Cannabis Stocks

It’s easy to see why. The global recreational cannabis market is expected to grow from around $20 billion in 2021 and 2022 to $130 billion in 2030, which is still just a fraction of what’s expected to be a $3 trillion total market for marijuana and related products (CBD, medicinal use, etc.). That’s better than a six-fold increase in less than a decade in recreational use alone and rivals growth rates unseen anywhere outside the best technology stocks.

And while that torrid pace of growth stirs up a frenzy of speculators any time the words “legal weed” are uttered by a politician, the market activity between those utterances has been a painful grind lower.

And that grind has followed a disappointingly common pattern.

Any significant effort toward legalization (medical marijuana, state-level votes, Canadian legalization, etc.) prompts a flurry of buying before the rubber meets the road and the grind begins again.

In December 2018, negotiators in the Senate and House reached an agreement on the Farm Bill that would eventually impact cannabis stocks.

Normally the result of a tug-of-war pitting conservative heartland agriculture interests vs. progressive coastal urbanites, and corporate farms vs. family farms, the Farm Bill legalized industrial hemp for the first time in decades, thanks to the pushing of then-Senate Majority Leader Mitch McConnell, who argued that there will be great economic benefits from legalizing the crop—and putting it under the purview of the U.S. Department of Agriculture rather than the Justice Department.

Given the rapidly accelerating sales and seemingly inevitable trend toward widespread legalization, you’d assume cannabis stocks would have exploded in the years since the Farm Bill passed … right? Wrong. In fact, shortly after the bill passed, cannabis stocks nosedived, losing more than 80% of their value in the ensuing 15 months, bottoming in March 2020 along with everything else at the outset of the pandemic. After rebounding with the broader market, the sector topped out in February of 2021 and has since fallen even further.

Despite that performance, there’s renewed optimism in the sector following a recommendation by the Department of Health and Human Services that cannabis be rescheduled from a Schedule 1 drug (alongside far more dangerous drugs like heroin, cocaine and other harmful drugs) to a Schedule 3 drug.

While it may seem academic, rescheduling offers a meaningful benefit to cannabis companies as it would remove the onerous restrictions of IRS Rule 280E, which bars companies from deducting expenses when their businesses involve Schedule 1 (or 2) substances. This simple accounting change could massively improve profitability for cannabis companies.

But, if every major legalization achievement has been a “buy the rumor, sell the news” event, how do you profitably invest in the best marijuana stocks?

Our Free Report, How to Invest in Marijuana Stocks, is an excellent place to start. In it, you’ll learn how to avoid the most common investing mistake novice cannabis investors make and the one factor that has allowed Cabot Cannabis Investor to regularly outperform the marijuana sector index.

If you’re less interested in methodology and more interested in simply having the names of the best cannabis stocks regularly sent to your inbox, a subscription to Cabot Cannabis Investor will get you both the best marijuana stocks and the market timing to profitably trade them.