How a Second Outbreak Could Spur Huge Growth Among Top Pot Stocks

Chuck Woolery at The Paley Center Beverly Hills, California. (Photo by Jason LaVeris/FilmMagic)Marijuana Stocks Set to Rise

Of course no one wants a second spike in coronavirus. That goes without saying. But there is a very real possibility that we could experience a second surge of the virus in the coming months as countries begin to reopen their economies (with some deeming it too soon).

A second outbreak would be without a doubt horrific. It would also send the economy falling again, possibly deeper than before, which could in turn create another opportunity for gains from pot stocks.

Now, again, I don’t hope this deadly scenario plays out, but it’s a very real possibility, and I’d be remiss not to let readers know how best to keep money in their bank accounts during one of the toughest economic times in the past 100 years.

The reason for my bullishness on marijuana stocks no matter how the economy navigates the next few months is simple: history loves to repeat itself.

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The best way to profit from the stock market is to learn from it. What the stock market is telling us about pot stocks is that they are trading well below their true value right now.

And that’s understandable. With the coronavirus sucking up all the political and media attention, there’s little hope for major pot reforms in the near future. Honestly, that’s for the best; we don’t want politicians focusing on marijuana right now when they have far bigger fish to fry.

On the U.S. political front, the COVID-19 pandemic is one of the worst outcomes. First, as mentioned above, there is almost no attention being paid to the war-on-drugs crisis that has plagued America for decades, putting thousands upon thousands of people in prison for non-violent drug offences while also allowing a multi-billion-dollar black market to flourish.

That this is an election year with several Democratic Party presidential candidates who were pro-pot legalization (a first time in U.S. history) only makes that a harder pill to swallow. In other words, this was a chance to push for real progress toward federal U.S. marijuana legalization.

Short of a president assuming power in 2021 and issuing an executive order to effectively legalize pot overnight, there was still a lot of hope to push whatever candidate the Democratic Party selected toward a marijuana-friendly agenda.

But due to the COVID-19 crisis (and a number of other factors), committed centrist Joe Biden is now helming the Democratic Party’s presidential fight, and he has recently proven to be unmovable on the marijuana issue.

I had held out hope that Biden would conform to the majority opinion of Americans regarding pot and support federal U.S. marijuana legalization, or at the very least select a vice presidential running mate who would be able to steer him in that direction.

While the latter is still very much a possibility, the former is all but dead, its cause of death a new report from the joint task force designed to bridge the leftist elements of the party (the Bernie Sanders wing) with Biden’s more centrist policies.

Marijuana was one of the major casualties, with reportedly “huge battles” going on between the left and the establishment Dems over U.S. marijuana legalization. (Source: “The left gets rolled on legalizing pot — and legal protections for cops,” Politico, July 8, 2020.)

In the end, Biden remained steadfast in his anti-pot commitments. As you’d expect, this is not good news for marijuana stocks.

But it’s not all bad news.

The good news here is that an argument took place at all. That’s a huge step up from the last election, when almost no candidate was advocating for U.S. marijuana legalization.

Another important thing to remember is that Biden is seeking (or at least is claiming so) a single term in office. That means a pro-legalization president could be in the White House come 2024. Not ideal, but better than waiting until 2028 (it’s doubtful—but not impossible—that Republicans will run a pro-marijuana candidate in that election).

So there is some good to be taken away from this. And even with the setbacks, I fully anticipate that federal U.S. marijuana legalization will come about within the next several years, with the question centering on just how long it will take.

That COVID-19 is almost all that the news talks about makes the process more difficult in the near term.

I personally believe that Biden would have been more pliable on this matter had the polls not been so favorable toward him. With the odds growing in Biden’s favor against incumbent Donald Trump, as well as the topic of U.S. marijuana legalization being subsumed by COVID-19 problems, it’s certainly not an ideal situation for legalization advocates.

But that doesn’t mean hope is lost.

In the meantime, marijuana stock investors need not panic. There are a good number of ways to make strong profits from pot stocks; investors just have to consult stock charts.

Coronavirus Stocks, Including Pot Stocks, on the Rebound 

When COVID-19 began to spread, the globe-spanning panic naturally made its way to the stock market. Companies in all industries were slammed by the virus (at first).

While many had predicted that we would see an economic collapse on par with the Great Depression, that apparently didn’t faze the stock market. Stocks quickly rebounded following the initial introduction of the coronavirus.

During the pandemic, I’ve focused on a select few stocks, which I’ve termed “coronavirus stocks.” These are shares of companies that aren’t just likely to survive the economic conditions created by COVID-19, but are likely to thrive because of them. Marijuana stocks are, at this moment, solid coronavirus stocks.

The reason being that their volatility makes them very susceptible to market shifts. Now, you may be asking, “Doesn’t that mean they’ll be especially hurt by another COVID-19 scare?” And you’d be right. But much like I predicted with the first go-around, pot stocks are more resilient than many believe.

Check out this chart below:

Chart courtesy of StockCharts.com

As you can see in the above chart, over the past three months, we’ve seen huge growth among three of the top pot stocks.

  • Innovative Industrial Properties Inc (NYSE:IIPR), a longtime favorite of mine, has seen gains of about 30% since April.
  • Curaleaf Holdings Inc (OTCMKTS:CURLF, CNSX:CURA), one of the stocks best situated to take advantage of the burgeoning U.S. marijuana market, has seen a whopping growth of about 50% in that period.
  • Canopy Growth Corp (NYSE:CGC), the industry standard-bearer, has seen growth at a slower pace compared to its rivals, but has still netted a healthy gain of about eight percent.

Now, the reason for this growth is pretty simple: a market correction set in to account for the coronavirus scare.

If another scare were to spread to the stock market again, we could see another opportunity to acquire top pot stocks on the dip, with profits potentially hitting 50%-plus in a few months.

That’s a very strong opportunity for investors, and it was one I had predicted when COVID-19 first hit.

IIPR stock, CGC stock, and CURLF stock remain my top pot stocks, even as we enter a very different economic outlook than the one we had in, say, December 2019.

But even with conditions having radically changed, I see immense opportunity for growth among the top pot stocks (and pot stocks more broadly), due to the market’s tendency to overreact.

Analyst Take

Marijuana stocks are hugely dependent, moving forward, on federal U.S. marijuana legalization. When that hits, we can expect to see intense growth across the industry, especially among the top pot stocks highlighted in this piece (IIPR stock, CGC stock, and CURLF stock).

But with the political climate presenting a pretty rough time for the fight for U.S. marijuana legalization, investors need to seek out ways to profit from these very lucrative pot stocks in the short term.

As coronavirus stocks, marijuana stocks have a number of advantages right now. Their volatility means they will see spikes both low and high. For those who are willing to stomach the risk, buying at the dip could result in some of the top returns available in 2020.

Furthermore, these economic conditions are only temporary. We all hope that COVID-19 is gone by the end of the year (and stays gone). It has wrought devastation on people’s health and employment.

But if the virus unfortunately sticks around, one small sliver of a silver lining is that investors can use the stock market uncertainty to eke out great profits. That’s how the top billionaire investors are able to benefit immensely every time one of these crises hits. There’s no reason that regular people shouldn’t be able to get in on the gains as well.