3 Stocks That Would Benefit From Florida Legalization

 florida marijuana legalization
iStock.com/Rex_Wholster

Is Recreational Marijuana Legal in Florida?

For those of you who are asking the question “Is recreational marijuana legal in Florida?” because of a recent report you may have seen, I have some bad news. That report was fake news. Yes, even the marijuana industry is not impervious to the great journalistic scourge of our time.

But while the day that Florida legalizes marijuana for recreational use is still a long way off (I’ll cover that later), it doesn’t mean that forward-looking investors can’t plan for what is looking more and more like an inevitability each day. Whether that day comes in one year or 10 is up for debate, but it is almost certainly on its way.

Three marijuana stocks in particular would benefit greatly from a Florida marijuana bill, and otherwise are prime investment targets for those looking to profit from the U.S. marijuana market.

First, though, what is the current status of the recreational marijuana legislation in Florida?

Well, Florida pot advocates tried to get the topic of recreational marijuana on the November 2018 ballot for the state midterm elections.

Unfortunately, the campaign organizers fell well short of the required 766,000 signatures that would have forced the issue to a vote. As such, organizers are now pushing for the issue to be on the 2020 ballot, likely coinciding with the next presidential election. (Source: “Recreational marijuana in Florida likely on hold for years,USA Today, January 2, 2018.)

While there is a possibility that the Florida state congress will make a move on recreational marijuana, that possibility is small. Most politicians at the state level prefer to have the issue of marijuana legalization relegated to a referendum, therefore absolving them of the responsibility of having to take a stance on a controversial issue.

Recent polls have shown that a majority of Americans do, in fact, support legalization of marijuana, but there is still a vehement bloc of voters that is strongly opposed to the drug.

You don’t have to look far to see prominent anti-marijuana crusaders occupying high levels of government. U.S. Attorney General Jeff Sessions is probably the most notable anti-drug politician in the country, and he occupies one of the highest law enforcement organizations in the land, the Department of Justice.

So if you’re keen on legal recreational marijuana in Florida, you’ll likely be waiting for the next few years at least, unless a massive political movement forms behind marijuana or politicians suddenly find their spines. Both outcomes are unlikely.

Having said that, if you’re a long-term investor in the marijuana market, you may not mind getting in early. Besides, these stocks are not dependent on marijuana being legal in Florida. Legalization in that state would add value, certainly, but Florida is not the be-all and end-all for these companies.

Florida Legalizing Marijuana Is Fake News, But These Stocks Are for Real

Again, to be clear, there is currently no major break in the news regarding the state of marijuana legalization in Florida. Should you read otherwise, please check your sources and reevaluate that news site.

These three companies, however, either have stakes in the Florida medical marijuana market (which is legal) or a strong presence in the U.S. marijuana market in general—or both.

Without further ado, let’s get to the three stocks.

Best Marijuana Stocks Should Florida Legalize Marijuana

Perhaps the company with the most to gain from recreational marijuana becoming legalized in Florida, Aphria Inc (OTCMKTS:APHQF, TSE:APH) already maintains operations in the state, where it runs one medical cannabis dispensary and plans on opening at least five more.

Having already established a foothold in Florida, Aphria stock is uniquely positioned to take advantage of the future situation in the state. After all, legislators and sellers will have formed a baseline of trust with Aphria due to its presence in the state, and this will naturally lead to further cooperation in the future, when recreational marijuana is legalized.

Chart courtesy of StockCharts.com

It’s always worth noting that Aphria stock had a bit of a shakeup when it sold off many of its U.S. assets in order to comply with Toronto Stock Exchange (TSE) rules that prohibited doing business in U.S. states where cannabis is legal (but illegal at the federal level) and said that companies that engaged in such actions could face delisting.

This was a knock-on effect of the current White House administration’s retrograde stance on legal weed. Whereas the Barack Obama presidency largely left the marijuana question up to the states, Sessions has made several public comments condemning marijuana and has long expressed his desire to further crack down on the drug, even though we have yet to see that take place.

But Aphria did not deal away its Florida holdings. While there are a number of reasons for this (the company is now in compliance with the TSE regulation even with its Florida business), it does show that Aphria values its Florida business. (Source: “Weed company Aphria sells part of stake in U.S. firm as it pulls from country,” The Toronto Star, February 5, 2018.)

The only hitch here is that APHQF stock has been in a rut lately. Aphria stock did more than double in value in the run-up to 2018, but it has been harder hit than most during the industry-wide correction that has impacted the industry.

While I expect APHQF to bounce back down the line as the marijuana sector emerges from the downturn (which I believe will take place in early summer), it may have yet to bottom. Therefore, the next few months could be rough for new investors.

Long term, I think APHQF stock could be a winner, especially for those looking to play on the future of the marijuana market in the United States.

Another stock that I believe is well suited to take advantage of movements in the U.S. market is Cronos Group Inc. (NASDAQ:CRON).

Aside from being the first marijuana-focused company to list on the NASDAQ (about which I’ve written at length)—and what a huge coup it was for CRON stock—the company’s latest deal signals that it has big plans for the U.S. marijuana market.

MM Enterprises USA, LLC, aka MedMen Enterprises, one of the largest cannabis retailers in California (with facilities in California, Nevada, and New York), entered into a partnership with Cronos. The deal will see the two companies form MedMen Canada, a joint venture that will develop new products and open stores across Canada.

Chart courtesy of StockCharts.com

Cronos has signaled its intentions to further this partnership into potentially bringing Cronos south, even while MedMen heads north.

“We want to change the perception of cannabis worldwide, and bring it to the mainstream,” said Cronos Group CEO Mike Gorenstein. “It was really clear MedMen offered, by far, the best retail experience. We wanted to make sure we could bring that to Canada.” (Source: “Cronos Group finishes the day up 11 percent after announcing MedMen partnership,” CNBC, March 19, 2018.)

As the two companies grow closer, should the partnership prove fruitful, Cronos will have a number of advantages when dealing with the U.S., including a solid partner that knows the legislative landscape, as well as has a listing on the NASDAQ.

CRON stock is one of the strongest performers in 2018 so far, with a bevy of good news landing and a stock value bump coming as a result.

The final marijuana stock that I think stands to benefit from a Florida marijuana bill is Canopy Growth Corp (OTCMKTS:TWMJF, TSE:WEED).

The largest player in the marijuana market has also made it public that it wants to get its ticker listed on the NASDAQ, which is a strong play and shows a willingness to pivot toward U.S. investors.

Chart courtesy of StockCharts.com

Canopy Growth stock, like most other big players in the marijuana market, has been on the lookout for international expansion. The company is ramping up its sales in Germany, another huge marijuana market that will reap huge rewards down the road should that country legalize recreational pot.

The company’s international moves show a willingness on Canopy Growth stock’s part to look outside the Canadian border for opportunities in the marijuana market.

While it does not currently have any direct operations in Florida, Canopy Growth is poised to be a major player in the market for years to come. You can bet that the company will be making more investments in the U.S. market as laws relax on marijuana down south.

In fact, the delay to the Florida marijuana bill vote may help Canopy in the long run, as the company can use the time to expand its presence in the U.S. market, a move that seems all but inevitable.

Analyst Take

Unfortunately, the headline “Florida legalizes marijuana” is fake news, but that doesn’t mean that planning on the eventual legalization is the wrong move.

It’s coming; it’s just a matter of time. Whether in 2020 or tomorrow, a number of marijuana stocks stand to benefit directly and indirectly from the move, and investors who are interested in the long-term game should not be scared off by these timelines.