Following an impressive rally over the summer, enthusiasm for cannabis stocks began to fade following the nomination of Rep. Mike Johnson (R-LA) as House speaker.
I remained (and remain) bullish on the sector, telling subscribers at the time that, despite Johnson’s opposition to cannabis legislation, “Cannabis stocks are a strong buy in the weakness.”
Using the AdvisorShares Pure U.S. Cannabis (MSOS) exchange-traded fund (ETF) and the leveraged version, AdvisorShares MSOS 2x Daily (MSOX) as proxies for the group, here’s how much the sector then advanced (as of November 28).
MSOS is up 12.6%.
MSOX is up 17.7%.
One reason for my continued bullishness is the potential for a big catalyst before the end of this year or early next.
Even if that catalyst gets delayed, I think it makes sense to accumulate the cannabis sector on weakness. (We offer the best specific names to consider in Cabot Cannabis Investor.)
Big picture, the reason is that there’s tremendous cultural momentum toward cannabis reform around the world. So it’s tough to think that investors won’t come around in a big way on cannabis names over the next six months to two years.
I document the powerful forces and trends behind this cultural momentum in Cabot Cannabis Investor.
But here is one example.
A recent Gallup poll found that around 70% of Americans support cannabis legalization, the highest level since Gallup began doing surveys on the topic in 1969. Back then, only 12% wanted legalization.
Understanding that this rolling wave of support exists (the cultural momentum) is why I was able to correctly predict that Ohioans would approve recreational cannabis use legalization in the November election. Following approval by Ohioans of recreational use, 53% of people in the U.S. live in a state that allows recreational use. Almost 75% live in a state that has legalized medical or recreational cannabis. Ohio became the 24th state to allow recreational use, and 38 states plus Washington, D.C., permit medical use.
Getting back to the Gallup poll, it’s crucial to understand that it found a sizable majority of Republicans are on board with the reform. This matters, because historically Republican lawmakers have been the most likely to oppose reform.
“More than ever, cannabis continues to break down the partisan barriers as U.S. voters are saying they want to create a responsible and regulated cannabis industry,” says Cresco Labs (CRLBF) CEO Charles Bachtell. “And while the timing of federal reform has been unpredictable, we’ve reached a tipping point where change is inevitable.”
A majority of men and women and all age groups support reform, Gallup found. There’s also majority support for reform across all races, and education levels.
“The nation has reached a broad consensus on legalizing marijuana,” says Gallup. “Not only do most U.S. adults favor it, but so do majorities of all major political and ideological subgroups. The high level of support among younger adults suggests national backing will only expand in the years ahead, likely resulting in more states, and perhaps the federal government, moving to legalize it.”
The poll found that 79% of people 18-34 years old back legalization. It found 71% of people 34-54 and 64% of people 55 and older support reform. Democrats were most likely to support legalization (87%), followed by independents (69%) and Republicans (55%). Support among Republicans increased by four percentage points since 2022. The highest level of support for legal cannabis is in the Midwest at 75%, followed by 72% support in the West, 70% in the South and 64% in the East.
The poll also found that 50% of Americans say they have tried cannabis, and 17% of American say they currently use. The poll was conducted during October 2-23.
In short, whether you agree with it or not (and there’s healthy debate) it seems inevitable that legalization reform favoring cannabis stocks will continue to play out.
