Marijuana News Today
It’s hard to overstate the potential impact a healthy U.S. cannabidiol (CBD) market could have on the future of the marijuana industry, and the marijuana news today only reinforces that potential.
Canaccord Genuity Group Inc (OTCMKTS:CCORF, TSE:CF) is one of the few banks (but that number is growing) that actively track the marijuana industry. We’ve written about it many times before and it recently released a note describing the excitement over the U.S. CBD market in the wake of the 2018 Farm Bill. (Source: “Cannabis stocks look set to flourish thanks to Trump’s 2018 Farm Bill,” CNBC, January 30, 2019.)
As you’ll recall, the 2018 Farm Bill legalized the cultivation of hemp, a cannabis plant very similar to marijuana save for one key difference: the absence of the psychoactive compound tetrahydrocannabinol (THC).
Instead, hemp has CBD in spades, meaning that the extract is now, after a fashion, legal for sale across the U.S.
I say “after a fashion” because technically, there are still federal restrictions on CBD. But the new bill has all but legalized many CBD products and we’re already seeing national retailers begin to carry CBD products.
In any case, the note from Canaccord espoused the belief that I’ve had for a long time: the 2018 Farm Bill is going to be a major driver of pot stocks this year.
The bank listed a number of stocks worth watching as the U.S. market opens up, but on the list was one of our favorites here at Profit Confidential: Canopy Growth Corp (NYSE:CGC).
Canopy Growth, it’s worth remembering, was one of the first pot companies to come out and publicly support the 2018 Farm Bill while also laying out a plan to tap into the U.S. CBD market.
This would mark the first major foray into the U.S. cannabis industry on a national scale, and if any company was equipped to do it, it would be Canopy Growth.
We’ll dive further into individual stocks below, but let’s first take a long view and project how this will impact the marijuana industry moving forward.
The most important development here is that whichever marijuana company can slide into the national U.S. market first stands to make huge gains in 2019. Whether that’s CGC stock or a competitor, this would be a truly defining moment for pot stocks as it would set one apart from the rest.
While we usually see the marijuana industry rise and fall in cohesion, this would be one of the first times that a pot stock would be able to fully differentiate itself from the crowd and see gains that were exclusive to it.
That isn’t to say there won’t be a rush of excitement across the industry when the U.S. CBD market is tapped into—it’s just that, unlike major deals in the past, I believe most of the gains will be centered on the main actors in the deal.
Again, that would be a departure from earlier cannabis industry moves that saw many companies rise together (the Big Alcohol partnership between CGC stock and Constellation Brands, Inc. (NYSE:STZ) being a prime example).
What that means for investors: Keep a close eye on the U.S. CBD market and be ready to pounce on the company that makes the first move into it.
Getting a little away from the positives of the marijuana news today, we focus back on Tilray Inc (NASDAQ:TLRY).
The company is one of the top winners to start the day, jumping two percent in early-morning trading.
But over the past month, TLRY stock has underperformed in a big way.
Tilray stock has gained 4.5% in January. While gains are never a bad thing, 4.5% isn’t exactly going to blow anyone’s top.
And that number only grows more disappointing when taken into account with the industry overall.
Where January saw many premier marijuana stocks win big, Tilray stock is stuck with that rather lame 4.5%.
Part of the reason for Tilray stock’s relatively poor performance is the charge of overvaluation that has dogged the company since its huge gains following its initial public offering (IPO).
Remember that TLRY stock was the first official pure-play marijuana IPO on a major American ticker.
While many companies have had to grapple with accusations of overvaluation, none have been impacted by it in the same way as Tilray stock purely due to the magnitude of its growth.
Tilray, at one point, was worth nearly 10-times its IPO price only a couple months after its IPO—and right before Canadian marijuana legalization.
Post-legalization, however, we’ve seen the company drop by almost half its value.
But while CGC stock is quickly approaching its high once again (and been the recipient of numerous endorsements to start 2019), Tilray stock has only continued to plummet—the month’s 4.5% gain notwithstanding.
All this serves to make me skeptical about TLRY stock moving forward. The company certainly has potential, but the stock is too volatile and unpredictable to hazard a projection as to when it will hit its nadir and bounce back.
I would caution advisors to look elsewhere for marijuana investment gains until TLRY stock finds its footing once more.
On the complete reverse side of things to Tilray, you have Canopy Growth stock.
My long-time favorite in the marijuana industry (going on about six months now) has seen its fortunes rise and fall in that period, but investors who have stuck with CGC stock have been duly rewarded: it is up 75% in January alone.
And the good news doesn’t end there for Canopy Growth stock.
Alongside Canaccord’s endorsement of Canopy Growth’s potential, you have a number of other analysts that have come out in support of the company.
Combine that with its presence at the World Economic Forum in Davos, as well as its intent to enter the U.S. CBD market, and you have the premier marijuana stock performing as you would expect from an industry leader.
I fully anticipate CGC stock to continue growing throughout 2019, easily able to gain as much as 100% by year’s end.
There are, as always, pitfalls and hurdles (an economic slowdown, for instance, would put a damper on growth), but Canopy Growth has all the tools to see massive growth in 2019, which should make investors smile.
TLRY and CGC Stock Performances
The performances of TLRY stock (black line) and CGC stock (blue line) over the past week are seen on the chart below.
Chart courtesy of StockCharts.com
It surprises absolutely no one that that U.S. marijuana market is so hotly pursued by the cannabis industry. It is the richest market in the world, after all.
Although we’re still a ways away from full U.S. marijuana legalization, CBD offers a very satisfying appetizer as we wait.
Watch for the top pot companies to take advantage of this new opportunity—to great effect for their share prices.