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Rising U.S.-China Tension Also Raises Profile of Aurora Cannabis Stock

If for whatever reason you’ve never heard of marijuana investments, your first look into the sector may be daunting. Initially, you’ll come across major names like Aurora Cannabis (NYSE:ACB), which seemingly offers plenty of upside. But then you’ll find other names like Tilray (NASDAQ:TLRY) or Canopy Growth (NYSE:CGC) and wonder: What separates ACB stock from the lookalike competition?

Rising U.S.-China Tension Also Raises Profile of Aurora Cannabis Stock
Source: Shutterstock

It’s a question that InvestorPlace feature writer James Brumley addresses very specifically. In the broader cannabis market, we have the hype of legal weed and we have its substance. Brumley argues that most sector players chase the former. This partially explains why cannabis stocks are so volatile.

On the other hand, Aurora Cannabis focuses on the latter. Brumley especially likes management’s push toward international dominance, particularly in Europe. Across the Atlantic, 29 countries have legalized marijuana to varying degrees. As social stigma fades globally, the company’s early investments should pay off significantly for Aurora stock.

I think that’s quite a viable argument. Additionally, I like Aurora Cannabis stock because the underlying management team makes smart, longer-term decisions as opposed to reactionary ones.

For instance, many critics blasted Aurora for acquiring Whistler Medical Marijuana for $175 million. Because Whistler only has a production capacity of 5,000 kilograms, the optics looked terrible, almost as if the executive team decided to partake in their own inventory. Of course, that narrative didn’t help ACB stock.

But what did the fine print state? Whistler specializes in strain-specific production that addresses symptoms and ailments. As such, Aurora moved beyond the low-hanging fruit of mere participation to a mission-centered operation.

However, these details mean nothing relative to a massive tailwind lurking in the shadows for Aurora stock.

Looming Economic Crisis Raises Profile of ACB Stock

Everywhere I turn, I see evidence that the U.S.-China trade war is about to spiral intractably out of control. The Trump administration has already blacklisted Huawei, China’s biggest technology firm. Now, the Chinese media is responding with increased stridency.

And here’s another wrinkle for those who are optimistic about the tensions finding a resolution. Culturally, the Chinese hate losing face. President Trump hates losing, period. This is perhaps diplomatically impossible to resolve because both reputation and legacy are at stake.

So how does the trade war benefit ACB stock? Simple. Trump has a choice between losing to China or losing to American potheads.

I’m only being slightly facetious. Because diplomatically we’ve probably reached the point of no return, we must assume headwinds will impact multiple industries. Actually, we might as well assume all industries will suffer. When you have shoe companies begging the President to back off, we’re facing serious trouble.

Thus, as a necessity, Trump’s hardline stance will stifle economic activity. That hurts the labor market, which in turn negatively impacts political sentiment ahead of the 2020 elections. Trump has little choice then but to loosen federal constraints on marijuana, thereby boosting Aurora stock among others.

I don’t think it’s that much of a stretch, either. Even considering the associated costs with legalization, including deflated material prices and regulatory costs, the move is a net positive. For example, Forbes’ contributor Mike Adams discussed the case of Pueblo, Colorado. Devastated after the death of its steel industry, Pueblo is clawing its way back.

How? Marijuana, of course! Legalization has created jobs that simply didn’t exist before.

Now imagine Pueblos all over the map due to the trade war. It’s got stakeholders in Aurora Cannabis stock licking their lips.

Going Full Circle with Aurora Stock

And why is that when other cannabis firms will also benefit from a potential U.S. legalization mandate? Surely, other cannabis players will enjoy the rising tide. However, ACB stock will be among the top beneficiaries thanks to previously discussed fundamentals.

In other words, we’re going full circle with Aurora stock. Per Brumley’s argument, ACB succeeded in their initial expansion efforts, with a focus on the viable European market. And on my point, Aurora levers a smart management team that thinks beyond the immediate term.

These and other fundamental strengths have positioned the company to best advantage any favorable legislative shifts. If you’re reading the political tea leaves, you can’t help but feel confident about the longer-term prospects for ACB stock.

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

Article printed from InvestorPlace Media,

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