For many pot stocks, their stock prices can often rise or fall rapidly depending on the prospects of marijuana legalization in the U.S. This is because there is significant growth potential in the industry, but much depends on progress in legalization in more states. access authorization and overall federal legalization.
One stock that routinely sees significant gains when talk of the possibility of marijuana legalization or any reform is based in Canada. Tilray brands (NASDAQ: TLRY). Over the years it has expanded into alcohol to make growth less dependent on cannabis alone. And its CEO Irwin Simon says he believes marijuana legalization could happen under an incoming Republican administration.
When Donald Trump won the US election in November, bank stocks fell almost immediately. The AdvisorShares Pure US Cannabis ETF it has lost nearly half its value since Nov. 5 as many investors saw news of a Republican takeover as bad news for the industry, given the party's typically tough stance on drugs.
But Simon remains an optimist. In a recent interview with Foxsaid he believes marijuana will be legalized at some point during the Trump administration. It points to the importance the industry could have to the overall economy and the tax dollars it could bring. In New York state alone, cannabis sales reached roughly $1 billion this year.
Nationally, the cannabis market could be worth as much as $76 billion by the end of 2030, according to Grand View Research, whose analysts expect the industry to grow at an annual rate of 12%. But how much growth is actually achieved over the next five years will undoubtedly depend on how much progress is made on legalization.
It's not the first time a cannabis CEO has been bullish about legalizing marijuana, and it probably won't be the last. It would be unlikely that Simon would come out and say it was over, come back in four years and hope for better chances under a different administration.
Instead, he will always want to focus on the positive. In Trump's case, Simon focuses on the next president's business acumen and the potential for him to take a practical approach to cannabis in terms of how many jobs and tax revenue the industry could bring.
But unfortunately the investors were already here. Despite all the optimism surrounding marijuana legalization in the past, there have been no significant changes in recent years to indicate that legalization will happen soon. During Trump's campaign, he seemed open to the idea of loosening restrictions on marijuana, saying, “We don't need to destroy lives and waste taxpayer dollars by arresting adults with their private parts.”
But during his first administration, he did not make any significant efforts to legalize marijuana. His position may have changed since then, but it's still debatable how much of a priority it would be for him and how likely any marijuana bill would be to pass the Republican-controlled House and Senate.
Whether you should consider investing in stocks depends on how patient you are willing to be. If you look at the next few months or even the next few years, it doesn't take a lot of progress and significant returns to make cannabis a worthwhile investment. Unless you're ready to stick around for at least five years, it might be better to hold off.
The good news is that with such a low valuation in hemp industry these days, with such tepid prospects for legalization, it might be a good time to buy discounted stocks and hold on for the long term. But even then, it is not a suitable strategy for risk-averse investors.
Tilray Brands is one of the biggest and best-known stocks and has consistently suffered losses. Over the last 12 months, its net loss reached $212.6 million. The vast majority of investors are likely to be better off looking for something safer growth stocks. But if you have time, patience and money to spare, there is a bullish case for investing in stocks for the long term.
Do you ever feel like you missed the boat when buying top performing stocks? Then you'll want to hear it.
On rare occasions, our expert team of analysts issues a “Double Down” action. recommendations for companies they think are about to emerge. If you are worried that you have already missed your chance to invest, now is the best time to buy before it is too late. And the numbers speak for themselves:
Nvidia:if you invested $1,000 when we doubled in 2009,you would have $355,269!*
Apple: if you invested $1,000 when we doubled in 2008, you would have $48,404!*
Netflix: if you invested $1,000 when we doubled in 2004, you would have $489,434!*
Right now we're issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.
