Marijuana News Today: Market Correction May Be Good Thing in Long Run
Marijuana News Today
Our marijuana news today is bittersweet, looking into how investors are now seeing marijuana stocks as high-value, due to their recent troubles on the stock market.
iAnthus Capital Holdings Inc (OTCMKTS:ITHUF, CNSX:IAN) CEO Hadley Ford has come out in support of marijuana stocks, precisely due to the current market correction. (Source: “Cannabis Canada: How pot stocks suddenly became in vogue with value investors,” BNN Bloomberg, August 27, 2019.)
While that seems counterintuitive, the thinking is rather sound: with share prices falling so severely, those who once deemed the market overvalued may now return to pot stocks due to their lower prices.
Ford discussed multiple issues facing the marijuana industry, from the firing of Bruce Linton at Canopy Growth Corp (NYSE:CGC), to the troubles at CannTrust Holdings Inc (NYSE:CTST) following an audit by Health Canada, to several anti-trust cases before the U.S. Department of Justice regarding acquisitions.
These issues have combined with a volatile stock market to produce one of the bigger declines in marijuana stock history.
Having said that, this isn’t unfamiliar territory. While the current decline is certainly one of the harshest we’ve seen in a long while, 2018 on the whole was pretty grueling for pot stocks and they ended up recovering just fine.
I believe that cannabis stocks will rise again at a similar rate when the current correction abates—the keyword, of course, being “when.”
That all depends on the broader market, as a recession will likely see many investors seek out safe-haven assets like gold. It’s doubtful that many people will want to try their hand in a market that’s volatile at the best of times, let alone see how it fares during an economic downturn.
But these are all micro problems. On a macro scale, the marijuana industry still has tons of value that is waiting to be tapped into. Federal U.S. marijuana legalization could very well take place during the next presidency. And if it does, I expect to see cannabis stocks roar back to life.
And that brings us full circle to Ford’s statement: weed stocks are now very reasonably priced.
Previously, some thought pot stocks to be overvalued. While I strongly disagreed with that assessment, I understood how some people came to that conclusion. But the currently available legal market for cannabis is still but a sliver of the overall market potential, something I’ve discussed time and again.
So what do investors do with this information? It’s a hard sell to say to reinvest right now, considering we have so little insight into whether there will be a recession, how long it would be if it were it to hit, and how devastating it would be to markets. Without that knowledge, it’s difficult to decide when the appropriate time would be to re-invest in the newly discounted pot stocks.
What we can do is monitor the stock market and see which way the wind is blowing. When the picture becomes clearer, it’ll be easier to determine when to invest in what I anticipate will be a major comeback for marijuana stocks.
OGI Stock
Seeing as how the marijuana news today is focused on the best value in the pot industry, I figured I’d start by singling out what I believe to be the best-valued pot stocks available right now.
The first is OrganiGram Holdings Inc (NASDAQ:OGI), a penny stock whose potential I’ve long extolled. What makes OGI stock so special is that it has a real niche right now in the marijuana sector.
OrganiGram doesn’t have a major partnership with any outside company yet. Beyond that, it’s small enough to be acquired, it’s nimble enough to see massive growth, and it has strong enough fundamentals to weather severe corrections.
OrganiGram is truly one of the strongest marijuana stocks out there, even during a market correction.
On top of all that, OrganiGram stock was one of the few cannabis stocks that naysayers weren’t constantly berating for being overvalued. While there certainly have been some accusations of overvaluation, by and large, many analysts have supported this stock.
With OGI stock having fallen significantly in recent weeks, I believe it will eventually hit a nadir and easily rally back to its former highs, probably exceeding them during the recovery period.
HEXO Stock
Another marijuana penny stock that I’ve been a fan of for a long time is Hexo Corp (NYSE:HEXO).
HEXO stock is very much akin to OGI stock in terms of size and strengths. Both are smaller pot stocks in terms of price, but high in terms of market cap and strong in terms of fundamentals.
Perhaps the biggest divergence is that Hexo struck a partnership with a large alcohol company last year, while OrganiGram has yet to do anything of that sort.
That means OrganiGram stock has higher potential for speedy growth, but HEXO stock is both more stable and more prepared for long-term success.
Much like OrganiGram, Hexo Corp has been taking a beating on the stock market recently. But the future is just as bright for Hexo now as it was a few months ago when its shares were soaring. Waiting and watching for the right time to invest in HEXO stock could amount to big gains down the line.
OGI and HEXO Stock Performances
The performances of OGI stock (black line) and HEXO stock (blue line) over the past week are seen in the chart below:
Chart courtesy of StockCharts.com
Analyst Take
The marijuana news today isn’t exactly rosy about the short-term prospects of the market, but I’ve always favored a long view of the industry. And the long view is very strong.
Sure, pot stock prices may be plummeting now, but we’ve seen this type of thing before. They always recover, and when they do, many investors are left with very strong gains in their portfolios.
