Future of Pot Market Just Got Brighter, & These 2 Pot Stocks Could Rise
If you’ve been following my writing for some time, you’ll know that I’ve always had my eye on one thing when it comes to the marijuana industry: global expansion—more specifically, expansion into major markets.
Marijuana stock investors have benefited immensely from Canadian pot legalization, and that’s a relatively tiny market.
Think about what will happen when a huge economy legalizes cannabis. For pot stocks, that will most likely generate massive share-price growth.
Two marijuana companies in particular are poised to benefit from the possible German marijuana legalization: Canopy Growth Corp (NYSE:CGC) and Aurora Cannabis Inc (NASDAQ:ACB).
German Marijuana Legalization on the Horizon?
Germany is a huge country (more than 80 million people) with one of the most powerful economies on Earth (about $3.8 trillion in GDP). Following its recent federal election, the country’s three main political parties are in discussions to put together a coalition government.
Those three parties all ran on platforms of relaxing marijuana laws.
That doesn’t necessarily translate into pot legalization in Germany anytime soon. But it does mean we’ll likely see some sort of movement in Germany toward marijuana legalization. (Source: “Elections in Germany and Cannabis: Where Does Each Party Stand on Marijuana?” Yahoo Finance, September 15, 2021.)
If Germany makes any sort of major legislative changes that edge toward pot legalization, huge opportunities will sprout up in the marijuana market.
The first opportunity would be for German marijuana firms to hold initial public offerings (IPOs) and create a whole new breed of marijuana stocks, ones that could surge as fast as Canadian pot stocks did in the early days of marijuana legalization in that country.
What’s more, new German marijuana companies would not only have the ability to hit the market with massive momentum, but could also be acquired by larger marijuana companies from Canada and the U.S. (though U.S. firms could have trouble in this regard, something I’ll discuss below).
If the hypothetical new German pot companies are acquired, it would likely generate huge share-price growth.
Essentially, pot legalization in Germany would create a second green rush.
What’s more, if Germany legalizes marijuana before the U.S. does, that could actually be better for marijuana stock investors.
That’s because the amount of excitement, capital, and new consumers coming to the legal pot market will be most pronounced when the U.S. federally legalizes pot.
Germany, despite being a large and rich country, can’t compare to the U.S., which has nearly 200 million more people and a GDP that’s more than five times the GDP of the European nation.
So, investors would naturally be less enthused about Germany legalizing marijuana if the U.S. had already done so.
Pot stocks would likely have already experienced huge gains as a result of the hypothetical federal U.S. marijuana legalization, so the share-price gains resulting from German pot legalization would likely be more incremental than if Germany legalized the drug before the U.S. did.
CGC Stock & ACB Stock Boast Strong International Connections
With all that said, here’s why Canopy Growth stock and Aurora Cannabis stock are the two marijuana stocks most set to benefit from German marijuana legalization, should it come to pass in the near future.
While I’ve been largely on the U.S. pot stock train for some time, the powerhouses in the market are still based in Canada. Several Canadian marijuana stocks are available on major U.S. exchanges, meaning they have access to substantially higher pools of capital from investors.
What’s more, the U.S. federal prohibition of cannabis prevents many U.S.-based marijuana companies from keeping their money in large banks. That prevents the U.S. companies from getting involved in international mergers and acquisitions.
Which brings us to CGC stock and ACB stock.
Canopy Growth Corp and Aurora Cannabis Inc are among the largest marijuana producers by market share. What’s more, they both boast multi-billion-dollar valuations, giving them access to capital to make aggressive acquisitions in Germany in advance of, and during, pot legalization in that country.
Chart courtesy of StockCharts.com
Canopy Growth stock and Aurora Cannabis stock are both volatile. They’ve have had a difficult 2021 so far, but at one point in 2020, they achieved gains of more than 100%.
Having said that, both companies already have holdings in Germany, meaning they’re experienced in navigating the German system and have been building relationships in the country for years.
Those footholds are going to be key to entering the German legal marijuana market faster than their competitors. That would also accelerate share-price growth for CGC stock and ACB stock.
What’s more, both Canopy Growth stock and Aurora Cannabis stock are currently on a downswing. Considering their propensity for radical swings in price, a single smart acquisition in Germany could spark a huge rally.
While I still endorse U.S. marijuana stocks as long-term investments, if you’re looking for stocks that could see huge gains in a short time frame (but with added risk), CGC stock and ACB stock have great potential (should marijuana legalization make real progress in Germany).
As explained above, Germany is another possible avenue for massive financial growth in the marijuana market.
While the dust is still settling following the country’s recent election, there’s a very good chance that we could see movement on pot legalization in Germany.
If that does come to pass, Canopy Growth stock and Aurora Cannabis stock are poised to rise if the companies play their cards correctly.