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Yesterday most marijuana stocks switched to a bullish trend after being in the woods for a long while. The surge was slow but significant enough to get the attention of market participants who were satisfied with the outcome of the trading session. Market analysts observing the upward trend were hopeful that pot stocks would continue to gain momentum in the near future. For example, the Dow Jones Industrial Average and the Nasdaq Composite soared by 0.5% to 1%.
The bump on Thursday gave hope to pot investors who had begun to despair on the stocks. Most marijuana stocks have been struggling due to challenges in the industry such as poor cashflow, poor management, and stiff competition in the industry.
As much as the COVID- 19 pandemic has done a number on most traditional stocks, the marijuana industry seems to have survived this one hit even as it continues to grapple with its unique challenges.
The bump yesterday was very welcome and seems to have something to do with the politics of the day. If this is the case it appears that the upward trend will persist for a while.
Why Are Marijuana Stocks Soaring?
Marijuana stocks have gained steadily in the last 24 hours. Industry heavy- weight Tilray (NASDAQ:TLRY) advanced at 18% while Canopy Growth (NYSE:CGC) advanced with a 14% increase. The two were followed closely by Cronos Group (NASDAQ:CRON) and Aphria (NASDAQ:APHA) both posting a 10% gain.
What Caused This Forward Momentum?
This move happened soon after the US vice presidential debate which happened on Wednesday. During the debate the Democratic candidate, Sen. Kamala Harris stated that should a Biden-Harris administration happen, marijuana will be decriminalized and criminal records relating to marijuana possession would be expunged.
It seems that investors were waiting to hear such news for a long time. Soon after the news caught fire marijuana stocks began climbing.
Cannabis is illegal under federal law in the US. However, federal authorities have desisted from arresting or imposing fines on the possession of small amounts of marijuana. So far, 33 states have legalized cannabis for medicinal use while 11 states have legalized it recreational use as well. Apart from that several other states are having discussions on taking a similar route.
The marijuana industry is a heavily regulated one due to the federal restrictions on cannabis. Being a schedule 1 drug, the legal framework is very tight and hence prohibitive for investors. As the federal government continues to warm up the idea of legalization, investors are becoming more comfortable with putting their monies in pot stocks. Consequently, it appears that an affirmative declaration on pot legalization could potentially bump the value of stocks in the industry. However, some pot stocks might still suffer.
Winners and Losers
As much as most pot stocks gained value yesterday, we might begin witnessing some dropping in value as they pave way for the dominant ones to take the day. Pot companies that have the right systems in place such as great financial management, good cash flow, and a solid financial standing will have a chance to grow while the weaker ones may succumb to mergers, acquisitions, or complete folding up. At the end of the day there has to be winners and losers in the game.
With that, here is an overview of what the marijuana stock market currently looks like.
1. Village Farms International Inc.
This is a Canadian-based agricultural producer that recently ventured into cannabis. In Q2, this company recorded a 93.8% decline in net income even though the company reported that they had not experienced any material disruptions related to the COVID-19 pandemic. In the past this company has shown positive growth and it is likely that this stock will bounce back up in the near future.
2. Harvest Health & Recreation Inc.
This is another Canadian-based vertically integrated cannabis company that has been experiencing steady growth. With the right fundamentals in place this will be a stock to watch in 2020.
3. Neptune Wellness Solutions Inc.
Neptune Wellness offers cannabinoid- based health and wellness services. In the last quarter which ended in June 30 2020 the company posted a positive revenue growth of 389.9%. They recently launched a pulse oximeter called Neptune Halo to support the fight against the COVID-19 pandemic. This appears to be a well-managed,tech- savvy cannabis company that may get the attention of investors in the near future.
4. Cresco Labs Inc.
Cresco Labs is a vertically integrated cannabis company that has managed to attract a huge following in the niche. The company is based in Chicago Illinois and has a presence in seven states where medicinal cannabis has been legalized. The stock has been gaining momentum and is likely to break past previous ceilings to achieve new highs.
5. Planet 13 Holdings Inc.
This is a holding company that works through subsidiaries to develop cannabinoid- based therapies. They run the largest marijuana dispensary which is based in Las Vegas. The growth of this company has been steady and reassuring for pot investors.
With the bullish trend persisting marijuana stocks are likely to regain the glory that has remained evasive since the inception of the legal marijuana industry.