Weed Just Won Big Time
The coronavirus prediction we made last week in these pages has come true…
And unlike most, it’s actually a positive one.
Last week, I shared research that said in the face of a coronavirus quarantine, weed wins.
And sure enough, cannabis sales have been ramping up in a major way in the face of the COVID-19 pandemic.
“Our checks across North America [have been] consistent: Regardless of region, cannabis purchases have accelerated… While likely on pantry loading, it’s not unreasonable to think there will be some boost to per capita consumption as people stay at home longer,” Bank of America analyst Christopher Carey said in a research note to clients.
That doesn’t tell the whole story.
On March 16, for example, adult-use cannabis sales more than doubled from the same day in 2019 in California and Washington state.
Many dispensaries across the U.S. and Canada are reporting their best weeks ever.
In Canada, Marijuana Business Daily is reporting “unprecedented” surges in sales.
Critically, cannabis operators have been working hard to ensure that the supply chain isn’t disrupted in the face of the demand increase.
Likewise, cannabis is less likely than other businesses to have operations disrupted in this fast-escalating environment.
San Francisco, the first major U.S. city to go on a full-blown lockdown, has assured residents that their access to cannabis isn’t at risk.
“Cannabis is an essential medicine for many San Francisco residents. Dispensaries can continue to operate as essential businesses during this time, while practicing social distancing and other public health recommendations,” the city’s Department of Public Health said in a statement.
Similar classification of cannabis production and dispensary businesses as essential is happening in other jurisdictions.
One big benefit the industry already enjoys is an existing infrastructure for cannabis delivery in many states. As other similar businesses — like liquor stores — scramble to find ways to adapt to the current environment, dispensaries are a step ahead.
Without a doubt, the market for cannabis stocks remains linked to the broader stock market amid the COVID-19 sell-off. But from a business standpoint, the strongest pot operators are well positioned to survive and thrive in the current environment.
Another not-so-surprising prediction from last week that’s coming true is the push for a sweeping stimulus package meant to help small businesses — like penny pot stocks.
At this point, because cannabis remains illegal at the federal level, it’s not totally clear whether cannabis pure plays will be direct beneficiaries of these programs. But we dramatically ramped up our exposure to indirect and pick-and-shovel plays in the months leading up to this crisis, which gives our portfolio better positioning than most pot portfolios.
I’ll let you know as things progress on that front.
At this point, it’s a safe bet that the market turbulence isn’t over. The best strategy is to wait out the panic and take advantage of the buying opportunities on the other side.
Because, believe me, there will be some incredible opportunities on the other side of this crisis.
To a bright future,