Marijuana Stock Recovery?
The marijuana stock market has been in free fall for the past several months. Despite being very bullish on the industry long-term, there’s no point denying what anyone with eyes can see.
In early 2019, we saw many pot stocks make monumental progress, only to see much of that progress wiped out in the summer.
But a marijuana stock recovery is not only likely, but it’s also damn near inevitable. And I believe that it’s closer than we think.
First, we have to tackle why the recovery is so important. For investors looking to make big gains in short periods, exploiting the boom-bust cycle of an industry is one of the best ways to come out on top. After all, that’s pretty much living by the old adage “buy low, sell high.”
At the moment, marijuana stocks are very low. But are they as low as they could get? Hard to say.
But pot stock prices are certainly lower than I expect they’ll be for much longer. That’s because, as we’ve seen numerous times, marijuana stock corrections always give way to big recoveries that send share prices soaring for months, sometimes a whole year.
So while pot stocks have undoubtedly taken a step back lately, the outlook of the industry is still extremely bright. After all, while share prices have fluctuated day-to-day, massive progress has been made in the legal cannabis market in general.
Mexico, Australia, and Malta are just some of the international markets that have recently begun exploring the legal marijuana industry.
Couple that with the growing momentum behind the push for federal U.S. marijuana legalization (and legalization at the state level) and you have what amounts to a very successful year for the pot sector.
And let’s not forget the triumphs that 2019 brought. For example, cannabidiol (CBD) is now largely legal across the U.S., paving the way for marijuana companies to enter the U.S. market in a big way.
On top of that, legislation like the Secure And Fair Enforcement Banking Act of 2019 (SAFE Banking Act), which would allow banks to handle pot-industry money in the U.S., is also gaining traction.
Overall, even with the current marijuana stock correction, it’s hard not to be bullish on the long-term outlook of the industry.
And that brings us to the prospect of a marijuana stock recovery. When pot stocks are finally able to break out of their funk and see gains return, I imagine it will be more akin to a dam bursting than a slow, steady trickle.
I wouldn’t be surprised if we see marijuana stocks double in price within months of a recovery beginning.
The question then is: “What event will help spark the marijuana stock market recovery?”
What needs to happen is for a restoration of confidence in pot stocks, and that will likely take some manner of massive development in the pot industry.
There are two types of events that could spur a rally: predictable and sudden.
Predictable events that could help marijuana surge are things like edibles being legalized in Canada. That would not only open a whole new selection of legal goods to consumers but also help tackle one of the biggest problems in the pot sector: the black market.
With marijuana edibles becoming legally available in December, the black market in Canada will lose one more advantage that it has had over the legal pot market.
This would potentially motivate a mass migration of consumers to the legal market. That, in turn, would boost revenue, which would then boost share prices.
Another “predictable” event that could motivate a massive marijuana stock recovery has to do with the U.S. presidential election.
If any of the Democratic candidates for president make federal marijuana legalization a centerpiece of their campaign—and their campaign begins to gain steam—the sentiment on pot stocks will turn bullish very quickly.
If, for instance, it appears likely that a pro-legalization candidate has a very real shot at becoming president, then I anticipate marijuana stocks will shoot up in price.
And then there are “sudden” events. These are events that are possible, but investors can’t be proactive about them.
For example, a massive partnership or merger would be a strong signal of a huge turn in the market. After all, these types of deals have helped drive pot share prices higher several times in the past few years.
A massive injection of capital into the marijuana industry from some outside source would be a key indicator that the pot industry is prepared for recovery.
Investors, not being privy to the goings-on behind closed doors, would have to anticipate this move far in advance, choosing to buy at the nadir of the marijuana stock correction and biding their time.
In either case, right now is ripe with opportunity for investors to get in at bargain prices and hold until the inevitable marijuana stock recovery comes. The industry is not even close to having maxed out its potential.
These low points may be concerning, sure, but it’s simply ludicrous to believe that cannabis share prices will remain this low forever.
Pot stocks have only scratched the surface of what the industry has to offer, and I anticipate big things ahead for a good number of marijuana stocks in 2020.
We’ve been here before. The boom-and-bust cycle of pot stocks is something that any cannabis investor who has been around for a year or two is familiar with.
Marijuana share prices rise and fall, but for long-term investors, they often only see their returns grow.
I don’t see why this time will be any different. A marijuana stock recovery is likely around the corner, whether in three months or six, and I anticipate that pot stock prices will come roaring back in a flash. What investors need now is nerves of steel and a keen eye, ready to anticipate the recovery.