The Cannabis Comeback
Where there’s smoke, there’s fire.
And cannabis stocks are on fire right now!
The S&P/MX International Cannabis Index, which tracks U.S. and Canadian legal pot stocks, has surged about 75% in the last 2½ months.
Just to put that in perspective, if it kept up that pace for a full year, the index would be on track for 1,100% gains in 2020.
What we’re witnessing isn’t out of nowhere. It’s been a long time in the making.
Lately, we’ve been in a challenging environment for cannabis stocks. From 2016–18, pot companies enjoyed a roaring bull market — one that inflated some pot stocks well beyond their realistic value.
Markets overcorrected for that in 2019, when virtually every cannabis name, good and bad, saw its share price get pummeled.
Cannabis operators who’d gotten hooked on cheap, easy access to capital suddenly realized that they had to mature their businesses fast.
In the past couple of years, many cannabis companies have transformed from tiny speculative penny stocks to robust enterprises with thousands of employees and hundreds of millions of dollars in revenues. Many are profitable.
And that means the rally we’re witnessing in marijuana stocks in 2020 is totally different from the frothy speculation of 2016 when cannabis investing only just started becoming accessible — this year, it’s based on bona fide business fundamentals.
At this point, I think that the upward move in cannabis stocks is only just beginning.
Strange as it seems, the COVID-19 pandemic may actually wind up being a critical catalyst that drives the adoption of nationwide legalization and stock price appreciation.
States desperately need revenues and job creation in the midst of the worst economic rout in most Americans’ lifetimes.
In New York, for example, experts believe that annual cannabis tax receipts could be as high as $1 billion a year. That would go a long way toward filling the gaps left by the coronavirus.
At the same time, health breakthroughs in cannabis-derived therapies could become a critical piece of the puzzle researchers are trying to put together to cure COVID-19 and other terrible diseases.
And a huge swath of the population is stuck at home and stressed out, driving demand for recreational cannabis all across the country.
I think it’s very possible that cannabis takes the lead as the single best-performing market sector in 2020.
To a bright future,