Markets these days are anything but predictable. You have zombie companies roaming around—propped up by zero-percent interest rates—waiting to go under, retail investor rebellions against hedge funds, unpredictable block trading, and, oh yeah, a global pandemic upending global economic activity.
But there’s one thing you can always rely on: marijuana stocks.
Now, you’re probably thinking: pot stocks are famously volatile and unpredictable—how could anyone say otherwise? To an extent, you’re right. Day to day and year to year, marijuana stocks have been on the unpredictable side.
But if you step back and look from a macro perspective, the picture becomes much clearer. Pot stocks are bound for growth. You know it. I know it. It’s only a matter of time before we see the legal marijuana market open up globally.
The growth will come not only from political movements toward legalization in the U.S., Europe, and elsewhere, but also with the continued clampdown on the black market.
These things are inevitable. I use that word a lot in regards to the marijuana industry, and it’s important to understand just how powerful that word is in relation to the stock market.
Few things are inevitable when talking about the stock market. Managing the unpredictable nature of trading is precisely what separates good investments from bad ones.
So when you do find an industry, security, trade, etc., that has a degree of certainty, it’s a huge advantage relative to other assets. And marijuana stocks are in that position right now.
While speculative investments in marijuana penny stocks are still prevalent, the market has more or less settled on several industry standard-bearers.
Three of the top pot stocks right now are Canopy Growth Corp (NASDAQ:CGC), Innovative Industrial Properties Inc (NYSE:IIPR), and Curaleaf Holdings Inc (CNSX:CURA, OTCMKTS:CURLF).
Chart courtesy of StockCharts.com
And while these stocks may rise or fall in the future, the simple fact is, they’re well positioned to take advantage of the growing marijuana market for years to come. That’s because their business model is built around the predictable expansions that the legal pot market is set to undergo in the coming years, most notably in the U.S.
In the case of Canopy Growth stock, the shrinking of Canada’s marijuana black market and the expansion of the country’s legal marijuana market is going to keep its share price rising for years.
Not to mention that Canopy Growth has a number of international ventures that could pay off handsomely down the line.
As for Innovative Industrial Properties stock, the company is poised to be a major player in the marijuana real estate sector in the coming years.
Since it’s a U.S.-focused marijuana company and its shares are listed on the New York Stock Exchange (NYSE), capital is allowed to flow into the company freely without fear of a government crackdown. In fact, Innovative Industrial Properties is currently the only U.S. pot stock that’s listed on the NYSE, giving it a huge advantage in the industry.
Curaleaf stock, meanwhile, is one of the leaders in the U.S. recreational pot industry.
While we’re still a few years away (at least) from federal U.S. marijuana legalization, Curaleaf has been rapidly growing its business across the country. While the company’s growth prospects will be somewhat limited as the legal process remains in political limbo, it’s still a very strong investment opportunity.
Canopy Growth Corp, Innovative Industrial Properties Inc, and Curaleaf Holdings Inc are solid companies with strong financials, leadership, and liquidity. All three of them are ready to make gains on the back of predictable growth in the marijuana market as legalization spreads and markets open.
Contrast that with the absolute madness we’ve seen in other parts of the stock market.
The GameStop Corp. (NYSE:GME) bonanza that occurred early this year was totally unexpected, almost impossible to predict.
The same goes for the recent block trading scandal that has sunk a huge number of what were considered blue-chip stocks. (Source: “Tiger Cub Hwang’s Family Office Behind Friday Trade Frenzy,” Yahoo Finance, March 28, 2021.)
And then you have the impending cash crisis, when the U.S. Federal Reserve eventually adjusts interest rates upward and stops its mass purchasing of assets on the bond market.
All this is to say that the common narrative that marijuana stocks are volatile is, in one sense, very true, but in another sense, entirely wrong. Pot stocks are as predictable, if not more predictable, than stocks in other industries at the moment.
In the stock market, having information that’s reliable and will lead to a pretty certain outcome can be very valuable. What’s more, having information about tomorrow can help investors make choices today that can result in massive boosts to their portfolios.
The entire market is unpredictable and in a state of flux right now. Tech stocks saw huge gains during a global pandemic that literally shut down huge swaths of the economy. Old, outdated retailers saw their share prices soar. Block trading has led to huge, unexpected swings in the market.
Compared to other securities, marijuana stocks really don’t seem that unpredictable or volatile.
There’s no such thing as a sure thing on the stock market. Anybody who tells you otherwise is selling lies.
But what does exist is predictable patterns. And the patterns we’re seeing right now in the pot stock market are pointing toward growth.
Although growth in an industry doesn’t always directly correlate to guaranteed stock-market success (refer back to the “sure thing” caveat), stocks operating in high-growth sectors have a better chance than others at seeing massive gains.
Moreover, while high-growth sectors are typically considered riskier due to their volatility, if 2020 has taught us one lesson, it’s that we shouldn’t take anything for granted. Stability is an illusion—the entire market is theoretically volatile.
When you take that perspective, it’s easy to see that marijuana stocks aren’t just strong investment opportunities, but also, potentially, some of the more stable and predictable ones around.