Cannabis Stocks Are Going Green in November

Election day is bearing down on us. And no matter who wins the presidency, four states have adult-use legalization initiatives on their November ballots.

Passage of those initiatives could trigger similar moves in neighboring states. This is probably what’s powering up U.S.-based multi-state operators (MSOs). I’ll let you know which companies I think will be the biggest winners this November and which ETF I’ve got my eye on to ride this trend.

But first, let’s look at some news.

The total U.S. legal medical and adult-use cannabis market could hit $35 billion by 2025, according to the latest report by New Frontier Data, a widely respected research firm covering the cannabis industry.


 

Importantly, these projections are based solely on the state markets that already had legal medical and/or recreational marijuana as of August. So, the projection — currently at a compound annual growth rate of 18% per year — could accelerate if more states legalize marijuana on the state level. And there are four very good possibilities.

4 Best Bets to Legalize Next

The four states I’m talking about are New Jersey, Arizona, South Dakota and Montana. They all already permit medicinal marijuana sales. They also have all slowly — oh, so slowly — moved toward adult-use for several years. The state governments are far behind the will of the people in those states. Potential tax revenue and job creation may be tipping the scales in the favor of full legalization.

Of these, New Jersey is probably most important for the market. Why? Because it is surrounded by Connecticut, Pennsylvania and New York, all states which don’t have adult use yet. And those states aren’t going to sit on their hands and watch the Jersey boys roll around in all that sweet, sweet tax money.

So, if the Garden State goes legal, you can bet the Nutmeg State, the Keystone State and the Empire State will all follow suit.

In fact, New York is already gearing up. Axel Bernabe, Assistant Counsel to New York Gov. Andrew Cuomo, recently said in an interview that cannabis legalization legislation will (again!) be introduced through the state budget in January, with the goal being to enact the reform by April.

I emphasize again because New York has a history of screwing this up. Previous estimates were torpedoed by a weird coalition of anti-drug moralizers and social justice warriors who wanted more set-asides for minorities. But Bernabe is optimistic that, this time, it will work.

After California and Florida, New York is the big enchilada of state legalization. According to a 2018 estimate by New York City Comptroller Scott Stringer, legalizing marijuana in New York could create a $3.1 billion market. And it could give the state a windfall of $435.7 million in annual tax revenue. New York City alone could gain $336 million in badly needed tax revenue.

That’s if New York doesn’t screw it up with red tape and high taxes like California did. But we’ll burn that bridge when we come to it.

Likely Winners in New York

Two likely winners from New Jersey going legal are Curaleaf Holdings, Inc. (OTCQX: CURLF, Rated D) and TerrAscend Corp. (OTCQX: TRSSF, Rated D), both of which have medical marijuana licenses in the state, and therefore are a step ahead on the legalization starting gun. They’re also both in the Marijuana Millionaire model portfolio, and both are performing nicely.

So, what companies will come out winners if New York legalizes? I can think of two contenders:

Curaleaf. America’s biggest MSO has four dispensaries in New York state and has a 72,000-square-foot grow facility. The company was recently busted for selling marijuana flower without getting approval from New York’s Department of Health, but that’s not threatening its licenses, and Curaleaf will probably get approval eventually.

Cresco Labs Inc. (OTCQX: CRLBF, Rated D). The company obtained four New York dispensaries and the right to operate one cultivation facility via the acquisition of Valley Agriceuticals. The dispensaries have recently been re-branded to the Sunnyside retail brand.

And there’s a third company — much smaller than the other two but packed with potential. I just recommended that to my Marijuana Millionaire Portfolio subscribers yesterday. So you’ll forgive me if I don’t mention it here, at least not yet.

Do your own research before you buy anything. If you don’t feel like doing the hard work, you can always buy an ETF.

The white shoe crowd on Wall Street favors the ETFMG Alternative Harvest ETF (NYSE: MJ, Rated D), a fund weighted toward Canadian cannabis companies. As I’ve said before — for example, in my May 28 article “Cannabis Could Be the Hottest Industry of 2020“’ — I favor another ETF, the AdvisorShares Pure Cannabis ETF (NYSE: YOLO, Rated D). That’s because YOLO is weighted toward U.S. cannabis companies. I’ve talked about YOLO plenty of times since then, too.

And time has proven me correct. Here’s how YOLO and MJ have performed this year, compared to the S&P 500 …


 

Even if you didn’t buy at the start ofthe year — if you waited and bought YOLO after reading my May 28 issue — you’d be up a little more than 12%. MJ, meanwhile, is DOWN 16% at the same time.

That just goes to show that you should buy cannabis stocks, but the RIGHT cannabis stocks.

If you still want to wait, that’s your choice. These markets are volatile. Maybe you’ll get a better entry opportunity. Or maybe, while you wait, YOLO will rack up more gains.

If you’re doing this on your own, be careful. But don’t miss out on one of the biggest bull markets going on right now.

All the best,

Sean

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One comment on “Cannabis Stocks Are Going Green in November

  1. Truus October 28, 2020

    Hello Sean,
    I am a subscriber to your marijuana millionaire as well as to supercycle investor.
    I would love you to explain why, when the stock market goes down, gold seems to go down with it, while I would have thought that the opposite should happen.
    Thank you,
    Truus

    Reply