The Rise in Cannabis Stocks, By Paul James

For investors, this is obviously great news. But for those of us in the cannabis community, it’s probably even better.

People don’t invest in a market unless they have confidence in that industry. Even though cannabis is still in its infancy, investors are already keen on the impact this market can have. And the profits that are bound to come from it.

Perception of cannabis is rapidly changing before our eyes. Just ten years ago, we may not have assumed the legal market would have grown into what it is today. And even though there’s a lot of progress that still needs to be made, 2020 truly was a year for cannabis to celebrate.

The 2020 U.S. Elections

Cannabis stocks initially saw a jump when the 2020 U.S. election results began to roll in. Four more states (New Jersey, Arizona, Montana, and South Dakota) legalized recreational marijuana, giving more than one-third of U.S. citizens access to legal cannabis. Beyond that, this will also be the start of four more state-level industries.

Then came the news that Joe Biden had won the presidential election. With the Democrats now in the White House, the chances of the U.S. coming closer to legalization are higher. Even though Biden and his vice president Kamala Harris don’t show much interest in legalizing recreational cannabis, they have discussed decriminalization.

What most people don’t understand is that by decriminalizing marijuana, it no longer becomes a federally controlled substance. And, with that, federally run services (such as banks) are much more likely to work with cannabis businesses.

While it’s too early to tell whether or not Biden will follow through with federal decriminalization, the market feels confident that this industry will continue to progress with him in office.

This confidence was revealed when cannabis stocks went up after the 2020 U.S. election results. Upon the announcement of Biden’s win, some cannabis companies saw double digital gains. Aurora Cannabis alone rose by 50%. Canopy Growth went up 10% and Tilray went up 25%.

Admittedly, the stock market has been on an upward trend thanks to news of a COVID-19 vaccine. While some may point out cannabis is merely apart of this trend, it seems as though there’s a lot more at play here.

COVID-19 and Cannabis Stocks

When COVID-19 initially hit back in March, the stock market saw an unprecedented crash. While much of the world went into lockdown, only a select few businesses were deemed essential enough to stay open. In the United States, cannabis was one of these businesses and it proved to be extremely helpful for keeping this industry going.

COVID-19 did hurt overall cannabis sales. While individual sales boosted, most companies had limited people coming in and out of their dispensaries - putting a dip in overall sales. However, the fact that these businesses were allowed to remain open made all the difference. Many companies started implementing curbside pick-up and delivery options - both of which have proven to be extremely popular and will probably stay even when the novel coronavirus is gone.

Innovative Industrial Properties, a cannabis-focused real estate investment trust (REIT), was one of the first to reveal COVID-19’s effects on the stock market after their significant first-quarter reports. Revenue soared by 210% and shares surged 118%. Adjusted funds for operation (FFO) jumped 107%.

Admittedly, most cannabis companies didn’t see such upward momentum when COVID-19 first hit. Most took a big dip along with the rest of the stock market. Luckily, cannabis stocks never went up in smoke and were quick to bounce back up throughout the second and third quarter of 2020.

Shares were selling for relatively the same price as they were prior to the market crash. While this wasn’t necessarily newsworthy, it did prove that this industry holds enough of a supportive market to carry on through such difficult times.

“The industry has been remarkably resilient during this pandemic,” Matt Karnes, founder of GreenWave Advisors, told the Ticker Tape. And that resilience is exactly what the market needed in order to climb throughout the 2020 election and afterward.

After the Election and Onwards

Just when we thought 2020 couldn’t get any better for cannabis, more news came in early-December. The United Nations (UN) central drug policy-making body voted to remove cannabis as a Schedule IV substance after 59 years of holding that title. The organization also now recognizes cannabis for having medicinal and therapeutic potential - though, non-medical and non-scientific uses remain illegal.

Still, the news was good enough to again cause cannabis stocks to jump. Aurora Cannabis grew by 10.6%, Canopy Growth gained 5.7%, Cronos Group climbed 4.6%, Tilray rose 6%, and Aphria jumped 8.6%.

“Congress may be moving slower than the cannabis industry would like, but it is moving faster than almost any other policy issue, analyst Eric Assaraf told TheStreet. “Not even the pandemic is derailing a House vote on the MORE Act scheduled for tomorrow, which would legalize cannabis.”

The Marijuana Opportunity Reinvestment and Expungement (MORE) Act of 2019 Assaraf speaks of ended up also getting voted in. However, being as the Republicans controlled the Senate, there was little hope of this becoming law.

That was until early January of this year when Democrats gained control of the U.S. Senate. This news was so overwhelming, cannabis stocks made another leap. Canopy Growth rose by 13.2%, Green Thumb jumped more than 10%, Tilray climbed by 19.24%, Aurora gained 5.3%, and Chronos Group was up 17%.

“This electoral outcome could truly unlock the vast economic benefits cannabis promises,” David Culver, U.S. Vice President of Government Relations at Canopy Growth, told Fox Business. “Both in terms of job creation and tax revenues and catalyze a post-COVID recovery for years to come.”

With so much optimism for 2021 to better than 2020, the year started with a bang when it came to cannabis momentum. 

Final Word

2020 was definitely one of the toughest years in modern history. However, even though the pandemic and economic crash, cannabis remained strong. And, for this reason, we have high hopes for 2021 and the years to come.

Since it’s impossible to predict where the stock market will go within the next few years, we don’t want to come to any conclusions. But being the United States political trends along with the general population’s change in attitude towards cannabis, it’s likely cannabis stocks will continue to climb.

If you’re new to investing and considering buying cannabis stocks, we definitely suggest you do some research on the market prior to taking your gamble. Unfortunately, the market has a way of profiting off those who don’t know what they’re doing and, with cannabis, there are a lot of inexperienced investors. As you do your research, be wary of those who claim they know where a stock can go - nobody has that kind of information.

Written and published by Paul James In Weed World Magazine Issue 150