Marijuana Goes Mainstream
Marijuana stocks have come a long way… but it hasn't been an easy ride.
Just ask any marijuana investor who bought shares last year. They may have been tearing their hair out, as I was many times throughout the year.
You can watch our horror unfold by the movements of the Horizons Marijuana Life Sciences ETF (HMMJ.TO) chart in the last year:
This ETF charts the "equity securities of life sciences companies, and other companies, with significant business activities in the marijuana industry."
It's a barometer for the cannabis market, and has holdings of the big-time cannabis companies like Canopy Growth (NYSE: CGC), Aurora Cannabis (NYSE: ACB), Tilray Inc. (NASDAQ: TLRY), Cronos Group (NASDAQ: CRON), and GW Pharmaceuticals (NASDAQ: GWPH).
It was down almost 25% last year.
But just look at how things have rebounded in 2019...
It's up 26% already.
This trend will continue...
A few years ago, you couldn’t buy cannabis stocks in the U.S. outside of thinly traded over-the-counter markets or if your broker allowed you to trade on the Canadian Stock Exchange or the Toronto Stock Exchange.
Frankly, it scared a lot of retail investors enough that they completely sat out the first wave of marijuana profits.
Fast forward to today, and many cannabis stocks have graduated to some of the largest exchanges in the world: the New York Stock Exchange and NASDAQ.
That is a huge deal because it legitimizes the company, gives retail investors easy access to the stock through traditional brokerages, and — most importantly — allows them access to institutional U.S. investors, which will be a massive influx of capital as the years go on.
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Here are the stocks that currently trade on the big exchanges:
Canopy Growth (NYSE: CGC)
Canopy is the largest marijuana producer on the planet. It was the first federally regulated, publicly traded cannabis producer in North America. It is the first billion-dollar cannabis company.
Cronos Group (NASDAQ: CRON)
Cronos Group is a geographically diversified and vertically integrated cannabis company with one of the largest and most scalable operating platforms in the global medical cannabis industry.
Innovative Industrial Properties (NYSE: IIPR)
IIPR is essentially the very first cannabis-based Real Estate Investment Trust (REIT). It acquires specialized industrial real estate assets that are used for growing medical-use cannabis and operated by state-licensed growers, with a focus on properties with sophisticated technology and infrastructure to meet rigorous quality standards for medical-use cannabis.
Tilray (NASDAQ: TLRY)
Tilray is a Canadian pharmaceutical and cannabis company headquartered in Nanaimo, British Columbia. Tilray became the first medical cannabis producer in North America to be GMP-certified in December 2016. In July 2018, the company became the first cannabis company to IPO on the NASDAQ.
Aphria (NYSE: APHA)
One of Canada’s lowest-cost producers, it produces, supplies, and sells medical cannabis. It is committed to providing pharma-grade medical cannabis. It was the first public licensed producer to report positive cash flow from operations and the first to report positive earnings in consecutive quarters.
Aurora (NYSE: ACB)
Aurora Cannabis Inc. produces and distributes medical cannabis products. It is vertically integrated and horizontally diversified across various segments of the cannabis value chain, from facility engineering and design to cannabis breeding, genetics research, production, and retail distribution. It started trading on the NYSE in October.
These are the big players in the market right now. But there are a couple companies that are doing well enough — and keeping their business above-board — in order to qualify for the prestigious uplisting.
Many more will uplist this year, and as they say, a rising tide lifts all boats...
I'd like to take that analogy further, by saying that while a rising tide lifts all boats, that tide will also bring the smaller boats towards the larger ones — creating fleets. For the nautically-challenged, a fleet is a large group of ships. And these smaller cannabis companies will be hitching their dinghies to the battleships.
We've already seen these weed fleets begin to form...
The first shot across the bow was Constellation Brands (NYSE: STZ) dropping $4 billion into Canopy Growth Corp. (TSE: WEED) (NYSE: CGC).
We saw it again when tobacco giant Altria Group (NYSE: MO) dropped a C$2.4 billion equity investment in Cronos Group (NASDAQ: CRON).
We're about to see it happen time and time again as Big Tobacco, Big Beverage, and Big Pharma start to inject their struggling ships with some new life.
I would be remiss to mention that "fleet" originates from flēotan, which means “moving swiftly.”
The moves will be fast, and you'd be wise to take a position in one of the smaller ships before they are swallowed up by the battleships.
Jimmy is a managing editor for Outsider Club and the investment director of the personal finance advisory, The Crow's Nest, and cannabis stocks advisory, The Marijuana Manifesto. For more on Jimmy, check out his editor's page.
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