Like various investment sectors and hot trends (GameStop!!!), the cannabis industry has been a wild roller coaster ride for investors. Before there was the GameStop short squeeze saga, there was Tilray. Canadian cannabis companies, thanks to their nation’s wise decision to legalize first, were able to get a jump on the competition, but financial magazine Barron’s has provided tips on investing in the future American market as federal legalization seems inevitable in the United States:
Now, events are breaking in favor of the American operators. On April 19, the House of Representatives passed a bill by a 3-to-1 margin that would allow the pot industry to use the federally regulated banking system. Senate Democratic leaders support a matching bank bill. Meanwhile, Covid-19 has left state governments desperate for tax revenue. New York, Virginia, and New Mexico recently joined the 13 states that have allowed recreational sales to adults. Over time, recreational sales will probably come to the 20 states that now allow sale by prescription. That could spur the remaining state holdouts to fall in line, if federal legalization doesn’t happen first. So, sales can’t help but grow.
While the stocks of most Canadian producers have fallen sharply in the past two years, the shares of U.S. operators have gained. Upside remains. The market caps of the eight biggest U.S. cannabis companies add up to $33 billion. That’s a reasonable four times the $7.5 billion in aggregate sales that analysts forecast for next year, and 10 times the expected cash flows. The overall U.S. market is several times larger than the leading companies, and market researcher BDS Analytics foresees sales topping $40 billion by 2026. The illicit market is perhaps twice that size. If the history of the alcoholic-beverage industry is any guide, customers will eventually come over to the legal market.
What makes less sense is the lopsided attention that investors pay to Canadian pot producers, who may be listed in the U.S. but mainly have Canada’s tiny market for their sales. The real action is right under their nose.
As Barron’s noted, the lack of banking access and the 280E IRS tax code have been heavy burdens on the cannabis industry, even more so on small, local craft cannabis boutiques like Kind Leaf, than on wealthy multi-state actors and international corporations. With any investment, it’s buyer beware, but the cannabis industry is even more volatile as the whims of politicians and voters can change, but it certainly looks like the future is bright. While the time could be now to invest, it’s definitely a good time to start doing your homework if investing in domestic U.S. companies intrigues you.
Whether you choose to invest in cannabis stocks or not, it’s always a good time to invest in your own happiness and the local economy by supporting Kind Leaf in beautiful Pendleton. At Eastern Oregon’s premier craft cannabis boutique, you get to choose from the best selection in the Great Northwest and you know that your hard-earned dollars stay in the Beaver State to promote the local economy and fund important services, including much-needed drug treatment and recovery programs. This week’s specials, while supplies last, include 30% off Charvak, Zurple Punch and Platinum Cookies flower. For extracts, there’s 30% off Self Made Shatter, East Fork Cultivar PAX Pod Cherry Wine. If edibles are more your speed, then you can enjoy 30% off Mr. Moxey’s Ginger 5:1 Mints, Golden Fruit Chew Blast Lemon Ginger, Magic Soda, and Muru Cannamixer.