I’m not here to kick cryptocurrencies. They’ve been on a losing streak since December, but all investments go up and down. No, I’m here to talk about the future. And the awesome potential in cannabis stocks.
Cannabis stocks, as tracked by the ETFMG Alternative Harvest ETF (NYSE: MJ), are holding up well. They ended Friday up 1.72% for the year so far. That’s not far behind the S&P 500 at 4.5%. And it’s way ahead of Bitcoin, down 36% for the year so far.
That’s past performance. What about the future? What do these things have going for them?
Bitcoin is the most well-known cryptocurrency. But it’s not the best. There are so many challenges with Bitcoin — transaction fees, scalability, slowness, and so on. Sure, Bitcoin is the biggest, with a recent market cap of $158.5 billion. It’s 41% of the cryptocurrency market, according to https://coinmarketcap.com/charts/.
But I could make a strong case for Ethereum, Neo, Litecoin or other cryptos being the next big thing. Based partly on ease of use, but also partly on how much growth potential we can see for those cryptos.
(Editor’s note: Weiss Ratings, the nation’s leading independent rating agency of financial institutions, recently gave Bitcoin a B- rating. To get our Weiss Cryptocurrency Ratings sent straight to your inbox every Thursday afternoon, click here.)
Now, speaking of growth potential, let’s pivot to marijuana. Cannabis. The Devil’s weed, as some call it.
The people who call it that are missing an enormous opportunity.
I believe that the marijuana industry is poised for supercharged growth. Growth that could leave the cryptos in a cloud of dust. Or at least a cloud of pot smoke.
Let’s look at three drivers that could send marijuana stocks higher.
Driver #1: Legal Market Is Poised to Boom
Canaccord Genuity estimates the combined recreational and medical markets will more than double by 2021. That’s massive growth. Well, guess what? That’s just for Canada! Our neighbor to the North is legalizing recreational use this year.
In the U.S., legal marijuana sales were just $9 billion in 2017. Now, Nevada, California and other states have legalized, and more are on the way. As a result, BDS Analytics says U.S. legal national marijuana sales will likely hit $11 billion this year and $21 billion by 2021.
And that’s with the Federal government refusing to legalize. Which brings us to …
Driver #2: Jeff Sessions Is Actually Helping the Marijuana Industry
U.S. Attorney General — and part-time Pinocchio body double — Jefferson Beauregard Sessions HATES legal marijuana. We aren’t sure why. Personally, I theorize it’s because he got kicked out of the tree by the other elves after burning too many pot brownies. Have fun coming up with your own theory.
Jeff’s been busy. On Jan. 4, after California dispensaries started selling recreational marijuana. Sessions ripped up the protections provided to the industry by the Obama administration. He rescinded the “Cole Memo” of 2013. That’s guidance from then-Deputy AG James Cole to federal prosecutors suggesting a hands-off approach to the state-legal industry.
Sessions’ action sent a chill through the industry. People don’t want to be prosecuted for running a business.
But people are fighting back. Sessions is named in multiple lawsuits by people who say marijuana use helps fight what ails them. And the states are getting into the battle, too.
- Washington State’s top legal official is preparing to potentially sue the Trump administration over marijuana enforcement policies.
- In California, the attorney general and other officials say they’ll defend legal cannabis from Sessions.
- Oregon and 19 other states are not only defending legal cannabis, they’re pushing to expand legal banking for marijuana businesses.
Without meaning to, Sessions has energized the U.S. marijuana industry. He’s given it focus. We could see recreational legalization advance faster because of his ham-fisted approach.
And that brings me to …
Driver #3: Legalization Will Shift Cannabis Stocks into Higher Gear
Cannabis stocks are the Rodney Dangerfields of U.S. investing right now. They get no respect, no respect at all. Banking is very difficult. They don’t get tax breaks. A legal cloud hangs over them. Heck, only one pot stock, Cronos Group (Nasdaq: CRON), trades on a major U.S. exchange.
Imagine then, what will happen when legalization comes. Boom! It will be like the end of prohibition back in the 1930s. By the way, that’s another useless crusade that only made crooks rich. And another crusade that ended because local governments needed tax revenue.
So, yeah, you can take the current legal marijuana business and double it. Or triple it. Or more!
I think we’ve seen the peak in Bitcoin for a while. For the simple fact that all that can be known about that investment is already out there. But cannabis? That’s still flying under the radar. The future is wide open. And it could be BIG!
The interesting part is that it may not be marijuana growers that do best in legalization. It may be ancillary businesses that really bloom. Those that provide goods and services that pot growers find essential.
I’ll write more about that opportunity. For now, the ETFMG Alternative Harvest ETF (NYSE: MJ) is a fine way to play this coming boom. And if you have a higher appetite for risk and reward, you can drill down to the individual stocks that are owned by that index.
The green boom is coming folks. Be ready for it.
All the best,
Sean Brodrick
