Are Marijuana Stocks Safe in the U.S.?
U.S. Attorney General Jeff Sessions’s disdain for pot is no secret. But how big of a concern are his threats of a marijuana crackdown? That’s one question that possibly keeps investors of U.S. marijuana stocks up at night. There’s no second opinion on this; as long as anti-marijuana policymakers hold the reins, a giant question mark will continue to loom over the issue of U.S. marijuana legalization.
While the Canadian marijuana industry has become the preferred investment haven for marijuana stock investors, the fact that Canadian marijuana companies are now foraying into the U.S. market for greater exposure is another cause of concern.
The two industries are increasingly getting intertwined, partly because of their geographical proximity but mostly because of their common struggles.
On both sides of the border, the marijuana industry is striving to come at par with the liquor industry and, to some extent, the pharmaceutical industry. Also, on both sides, political figures are deciding their ultimate fate.
In Canada, the situation is not as dire as in the U.S. The Canadian Senate is just one step away from passing the marijuana bill. After a debate last week, the marijuana bill has gone for a second reading now. Chances are that the final rubber stamp of approval will be received by end of summer.
In the U.S., however, things are looking a little grim. Just when it seemed like the industry was picking up steam, Sessions made a swift move to pull the plug on state-specific marijuana legalization initiatives.
Recall that in early January, when California began selling recreational pot at dispensaries and Vermont surprised us with its unique legislative order to legalize recreational marijuana, Sessions moved in to rescind the Obama-era Cole Memorandum, followed by a threat of a crackdown on marijuana.
The Cole Memo allowed states to write their own marijuana laws, without much interference from the federal government. With the Cole Memo now revoked, the federal government holds power to meddle in the state affairs.
Lucky for us, the Trump-Russia controversy has been keeping Sessions busy lately. And with so much already on his plate, it is being speculated that he may not get around to his promised marijuana crackdown before his tenure is over.
You see, the growing divide between Trump and his wingman has raised doubts about his future with the administration. Regardless, in my view, Sessions’s threats were merely hot air.
Should You Consider Marijuana Stocks Now?
There’s no reason not too. In fact, now may be the perfect time to consider them. Think long term. The current political leadership will sooner or later exit Capitol Hill. The fate of the industry would land in the lap of the next leadership.
Only a fool would question the inevitability of marijuana legalization in the U.S., given all the signs in favor of it. Most Americans want it legalized and the number of those who favor legalization is growing with each passing day.
We’ll find out in due time which way the winds will blow for marijuana stocks. But to completely rule out the possibility of federal-level marijuana legalization is nonsensical.
That brings us to the most plausible question; that is, what are the best marijuana stocks to consider right now?
Obviously, the best marijuana stocks for U.S. investors may be ones that have a backup plan in store, in case things go south in the U.S. market. I’m talking about Canadian marijuana companies with partial U.S. exposure.
Chart courtesy of TradingView.com
1. Cronos Group Inc (NASDAQ:CRON)
Cronos stock is one top marijuana stock I’m eyeing right now. Cronos Group Inc is the only Canadian marijuana company that has so far managed to forge its way into the U.S. capital markets. Cronos is now listed on the Nasdaq, making it an easy buy for U.S. investors.
Just earlier this month, it joined hands with American marijuana company MedMen Enterprises. (otherwise known as MM Enterprises USA, LLC) in a bid to tap into the U.S. sales channel. MedMed operates marijuana retail locations in California, Nevada, and New York. MedMen likewise gets access to the Canadian market. I’ve previously discussed the implications of the Cronos-MedMen joint venture in greater detail. It’s a win for both companies.
2. Aphria Inc (OTCMKTS:APHQF, TSE:APH)
Another great Canadian marijuana stock with U.S. exposure is Aphria Inc. Aphria entered the legal marijuana market with a 37.6% stake in a U.S. medical marijuana company, Liberty Health Sciences Inc (CNSX:LHS) last year. However, listing rules at the Toronto Stock Exchange forced Aphria to sell part of the stake. Aphria was given the option to turn compliant or face delisting.
Take note that the Canadian exchange does not allow companies with significant U.S. operations to be listed on it if their core business is deemed illegal by the U.S. federal government.
Aphria still owns about 28% of Liberty Health, despite having sold a part of the share. As obvious, it’s keeping its options open in the U.S. in hopes of a positive regulatory shift. In Canada, Aphria remains one of the top three players. So this is one marijuana stock you should be eyeing if you’re a U.S. investor willing to invest over-the-counter.
3. Canopy Growth Corp (OTCMKTS:TWMJF, TSE:WEED)
Finally, Canopy Growth Corp would make it to any list of top stocks since it is, hands down, the largest marijuana company in the world by market value. Today, it makes a cut on the list since, like Cronos, it is also striving to make it to the Nasdaq.
Also, Canopy Growth may not yet have a direct stake in the U.S., but a U.S. company holds a stake in it. Alcohol beverage company Constellation Brands, Inc. (NYSE:STZ) bought a 10% stake in Canopy Growth last year, obviously seeing potential in its business, which complements it in the North American market. So, this is one stock I wouldn’t want to miss out on.
The Attorney General’s repugnance toward weed is a legitimate cause of concern for marijuana investors. But this concern shouldn’t last too long. The dark clouds hovering over U.S. marijuana stocks will sooner or later disperse. It’s only a matter of time. We have reason to believe that early investors may get a golden opportunity to witness a parabolic rally in their marijuana stocks.
Cronos stock, Aphria stock, and Canopy Growth stock make for three of the best marijuana stocks because of their diversified nature of business in the region. U.S. investors of marijuana stocks should be watching these top marijuana stocks closely as the industry undergoes significant transition this year.