This Chart Shows Why Marijuana Stocks Are Going to Dominate in 2020

Pot Stocks Off to Hot Start in 2020, Bodes Well for Marijuana IndustryMajor Pot Stocks on the Rise

Looking at the performance of marijuana stocks so far in 2020, we see strong gains that foretell even bigger moves in the near future.

First, let’s look at the current state of the cannabis industry.

Last year was the first full year of marijuana legalization in Canada. Meanwhile, in the U.S., 11 states and D.C. now permit recreational pot. We have gotten the first taste of the massive revenue that the legal marijuana industry can produce.

The global pot industry is on its way up, even if 2019 had a few hiccups. Namely, revenue came in under expectations.

Advertisement

The reason for that is quite simple: a lack of cooperation on the part of governments. Related to that, the marijuana black market continues to outperform the legal market in California, Canada, and likely everywhere else that marijuana is legal.

Why? Illegal weed is cheaper, and long-time consumers have already come to rely on the black market. Why would they change their buying habits all of a sudden for more expensive products?

Of course, most people would prefer to be on the right side of the law, but considering how relaxed most marijuana law enforcement is now (especially in places where legal sales are permitted), price is often a deciding factor.

Convenience comes into play as well. Many U.S. states and Canadian provinces were slow to roll out legal brick-and-mortar pot storefronts.

This was a failure of government policy rather than the marijuana companies themselves. Those companies were more than happy to open hundreds—even thousands—of storefronts in areas where they were allowed and consumer demand warranted them.

In any case, those issues will be sorted out in the near future as the cannabis industry matures and the legal aspects are sorted out. The only question is one of time. The faster these issues are sorted out, the faster we’ll see humongous growth among pot stocks.

That’s because, even without significant changes to the marijuana industry, some of the cannabis stocks I’ve been writing about for years are now on the upswing.

Chart courtesy of StockCharts.com

As can be seen in the above chart, Canopy Growth Corp (NYSE:CGC), Curaleaf Holdings Inc (OTCMKTS:CURLF, CNSX:CURA), and Innovative Industrial Properties Inc (NYSE:IIPR) saw strong gains in the first few weeks of 2020.

CGC stock jumped by 18%, CURLF stock by 16%, and IIPR stock by nine percent.

These stocks fell dramatically at the end of 2019 as concern spread among investors that marijuana stocks were overvalued.

But anyone with sense enough to look at the projections for the pot industry—both global and domestic—know that this sector is only beginning to reach its potential.

As a result, we can expect to see cannabis stocks continue to rise as the year goes on and good news builds momentum.

As is always the case with the stock market, momentum builds confidence, which in turn generates gains, which in turn builds more confidence—creating a self-perpetuating growth cycle.

The really big gains won’t come until either there are massive policy changes by governments or large investments into the cannabis industry.

Ultimately, I anticipate several months of very solid share-price growth in the marijuana stock market. This presents an excellent opportunity to marijuana investors who are looking to get in on the next big wave.

In addition to the three aforementioned pot stocks that have been seeing huge growth, there are many others that could see strong gains in 2020. Many of these stocks aren’t even public yet.

The U.S. marijuana market is set to explode in the next few years. Whether through legalization of medical cannabis in nearly the entire country, or through federal legalization of recreational pot, we can expect that marijuana stocks operating in the U.S. will continue to rise.

On top of that, we have been seeing legislative half-measures come in like the Secure and Fair Enforcement Act of 2019 (SAFE Banking Act), which could make it much easier for banks to handle money from the pot sector.

Such legislation would make it much easier for U.S. pot stocks to list on major exchanges. Currently, no pure-play marijuana stock that has major operations in the U.S. is listed on the Nasdaq or the New York Stock Exchange).

The above stock chart shows very strong growth, even without any major developments in the marijuana industry. When those major changes come, we could expect to see huge gains across the board

Analyst Take

All this culminates in what could be the best year for cannabis stocks yet. We’re already off to a strong start, and I believe that the momentum will hold as 2020 continues.

Considering how strong the past has been for marijuana stocks, that’s saying something.

I forecast that we’ll see the legal pot market continue to mature and deal with its legacy issues, leading to organic growth.

There are also major events on the horizon that could mean huge gains for pot stocks. Things like federal U.S. marijuana legalization and global expansion, for instance, could send shares flying sky-high.

The combination of organic gains, recovery from last year’s marijuana stock market correction, and huge progressions in the pot industry means that marijuana stocks could increase by as much as double in 2020.