)

Market Cap: 471M
Average Volume: 297,695
YTD $ Change: -72.59%

Acreage is one of the largest and most powerful cannabis companies in the US. This multi-state, vertically integrated cannabis company has a market cap of $2.5 billion and has some of the best political connections in the business.

Medmen Holdings (MMNFF)

Market Cap: 79M
Average Volume: 1,415,079
YTD $ Change: -86.45%

Headquartered in California, this company cultivates, distributes and retails recreational and medicinal cannabis. The company owns and operates 19 cutting-edge facilities in 5 key states with over 1,000 employees.

SAFE Banking Act Standout Stocks

I think that Trulieve Holdings (TCNNF) and Cresco Labs (CRLBF) will be the star standouts of the SAFE Banking Act breakout. These are two of the fastest-growing companies and ones that CST members are paying close attention to.

The Big Picture on the SAFE Act and the Cannabis Sector

The SAFE Act isn’t getting much coverage from the mainstream media and that’s a good thing for self-direct traders that truly UNDERSTAND how big this event really is.

This could be a huge catalyst for the cannabis sector. I expect this bill to pass this year and if it does, certain cannabis stocks could see moves like we’ve never seen before.

Remember that not all stocks will have the same momentum from this event. Keep an eye on the five stocks above. I believe that these are the early cannabis industry leaders that will benefit the most from cannabis banking reform.

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*YTD % change as of the close on 12/11/19.