Pot Stocks Look to Make Big Gains in 2020
The future of the marijuana industry is rife with potential gains. One important question that all investors should ask themselves, however, is what timeline are they most comfortable with?
Is it a more distant future with the possibility to see massive gains or a more immediate one that has a lower ceiling? In other words, would you rather see strong gains, fast, or massive gains slowly?
And that brings us to the future of marijuana stocks in 2020.
Many pot companies, especially those operating in Canada, are turning towards immediate profits as a way to spark gains in the now. And that makes sense.
With the Canadian market now fully legal with edibles having recently been made available, there’s a sense that these primarily Canadian marijuana stocks ought to be seeing strong numbers from here on out.
But I’ve explained several times why this is faulty thinking.
Yes, Canada is a fully legalized market, but there are myriad obstacles preventing pot from reaching its true potential…yet.
The most obvious one being the still-burgeoning black market that is several magnitudes more lucrative than the legal market. That is changing, but it will take some time before the Canadian legal market—and really any legal market—truly begins to see its potential reached.
In any case, this hasn’t changed the demand from investors to see profits in the present. As a result, many pot companies in Canada are shifting gears from expansion to immediate profits. And this is only going to intensify in 2020.
The move will likely pay off by causing share prices to grow strong in the coming year. But, in a way, it’s mortgaging their future to see gains in the present.
By curtailing their efforts to expand internationally, these pot stocks are closing themselves off—or at least handicapping themselves—when it comes to the massive potential of the global marijuana market.
Canopy Growth Corp (NYSE:CGC), for instance, is the largest marijuana stock on the planet based on market cap. But it still only accounts for $7.0 billion.
When looking ahead at the marijuana market, we’re talking hundreds of billions of dollars, so much of the industry is still unaccounted for.
CGC stock, in fact, is the perfect example of the shifting tide among Canadian pot stocks away from growth and now towards profit.
Canopy Growth was started by Bruce Linton, who later became the company’s CEO. Under Linton’s direction, it quickly became a dominant force in the marijuana industry. Canopy Growth expanded across the globe and led the charge towards legalization, seeing its share price skyrocket over this time.
But then things began to change at Canopy Growth. After its partnership with Constellation Brands, Inc. (NYSE:STZ), an alcohol giant, CGC was facing more and more pressure to deliver high profits and keep costs down.
Couple that with legalization finally hitting Canada and you had a perfect storm come together, forcing Linton out as CEO. He was replaced after a brief interim by David Klein, a senior executive who had been at Constellation for 14 years. (Source: “Canopy Growth Announces David Klein As New Chief Executive Officer,” Canopy Growth Corp, December 9, 2019.)
This signals a huge shift in priorities at Canopy Growth. Whereas before the company was focused on being a dominant global player in the marijuana industry by getting in on the ground level in budding pot markets, now it’s gearing up to see profit growth as a number one priority.
What that means is less money being spent on growth.
Klein, for his part, is a nice fit for Canopy Growth. His work at Constellation was focused on spreading alcohol brands around the world, including the U.S., Canada, Mexico, and Europe.
Naturally, this experience will come in handy as the legal marijuana industry looks to grow globally, even if that is becoming a secondary priority behind profits for the company. He’s replacing one of the last executive holdouts from Canopy Growth’s earlier, growth-oriented days, interim-CEO Mark Zekulin.
“Thanks to the efforts of Mark [Zekulin] and the entire team at Canopy Growth, no company is better positioned to win in the emerging cannabis market, ” said Klein. (Source: Ibid.)
Zekulin, for his part, had been with Canopy Growth since the beginning, assuming the leadership role when Linton was notoriously fired.
“It has been an incredible six years at Canopy Growth, and I have witnessed the team and Company grow from five people in an abandoned chocolate factory, to thousands of people across five continents,” said Zekulin. (Source: Ibid.)
What this CEO changeover signals is that Linton’s ideas about pot—that it’s a globally powerful product that will see massive growth long-term—are being sidelined for more profit-oriented leaders at Canopy Growth.
It’s been said that this was the primary issue between Linton and the board—his focusing on growth and spending instead of focusing more doggedly on profits—and that issue allegedly led to his dismissal.
While not every company is going to follow in Canopy Growth’s footsteps, this is the industry standard bearer. What Canopy Growth does matters and sends shock waves through pot stocks.
I imagine that many other Canadian marijuana stocks will be on a similar path in the coming year. In fact, many have already made moves to align themselves with this profit-first development plan.
Which brings us to the question I first posed in this article: are you the type of investor interested in strong short-term gains or the type more interested in trying to achieve massive growth, but willing to wait longer?
Growth Now vs. Gains Later—Best Pot Stocks for All Investors
The fact of the matter is that investors are going to be asked to choose which of these paths they’d prefer to navigate. But, fortunately, for us, there are strong pot stocks in both camps.
The fact is that profit-focused marijuana stocks are likely to have a stronger 2020, while other pot stocks are looking to grow more in the future.
In the profit-now camp we have, of course, Canopy Growth stock. The interesting thing about CGC stock, however, is that it’s actually in the perfect place for those who can’t decide between the two options.
Linton’s decisions while CEO will linger for many years after his departure, with the possibly most important one coming when he made the deal to acquire Acreage Holdings Inc (OTCMKTS:ACRGF, CNSX:ACRG.U).
Canopy Growth acquired the right to buy out Acreage Holdings for $3.4 billion, with a mandate to exercise that right when cannabis production and sale becomes federally legal in the United States. (Source: “Canopy Growth Announces Plan To Acquire Leading U.S. Multi-State Cannabis Operator, Acreage Holdings,” Canopy Growth Corp, April 18, 2019.)
It was exactly this kind of deal that worried the board members at Canopy Growth…but also exactly the type of deal that could see the CGC stock price grow exponential in the next few years.
You see, the U.S. marijuana sector is now the most potential-filled segment of the market, with the highest potential for growth being in the future. While that future remains uncertain, in that we don’t know when legalization will hit, I’m certain that it is on the way.
With that in mind, CGC stock is perfectly positioned to see gains with its current profit-first plan that its new CEO will likely be instituting. Meanwhile, it also has the ability to see rapid growth during U.S. marijuana legalization, with its Acreage Holdings deal allowing it to expand quickly into the U.S. market.
It’s a win-win plan that makes CGC stock very strong.
On the flip side, we have Curaleaf Holdings Inc (OTCMKTS:CURLF, CNSX:CURA).
CURLF stock is a U.S. marijuana stock that is set to be the first company in the pot industry to see $1.0 billion in revenue, according to its 2020 projections.
Considering that it operates in 12 U.S. states and continues to expand, this is already the powerhouse U.S. marijuana stock, until a company can overtake it or a new one dethrone it.
And while it waits for recreational marijuana to be fully legalized across the country, it’s taking advantage of the U.S. medical marijuana market (33 states and D.C.).
All this combines to make Curaleaf stock one of the better buy-and-hold companies in the industry. In fact, I believe that Curaleaf stock is the CGC stock equivalent in the U.S. market; an industry standard bearer that could see exponential growth similar to the gains Canopy witnessed when Canada legalized pot.
I’d argue that CURLF stock has the ability to see exponential gains over the next few years, tripling or even quadrupling. The sky is the limit for Curaleaf stock. All it’s going to take is U.S. legalization to become a reality, which is only a matter of time now. Whether it’s in two years or seven, my trust in Curaleaf stock seeing huge gains for investors is strong.
The future of the marijuana industry is a bright one. There are gains to be had in multiple segments of the market. From medical pot to legal recreational weed around the globe, the industry is continuing to grow every day.
What’s important for investors is to choose which types of pot stocks they’re most comfortable with: those operating in markets that already have legal marijuana and therefore are looking to produce profits; or companies that are instead banking on the future.
Both have the ability to reap big gains, with one entailing a longer wait time…but likely a higher payoff.
Overall, it’s hard to go wrong betting on the future of the marijuana industry. And, while I’m more bullish on the pot market long-term, even those looking to make money in a relatively shorter period of time need not look hard for a strong pot stock.