U.S. Marijuana Legalization Is Closer Than We Think: Huge Potential for Pot Stocks

Federal U.S. Marijuana Legalization Is Closer, Meaning Huge Potential for Pot Stocks
iStock.com/Darren415

U.S. Marijuana Legalization

It’s hard to be bullish on marijuana stocks right now due to the downturn. Or at least, it’s hard if you’re in the game for short-term profits. On the flip side, for those looking to go long and see real gains down the road, this might be as good a time as any.

First you have the fact that pot stocks, by falling, have now hit bargain prices that will no doubt rise in the future when the market stabilizes.

While you may be waiting some time for that stabilization to come, it’s almost a certainty at this point. We’ve seen the market dip multiple times before, only to reward those with steel nerves with higher gains on the other side.

And the most important thing about marijuana stocks right now is that a truly monumental, market-altering event could be just around the corner: U.S. marijuana legalization.

Advertisement

While I’ve previously discussed all the progress that is being made on this front, it’s hard to overstate just how far the cause of federal U.S. legalization has come—and how massive legalization would be for pot stocks.

As a result of Canadian marijuana legalization in 2018, we saw weed stocks double, triple, and more. Legalization in the U.S., a far more lucrative market, would likely have a similar effect.

And U.S. marijuana legalization is damn close.

We’ve seen polls showing that the majority of Americans support weed legalization in one form or another. We’ve seen 11 states and Washington D.C. legalize recreational marijuana, creating massive markets in states across the Union, including California, the largest pot market in existence right now.

But a lot of progress is happening behind the scenes as well, speaking to a seismic shift in the political landscape of pot legalization.

Just recently, the federal government announced that it will process dozens of applications for cultivating marijuana plants for scientific purposes. (Source: “Researching Medical Marijuana May Soon Get Easier,” NPR, August 27, 2019.)

This decision was made by the U.S. Drug Enforcement Administration (DEA), which has faced a lawsuit and complaints from the years-long delay that used to stand in the way of researchers studying the plant.

Expanding cannabis research will serve to further soften marijuana’s image in the eyes of Americans, including lawmakers. After all, marijuana has traditionally broken into markets first as a medicine and then as a recreational drug.

As it stands, 33 states and D.C. currently permit medical marijuana. And of course, last year Epidiolex became the first cannabis-derived drug prescribed by doctors.

Finally, we also have the fact that hemp was legalized across the U.S. in 2019, allowing cannabidiol (CBD) to become a nationally-approved product.

All this serves to demystify marijuana in the eyes of consumers and help it along its path toward full legalization across the country.

“I am pleased that [the] DEA is moving forward with its review of applications for those who seek to grow marijuana legally to support research,” said Attorney General William Barr. (Source: Ibid.)

Good to know that the current administration currently supports pot legalization, or at least it doesn’t actively oppose it.

President Donald Trump hasn’t been exactly consistent on his approach to U.S. marijuana legalization, but it wouldn’t be hard to imagine the heterodox president supporting it, despite many in his party likely not following suit.

You may remember that his first attorney general, Jeff Sessions, was famously anti-marijuana. An anti-drug crusader to the bone, many believed that Sessions would crack down on pot. That fear never materialized, and it appears that Barr is not as vehemently opposed to marijuana.

Speaking of attorneys general, another huge win for the marijuana industry came by way of former acting U.S. Attorney General Matthew Whitaker. He will serve as outside counsel for Toronto-based CBD company Alternate Health Corp (OTCMKTS:AHGIF, CNSX:AHG). (Source: “Canadian CBD firm lands controversial former US attorney general as counsel,” Marijuana Business Daily, August 27, 2019.)

As seen in the below chart, Alternate Health stock has been battered in 2019, much like many other pot companies over the past few months. But the future is bright, with such an insider being brought on to help the company.

Chart courtesy of StockCharts.com

Whitaker’s role at Alternate Health will involve “strategically advising” the CBD company.

“I think there is serious potential in the CBD industry, and everyone at Alternate Health will work hard to be a leader in the industry.” said Whitaker. (Source: Ibid.)

The company is relatively new to the CBD market; in early May it announced a $20.0-million acquisition of Southern California-based Blaine Labs, which offers a variety of CBD skincare and health products.

It’s worth noting that Alternate Health is divesting from its marijuana assets with the addition of Whitaker. Still, the fact that the company is currently in the CBD sector is a strong indicator of just how far the reputation of cannabis has come in the United States.

And remember, Whitaker is hardly the first political heavyweight to join a marijuana company. Former speaker of the House John Boehner joined Acreage Holdings Inc (OTCMKTS:ACRGF, CNSX:ACRG.U) last year.

Including a former Israeli prime minister, there is some serious political heft at work in the marijuana industry.

And you know that these former political insiders are going to use their connections to help improve their respective companies’ outcomes—that’s just good business. Whether it’s ethical is another question entirely, but let’s get back to the matter at hand.

We have political insiders with serious skin the game when it comes to seeing U.S. marijuana legalization take place. Combined with the fact that the drug has never been more popular or accepted in the eyes of Americans, this is a perfect storm for legalization.

Then there’s the fact that, of the remaining Democratic Party presidential hopefuls, the majority of the front runners have come out with pot legalization plans of one sort or another.

Some favor decriminalization while others are on board with full legalization, indicating that the next Democrat president will likely be pro-pot. That doesn’t necessarily mean they’ll emerge victorious in this cycle, but if they do succeed, it is not outside the realm of possibility to see U.S. marijuana legalization within the next five years.

Couple that with pot stocks being at the lowest prices they’ve been in 2019, and you have a setting that is ripe for gains.

Analyst Take

The marijuana industry is no doubt edging toward global legitimacy. There’s also no doubt that other countries will join Canada in legalizing the drug, and when they do so, share prices will rise.

Not to mention that the more customers that are available, the more opportunity there will be for sales, supply contracts, and other sources of recurring revenue that will juice quarterly reports and, by extension, stock prices.

Overall, while things may seem bleak in the near term, marijuana stocks are about as full of potential as they’ve ever been, due to their decrease in price. Investors who are willing to play the long game could end up being richly rewarded.