Marijuana Stock Recovery
With marijuana stocks continuing to drop in price, those with a long view on the industry are not seeing disaster, but opportunity. This is going to be a global powerhouse industry, with many of the currently-available pot stocks set to dominate the market.
As such, when corrections take place, it can often be a good time to invest. But, as is the case during any down-time in an industry, the question is when the marijuana stock recovery will take place.
The key to maximizing returns is timing one’s investments to coincide with the beginning of the upswing.
That being said, there are three key events that could easily help revive marijuana stocks and rescue them from their current funk.
Some of them are more predictable than others, but I could see any of these three developments being the motivating factor in a massive surge for pot stocks.
The first—and perhaps one of the most likely—events to occur that would catalyze a marijuana stock recovery is continued pot legalization.
Even amidst the current downturn, we’re seeing countries continue to relax their marijuana laws.
The most recent win on this front came in Germany, with medical cannabis company Demecan Holding Gmbh securing $7.6 million in financing to expand its production in Europe’s largest medical marijuana market. (Source: “German cannabis firm Demecan secures 7 million euros in financing,” Marijuana Business Daily, October 7, 2019.)
The money comes from a European venture capital firm, and this story is an encouraging sign for marijuana bulls. It signals that the cannabis industry has a very positive future ahead of it as it expands in billion-dollar markets just waiting to be unleashed.
Germany even considering recreational marijuana legalization would be enough to send share prices soaring through the roof. In fact, I believe that, at their current price, an event like this would likely see most pot stocks gain 50% to 100% in a matter of months, perhaps even weeks.
To be fair, German marijuana legalization is unlikely to happen soon. Demecan is one of only three companies authorized to grow medical cannabis in Germany. The other two are the Canadian companies Aurora Cannabis Inc (NYSE:ACB) and Aphria Inc (NYSE:APHA).
But Germany isn’t the only country that is looking to expand its legal marijuana market. Australia recently announced that it was legalizing recreational marijuana in its capital city, Canberra.
And, of course, the Holy Grail of marijuana markets remains very much in play, with America as close as it has ever been to marijuana legalization at the federal level.
It’s worth noting that not all these markets are created equal. If Australia, for instance, pushes for marijuana legalization in the coming months, I would anticipate a strong boost for marijuana stock prices.
But if the U.S. or Germany do the same, I expect that the price increase among pot stocks would be substantially greater.
In effect, all legalization news is good news, but some stories are likely to engender greater stock gains than others.
Major Marijuana Investment
Another tried and true method that could help see marijuana stocks bounce back in a hurry is major outside investment into the industry.
Much like Canopy Growth Corp (NYSE:CGC) single-handedly ended a marijuana stock correction back when it formed a partnership with Constellation Brands, Inc. (NYSE:STZ)—and then did so again when Constellation Brands reinvested—a huge dose of capital into the market from an outside source would help drive share prices up again.
Remember that it wasn’t so long ago that giant companies like Coca Cola Co (NYSE:KO) were rumored to be looking into the marijuana industry. While those deals never materialized, I doubt that means the would-be investors have given up on the idea.
There is still a lot of buzz surrounding the marijuana industry, even if the current pot stock downturn has many investors running scared.
Large companies know that the future of this industry is bright, and are excited to get in on the ground floor of what will be a multi-billion-dollar global industry in just a few years.
It’s also worth noting that outside investments could come from Big Pharma as medical marijuana continues to expand around the globe.
The third big type of event that I’ll tackle today is marijuana product proliferation. By that I mean the expansion of the market by way of offering a greater diversity of goods.
We’re seeing the effects that the legal cannabidiol (CBD) market across the U.S. has had on marijuana revenue, with CBD oil and other products of that nature becoming increasingly popular.
The next big move for marijuana companies is to see edibles legalized. Canada is going to do that by the end of 2019, and we’ll likely see an increase in revenue as a result.
Moreover, by offering an increasing variety of products on the legal market, companies will be incentivizing consumers to move from the black market to the legal one.
That would be enough to spark a massive rush in the pot stock market, with revenues ballooning overnight if governments become more adept at killing the illegal marijuana trade.
In any case, as marijuana products flood the market, whether as medicine, recreational drugs, edibles, or health supplements, there is a huge variety of applications for pot, which in turn means big potential for revenue growth.
The marijuana industry is going to recover, of that, I have little doubt. What investors should focus on is how best to anticipate the marijuana stock recovery and invest accordingly.
Above are, in my mind, the three most likely scenarios to provoke a recovery. Being on the lookout for any of them will keep marijuana bulls ahead of the trend and, therefore, better able to play the market.