To put it frankly, cannabis stocks have been an utter disappointment over the past few years.
The nationwide legalization of weed in Canada in late 2018 was supposed to be a critical inflection point for the entire cannabis industry. Throughout 2019 and 2020, the legal Canadian cannabis market was supposed to boom on the back of huge and growing demand, and that success was supposed to make it easy for U.S. and other developed nations to subsequently legalize cannabis and start their own “pot booms”.
But none of that happened.
Instead, Canada stumbled out of the gates, and potential U.S. legalization got delayed multiple times.
Cannabis stocks, naturally, boomed in late 2018, and have been on a downward spiral ever since. The ETFMG Alternative Harvest ETF (NYSEARCA:MJ) — the largest and oldest cannabis ETF — almost doubled in late 2018 to over $45. Ever since, it has lost more than 75% of it value, clocking in most recently around $11.50.
But there’s reason to believe that cannabis stocks — notorious for false starts — are finally ready to actually boom.
Pollsters and betting markets are saying that Joe Biden has a strong chance of winning the 2020 U.S. Presidential Election. His running mate, Kamala Harris, said in the most recent VP debate that, if elected, she and Biden will federally decriminalize cannabis. Of course, this strongly implies that if Biden wins, federal legalization of cannabis will likely follow suit.
This will spark the long overdue cannabis boom in the U.S. And — because the U.S is the world’s largest economy and often heralded as the global “leader” — U.S. federal legalization will inevitably be followed by legalization across a number of other countries in the world.
To that end, the global cannabis boom that was supposed to start back in late 2018, may actually start in November 2020 — which, of course, means it’s time to buy some marijuana stocks.
With that in mind, my top 3 cannabis stocks to buy now are:
Cannabis Stocks to Buy: Canopy Growth (CGC)
First on this list of cannabis stocks to buy, we have the industry’s largest company, Canopy Growth.
There are many reasons to like Canopy Growth long term. Most of them boil down to one thing: Canopy Growth has $2.4 billion on the balance sheet, which is an order of magnitude more cash than pretty much every other cannabis company out there.
Why is that so important?
Because in early-stage, emerging industries on the cusp of entering the hypergrowth phase, more money is everything. More money enables Canopy to make more investments in more geographies, and gain more high-value exposure to various different parts of the cannabis market, which in turn allows the company to establish early leadership across various geographies (like Europe and America) and product verticals (like edibles and vapes). That early leadership will give Canopy a significant “leg up” when it comes to dominating those various geographies and product verticals at scale.
Essentially, by having the most money in the cannabis industry, Canopy Growth has the most visibility to long-term cannabis market dominance.
To be sure, having all these resources has not saved CGC stock from the cannabis market demise over the past few years. In late 2018, this was a $50 stock. The GCC stock price today sits below $20.
But the series of false starts in CGC stock have been due to a lack of sustained growth in Canada, delays in U.S. legalization, and mismanagement of the business. All three of those headwinds will likely be fixed in 2021, and as they do get fixed, CGC stock could take off like a rocket ship.
My favorite cannabis stock to buy for a potential “blue wave” catalyst in November is GrowGeneration.
GrowGeneration is an early-stage, rapidly growing U.S. hydroponics retailer that one day wants to be the national, go-to convenience store for cannabis growers — a national chain where cannabis growers can go to get the necessary supplies they need to grow cannabis.
There are two reasons I really like GRWG stock here and now.
One, the long-term growth narrative supporting GrowGeneration is compelling, as the hydroponics market is currently too fragmented, inefficient and antiquated to meet the inevitable cannabis supplies demand surge that will materialize as more and more states legalize cannabis in the U.S.
Two, GrowGeneration is 100% levered to the U.S. cannabis market — whereas most public marijuana stocks have ample exposure to Canada and other geographies — meaning that a potential blue wave in November will be especially beneficial for GrowGeneration stock.
Put it together, and it’s clear to see that GRWG stock is the best cannabis stock to buy right now, for both near-term profits and long-term gains.
So, if you believe we will indeed get a blue wave in November, I say buy GRWG stock.
Last, but not least, on this list of cannabis stocks to buy for a potential game-changing blue wave catalyst is Cronos.
Much like the bull thesis on Canopy Growth, the bull thesis on Cronos comes down to resources.
That is, because the company has $1.3 billion in cash on its balance sheet and is backed by $70 billion global tobacco giant Altria (NYSE:MO), Cronos has enough resources and firepower to guarantee itself a bright future in the global cannabis.
All that has to happen in order for CRON stock to rebound from the dead, then, is for the global cannabis industry to break out of its two year slump.
That could happen in November if we get a blue wave.
If that happens, then CRON stock — with an underlying valuation of less than $2 billion in what projects to be a $100+ billion industry at scale — could finally start its long overdue multi-year growth ramp.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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