Marijuana Stocks: How Will Weed Do This November?

Marijuana stocks - Marijuana Stocks: How Will Weed Do This November?

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It’s a bit ironic. Four years ago, when recreational as well as medical marijuana was on the ballot in just a small handful of states in conjunction with the presidential election, marijuana stocks like Hemp Inc (OTCMKTS:HEMP), Cannabis Science Inc (OTCMKTS:CBIS) and Medical Marijuana Inc (OTCMKTS:MJNA) were dishing out red-hot gains.

marijuana stocks

This year, some sort of weed decision is going to be made in more states than ever before, yet the same marijuana stocks aren’t nearly as hot.

Perhaps it’s time to make a speculative play on some of these weed stocks, free of the worry that you’re getting in at a short-term (no pun intended) high.

A quick run-down of which state is voting on what — and the odds of new legalization — is in order for those investors who had put the idea on the shelf but are ready to dust it off again.

Weed on the Ballot

Marijuana is on the ballot for one reason in another in nine states this November, and the handicappers think legalization is more likely than not for most of those measures.

On Nov. 8 in Arizona, California, Maine, Massachusetts and Nevada, voters will be deciding whether to legalize pot purely for recreational purposes, following in the footsteps of Alaska, Oregon, Washington and Colorado. The measure in California, proposition 64, is the one to watch closely. If it passes, some say it will pave the way to federal-level legalization of weed. Prop 64 is well-supported too, with 60% of the state’s population in favor of the measure.

Also on Nov. 8, Arkansas, Florida, Montana and North Dakota will all be considering measures to legalize marijuana for medicinal purposes. In all four cases, usage of marijuana still would be quite restricted.

Marijuana is already legal for one purpose or another in half the nation’s states, not counting the states that will be balloting on new marijuana laws next month. Even if only a handful of those states pass or change existing laws, the tide will have technically turned from its perfect straddle right now.

And the odds are looking good. Marijuana was well-supported when it was on the ballot in some states four years ago. Now, 54% of the nation feels marijuana should be legalized nationwide, versus the 41% that feel it should be outlawed in all states.

By voting standards, those are strong odds.

The Timing Is … Better

A couple years ago, fans and followers of the pro-marijuana movement were surprised to find that marijuana stocks’ results were disappointing. As it turns out, just because it’s legal doesn’t make it a viable business. Those pesky things like taxes, competition, marketing, management and all the other boring aspects of running a business made it tough for these names to thrive as expected.

I still stand by something I said three years back:

“Hemp, marijuana, pot — call it whatever you want — it has a future, but it doesn’t have enough of a present to dive in blindly like some already have. Two years from now, some of these stocks will still be around, and some won’t. Some new marijuana names will be on the scene. Some will be well-run and investment-worthy businesses, and some won’t, just like any other industry. But I’m willing to bet that all of these stocks will be trading at lower prices at some point in the foreseeable future, ’cause hype never lasts.”

The misguided mindset isn’t skewing the picture or these marijuana stocks quite as much this time around. This time around, weed is more of an actual business, for better or worse, and the market is looking at opportunities through a more realistic lens.

In other words, with most of the hype is now in the rear-view mirror, most marijuana stocks are now a bit closer to prices that accurately reflect the industry’s true risk and reward rather than mere hope. It still wouldn’t hurt to keep them on a short leash, though.

That said …

Which Marijuana Stocks?

Of the aforementioned Hemp Inc, Cannabis Science and Medical Marijuana Inc, the only one with revenue worth mentioning is Medical Marijuana. The failure-to-launch for the other two is a nod back to the mere hype many of these penny stock outfits managed to create that was never going to be backed up by substance.

And sadly, there are more failures in the typical basket of well-known marijuana stocks than not.

There are names worth owning in this space, however.

Obviously the true pharmaceutical companies that just happen to be using cannabis as the foundation for legitimate drug development are going to gain credibility if we see a sweeping acceptance of medical marijuana in early November. Not that the industry needed it.

Though arguably/technically illegal in most regards, the federal government has chosen to leave pharmaceutical companies working with cannabis alone if the work was for a greater good and not just a flimsy excuse to sell “highs” under guise. Wider-spread adoption in November will bolster the already-solid bullish case for names like GW Pharmaceuticals PLC- ADR (NASDAQ:GWPH) and Zynerba Pharmaceuticals Inc (NASDAQ:ZYNE).

At the more recreational end of the investment spectrum, things get a bit trickier.

That’s not to say there aren’t viable enterprises doing business in the recreational marijuana makers. It’s just that most of the good ones aren’t publicly traded entities. And the ones that are publicly traded are mostly penny stock plays and priced dirt-cheap for a reason.

Tread lightly if you just have to tiptoe into this arena. And, sorry, you’re on your own to find them. They are out there, though.

One noteworthy nuance: The companies that support growers rather than growers themselves are well-positioned. In other words, don’t think plants and dispensers. Think grow-lights and at-home greenhouses.

Whatever the case, just as it did around this time in 2012 and 2014, the sheer act of voting on marijuana legalization can light a fire under some of these stocks. Indeed, it already has to some degree.

It’ll take at least one more round of national voting to get these names completely out of the “speculation” column and into the “investment” category, though. The trick in the meantime remains picking the right one at the right time, and knowing when to get out.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.

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