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Tracks & Trails

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Jaxon Hill
Jaxon Hill

Buy Pot Stocks

If you think it's a challenging time for Wall Street, take a closer look at how poorly marijuana stocks have performed since February 2021. With federal cannabis reforms failing to materialize, pot stocks quickly went from the hottest thing on Wall Street to absolute buzzkills. But that may be about to change.

buy pot stocks

Cannabis is a massive global opportunity. Research firm BDSA has forecast a compound annual growth rate of more than 16% for the industry through 2026. If accurate, the global weed market would be worth $61 billion in 2026, with a majority of these sales originating in the United States. In other words, the beatdown that pot stocks have endured has rolled out the red carpet for opportunistic investors.

Interestingly, the lack of cannabis reform on Capitol Hill has actually been a positive for Innovative industrial Properties. With weed illegal at the federal level, access to credit markets has been spotty for pot stocks. IIP has stepped in with its sale-leaseback program to allay these concerns. IIP acquires facilities with cash and immediately leases these properties back to the seller. It's a win-win that puts cash in the pockets of multi-state operators (MSOs) while landing IIP long-term tenants.

When SNDL first became a publicly traded company in 2019, it was relatively undecipherable from other Canadian pot stocks. It primarily focused on wholesale cannabis, with management making the decision not long thereafter to pivot to retail sales because of its higher margin potential.

Canadian marijuana stocks rallied Thursday, then gave up those gains on Friday, following a Bloomberg report that U.S. Senate Democrats plan to introduce a federal cannabis decriminalization bill this month. So are Canadian marijuana stocks buys now?

Those legislative efforts would follow a year of soured optimism over the prospect of U.S. cannabis reform. That sentiment has dragged marijuana stocks lower through this year. And even if the U.S. passes full federal legalization, the implications for Canada's pot producers are unclear.

Aurora and its rivals have dealt with layoffs, facility closures and executive-team shakeups over the past few years, following losses, competition and overexpansion. Market share continues to shrink for big Canadian marijuana stocks like Hexo (HEXO), Canopy Growth (CGC) and Tilray (TLRY).

IBD only has full ratings for marijuana stocks in Canada that trade on the big U.S. exchanges. But it also tracks stocks related to the marijuana industry, like Innovative Industrial Properties (IIPR), a U.S. cannabis-focused real-estate investment trust.

MarketSmith also has limited ratings data for some U.S.-based cannabis producers that operate in legal states, like Curaleaf (CURLF), Green Thumb Industries (GTBIF) and Trulieve (TCNNF). Those marijuana stocks trade over the counter and in Canada.

Amid the volatility in marijuana stocks, one way to avoid stock-specific risk is via ETFs. The ETFMG Alternative Harvest (MJ) ETF is one such option. The AdvisorShares Pure Cannabis (YOLO) ETF and the Cambria Cannabis ETF (TOKE) are others.

But for those who have been observing cannabis companies from the sidelines, pondering whether or not to get into the space now that stock prices of the biggest licensed-producers are significantly higher than they were two years ago, is now the right time to buy? Will pot stocks soar or crash after October 17th, when recreational weed officially becomes legal?

Marijuana stocks plunged after Senate Minority Leader Mitch McConnell criticized Democrats Tuesday for pushing to include measures to make it easier to buy pot in an end of year spending bill before Republicans take hold of the chamber.

Industry analysts generally see a murky path forward for all of the cannabis reform bills on Capitol Hill, but but they feel that meaningful steps towards legalization are expected to continue to spark interest in cannabis stocks.

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Despite cannabis stocks having a very challenging year, this quarter has been quite strong. The New Cannabis Ventures Global Cannabis Stock Index is up 31.4% since 9/30, when it posted an all-time closing low:

At 420 Investor, we focus on 31 stocks and hold just 12 currently in our model portfolios. We are careful to avoid heavily promoted stocks, we look for management teams that are strong and we pay attention to the financials and are always checking the story, too.

The selloff in riskier stocks has hit U.S. marijuana businesses hard. The AdvisorShares Pure Cannabis ETF , one of the larger funds tracking the sector, is down 22% this year even after a poor 2021. The fund lost almost one-third of its value last year as hopes of marijuana reform in Washington faded.

Cannabis stocks shot to record gains Thursday after President Joe Biden formally sought to review how marijuana is classified under federal law, a change that pot producers in the U.S. and Canada have long sought after months of stalled federal reform that soured enthusiasm in the industry.

Exchange-traded funds focused on the marijuana industry reflected record gains after stocks reacted to the news. The AdvisorShares Pure US Cannabis ETF MSOS, -1.39% rose 34%; the ETF, which focuses on the U.S. pot industry, had never previously gained more than 9.5% in a single session, according to FactSet. The ETFMG Alternative Harvest ETF MJ, +0.28% increased 19.6%, topping its previous record for daily percentage gain of 14.9%.

When it comes to popular investing trends, cannabis stocks are near the top of the list. The marijuana industry has grown rapidly over the past decade. And this makes investing in cannabis a more attractive opportunity than ever.

As marijuana legalization becomes more widespread, it's going to become more common to find marijuana stocks in investors' portfolios. You may find yourself wondering whether you should be joining in.

The main benefit of considering getting into marijuana stocks right now is that the prices have fallen sharply due to oversupply and the marijuana bubble bursting, causing cannabis stocks to be at bottom-level prices. That said, there are signs that the cannabis industry could see signs of growth shortly.

Another excellent reason to invest in MJ stocks is the large number of companies to choose from, some of which carry less risk than others. One of the reasons people are hesitant to invest in marijuana stocks is that these companies may have a more difficult time getting financing through traditional means. But plenty of companies offer ancillary products and services that don't hit these same roadblocks.

This ETF invests in the global market, however, it's main holding is BlackRock Liquidity Treasury which comprises 27.59% of the fund. Individual stocks include Village Farms Internationial, Innovative Industrial Properties, GrowGeneration Corp, and Tilray. These comprise another 38.7%.

As you might expect, there are a lot of ups and downs in the marijuana industry as the market and regulators figure out how it's all going to work. However, there is also a lot of potential for gains if you pick the right marijuana stocks or EFT to invest in.

Why? Because marijuana stocks are burning up the market! With medical marijuana legal in 31 states and recreational marijuana legal in 9 states plus Washington D.C., pot is starting to gain mainstream business acceptance in the U.S. Plus, on October 17, marijuana becomes legal throughout Canada.

Pot stocks are legal to trade in all 50 states. But when it comes to the product itself, not every state allows the legal sale and/or possession. What does that mean for investors? Marijuana stocks are legitimate, especially with new markets opening up all over the map.

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Meanwhile, based on the word from the TipRanks 13-F Tracker, pot stocks are looking like a bad idea to hedge funds out there. All four of the pot stocks that saw gains today have also seen declining hedge fund involvement over the last several months.

But once you weed (sorry, again) out the large number of speculative penny stocks that don't trade on big exchanges like the NYSE or Nasdaq, you are left with just a handful of companies that seem legit.

The Securities and Exchange Commission cracked down on pot stocks last year, suspending trading in five of them "because of questions regarding the accuracy of publicly available information about these companies' operations."

"My mom is on TD Ameritrade and is constantly asking me, "When should I invest in pot stocks?' My answer is, 'Never.' But she invested in one and it wound up getting investigated by the SEC," Bricken said.

For more coverage on cannabis stocks including my top picks, consider a subscription to Cannabis Growth Portfolio. Subscribers get access to the model portfolio, cannabis sector research dashboards, real-time updates, and more.

"Congressman Yarmuth purchased the stocks after seeing four states legalize the use of recreational marijuana in the November elections," a Yarmuth spokesperson told FOX Business. "He was transparent about it and followed all House Ethics and financial disclosure rules." 041b061a72


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