I’ve been pounding on the table about cannabis stocks and the potential “Blue Wave” catalyst since August. Now, that Blue Wave catalyst — wherein Democrats control the White House, the House of Representatives and the Senate — is turning into a reality as it increasingly appears that both Democratic candidates will win their Georgia Senate runoff elections.
In response, cannabis stocks are doing exactly what you’d expect them to do: They’re surging.
The ETFMG Alternative Harvest ETF (NYSEARCA:MJ) is up 12% on the day. It now trades at its highest levels since the Covid-19 pandemic struck.
Make no mistake. This breakout in pot stocks is not a head-fake. It’s the real deal. Indeed, it’s the beginning of a multi-year surge higher in marijuana stocks.
That’s because the cannabis megatrend is all about legal developments. The demand is there. We know that. Just look at the black market for cannabis. That’s a $70 billion industry in the U.S. alone – and a multi-hundred-billion-dollar industry globally.
Thus, the cannabis megatrend isn’t about generating new demand for weed. It’s about transferring the already enormous demand for weed from the black market to the legal market. A Blue Wave, which paves a clear path towards federal cannabis legalization, is a huge step in this transfer of demand. It also comes on the heels of Canada federally legalizing cannabis, and Mexico doing so soon.
All in all, the geopolitical stage for enormous global cannabis demand to shift into the legal channel over the next decade. This seismic shift will power big gains in marijuana stocks.
With that in mind, let’s take a look at my three favorite cannabis stocks to play this long overdue Pot Stock Boom:
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 their hypergrowth phase, more money is everything.
More money enables Canopy to build bigger growing facilities, create more products, expand geographically, and acquire strategic assets. These moves lay the foundation for Canopy to gain more high-value exposure to the cannabis megatrend than anyone else, and establish early leadership. That early leadership will give Canopy a significant “leg up” when it comes to dominating the cannabis industry as the market matures.
Essentially, by having the most money in the cannabis industry, Canopy Growth has the most visibility to long-term cannabis market dominance.
It also helps that Canopy Growth has a new management team that is hyper-focused on streamlining the company’s operations and improving profitability. These internal improvements will couple with macro tailwinds to propel CGC stock significantly higher in 2021-22.
GrowGeneration (GRWG)
One of my favorite cannabis stocks to buy for the Blue Wave catalyst has long been 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. Think Home Depot (NYSE:HD) for 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 this Blue Wave will be especially beneficial for GrowGeneration stock.
Put it together, and it’s clear to see that GRWG stock is one of the best cannabis stock to buy right now, for both near-term profits and long-term gains.
Cannabis Stocks: Silver Spike Acquisition (SSPK)
For long-term investors, the best cannabis stock to buy today may be Silver Spike Acquisition, a blank-check company that is set to acquire WM Holdings, or the owner of Weedmaps.
Weedmaps is the world’s leading online listings marketplace for cannabis. It is a website which consumers use to discover and locate cannabis dispensaries, peruse product inventory and store information for those dispensaries, and even buy product from those dispensaries through delivery/pick-up orders.
Weedmaps is somewhat like the Google (NASDAQ:GOOG) meets Amazon (NASDAQ:AMZN) of marijuana. The novel platform connects prospective cannabis buyers, to cannabis sellers, in a streamlined, organized way, and even allows them to directly buy pot.
That’s a powerful value prop, because the cannabis market is messy, and needs a Google-like platform to provide the necessary technology infrastructure to consolidate, organize, and streamline the discovery, buying, and selling processes.
To that end, Weedmaps is a two-sided cannabis marketplace that provides enormous benefits to both sides. Buyers get all the information and access they need. Sellers get all the distribution and exposure they need.
This favorable growth flywheel will propel Weedmaps to, indeed, turn into the “Google of Marijuana” one day. As the company does, SSPK stock will emerge as one of the cannabis industry’s biggest winners.
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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