How Marijuana Stocks Could See Their Best Year Yet in 2019

How Marijuana Stocks Could See Their Best Year Yet in 2019
iStock.com/Darren415

Marijuana Stocks in 2019

There’s no contention that 2018 was a bit of a down year for marijuana stocks. While it was full of swings, both positive and negative, ultimately we didn’t see too much growth last year. Nevertheless, marijuana stocks in 2019 look poised to have a very strong performance, maybe even their best yet.

There are several factors at play that may make 2019 such a fantastic year for pot stocks.

First, you have the fact that they largely underperformed in 2018. That means that, unlike in late 2017 when marijuana stocks surged by hundreds of percentage points in a few months, the sector is ready for a rebound rather than a correction.

Next, you have a lot of all-time highs that were reached in 2018, followed by several corrections. These highs point to the fact that marijuana stocks are clearly able to hit those numbers and will likely surpass them again in 2019. Therefore, savvy day traders could see huge growth in short periods of time.

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But the main reason is that the legal cannabis industry is maturing in all the right ways.

In 2017, we had a spatter of major investments and acquisitions in the pot sector, and they were very effective at causing marijuana stocks to surge.

In 2018, that picked up, with many companies making a bevy of acquisitions (Aurora Cannabis Inc (NYSE:ACB) being one of them) and several companies scoring huge partnerships with major outside industry giants—namely Canopy Growth Corp (NYSE:CGC), Hexo Corp (OTCMKTS:HYYDF, TSE:HEXO, and Cronos Group Inc (NASDAQ:CRON).

The end result was that we’re seeing more money than ever flood the market and propel marijuana stocks to new heights. I expect that we’ll continue to see more of these lucrative deals as the industry ages and more institutional investors warm to the idea of the weed business.

The stock chart below shows positive gains among many marijuana industry giants—CGC stock (black line), ACB stock (blue line), CRON stock (red line), HYYDF stock (green line), and TLRY stock (pink line)—over the past month.

Chart courtesy of StockCharts.com

Another aspect of the marijuana industry maturation is that major initial public offerings will become the norm rather than the exception.

Tilray Inc (NASDAQ:TLRY) proved just how hungry investors are to get in on the ground floor of a marijuana company, when it became the first pot company to have its initial public offering (IPO) on a major U.S. exchange (the Nasdaq), sending the company’s stock soaring by hundreds of percentage points in a matter of days.

For those looking to make huge gains in a short time, there were few better choices in the market in 2018 than TLRY stock. But Tilray is only the first, and most certainly will not be the last.

Considering how exciting and profitable Tilray stock proved to be, I imagine that the next major IPO of a marijuana company on an international exchange will see another huge rush in its early days, hoping to mimic the astronomical gains of Tilray.

While it will certainly be a time fraught with uncertainty, for those willing to play the game, the rewards will be some of the best anyone could hope for in a portfolio in 2019.

And those are just the probable reasons that marijuana stocks in 2019 are poised for success.

One possibility that would radically shake up the marijuana market is if the Democrats nominate a presidential candidate with a pro-marijuana agenda.

We’re going to see a lot of talk about who will win the U.S. presidential nomination to challenge Donald Trump. If the winner holds strong views on marijuana reform (in keeping with numerous polls showing that the American people are ready for legal pot in one form or another), expect to see marijuana stocks skyrocket.

Furthermore, if the leading candidate in 2019 emerges with a staunch pro-marijuana platform and is able to defeat Donald Trump in 2020, we’re looking at a gold rush in the marijuana industry over the next few years.

The one caveat is that the candidate follows through on their pledges and is able to cut through congressional roadblocks to implement marijuana reform.

Overall, there’s a lot to be excited about when it comes to marijuana stocks in 2019 and beyond.

But there is one way that everything could go south.

What Could Hurt Pot Stocks in 2019?

Frankly, much of what could negatively impact pot stocks in 2019 is out of the control of the industry itself.

You see, near the end of 2018, we saw some major downturns on the broader stock market. These turned out to be blips (so far, at least) and haven’t driven a massive retreat.

Given that many economists are now predicting a recession in the near future, if we end up seeing a broader market downturn, that will no doubt hurt pot stocks in the near term.

While I’m very bullish on pot stocks—market pullback or no—they would be profoundly affected if a recession comes to pass, with more volatile industries like marijuana being inherently more at risk.

Analyst Take

The marijuana stock market is looking like it’s going to have a good time in 2019, provided the market remains stable.

With so many factors that could help bolster the pot industry—and relatively few that could harm it—we’re looking toward what is likely to be a strong outlook for marijuana shares.