As many of my InvestorPlace readers know, I’ve spoken glowingly about the cannabis industry. For me, the bullish thesis came down to a very elemental argument: an untaxable black market has turned into a tax revenue-generating legal market. Suddenly, we went from zero growth and earnings to real numbers on the spreadsheet. Unfortunately, that has not helped the case for Canopy Growth (NYSE:CGC) and CGC stock this year.
Of course, having analyzed this sector for years now, I’m incredibly disappointed that the green market hasn’t taken off. And that’s particularly frustrating when I consider the new normal. When the novel coronavirus pandemic struck us, millions were sent home to work remotely. Without having to commute to the office, we collectively had much more time on our hands.
And what did we do with that extra time? At first, we binge-watched our favorite Netflix (NASDAQ:NFLX) – well, you did as I haven’t made the plunge yet. But then boredom kicked in again and we found Robinhood. At that point, everybody became a day trader, as the Wall Street Journal noted.
Naturally, the influx of volume featured new and educated investors. That led to some interesting dynamics, such as stocks of bankrupt organizations briefly taking off. But CGC stock? Aside from a robust recovery from its March doldrums, things haven’t gone according to plan.
However, our own Matt McCall encouraged investors to keep a long-term perspective. With an extended horizon, you can easily visualize potential catalysts. Primarily, McCall stated that the damage from the coronavirus has led to government agencies having “too many pressing priorities to keep cannabis illegal forever.”
I agree. But which candidate is best for CGC stock?
Trump Is Likely the Best Bet for CGC Stock
Despite the rancor and the nonstop attacks that the mainstream media has launched against the incumbent – and let’s face it, I haven’t been too kind to the administration’s “leadership” either – Donald Trump has some very good qualities. In my opinion, Trump has great instincts.
The problem is that he has dumb advisors, like Fox & Friends and just Fox News in general. And when Trump isn’t getting guidance from Fox, he’s getting it from One America News Network, which promotes material too extreme for even Fox News.
You see, our president is like Secretariat. When he is laser focused, he can accomplish anything, like driving unemployment for all American demographics to their record lows. Someone just needs to put the blinders on him. And if reelected, I believe that would happen, which would be great for CGC stock.
Why? Because at the end of the day, Trump is a businessman. And keeping a viable job market illegal due to irrational religious reasons will not stand under his administration.
On the other hand, I have big questions about former Vice President Joe Biden. Frequently, the left-leaning media states that a vote for Trump is a vote for an infamous dictator. But in my view, a vote for Biden is a vote for California Gov. Gavin Newsom.
If the California economy was a race, Newsom would be the grand wizard of those cross-burning fools. Recently, he announced a sweeping executive order banning the sale of new gasoline-powered cars by 2035. Further, I would like to remind readers that California Democrats passed AB 5, a law designed to help Uber (NYSE:UBER) and Lyft (NASDAQ:LYFT) drivers receive employment benefits but instead upturned the state’s independent contractor industry.
That ended up hurting non-drivers, such as comedians.
Social Unrest Is Another Challenge
With the fractures in our society, many have taken to the streets to protest various injustices. Though most of these protests appear peaceful, many of them have turned violent, whether through inside agitators or through confrontations with opposing parties.
Whatever the case, it’s been a nightmare for police officers, most of whom are salt-of-the-earth types just trying to do their job. As well, the health crisis of the coronavirus makes law enforcement less willing to chase relatively frivolous crimes like individual-scale black market marijuana distribution.
In that situation, whether you’re talking about the Canadian market or the cannabidiol market in the U.S., police officers are just not going to get involved with someone carrying or selling a stash of marijuana. In other words, the risk-reward incentive for the black market has increased favorably.
Unfortunately, I see that as another pressure point for CGC stock. Granted, once the pandemic fades, the bullish narrative that McCall mentioned earlier should take hold. For now, you may want to consider a measured approach: buy a modest amount now but keep some funds in the tank for possible volatility later.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.