Weed stocks are on fire. The sector has seen an enormous rally in the last three months. Today I am going to explain what has been driving the big rally and reveal what we should expect moving forward.
Weed stocks have seen a huge rebound in the last four months.
The entire cannabis sector has risen – but a select group of early industry leaders have risen the most.
- Green Thumb Industries (GTBIF): +300%
- Curaleaf (CURLF): 230%
- Cresco Labs (CRLBF): +220%
- Innovative Industrial Properties (IIPR): +158%.
- Canopy Growth Corp. (CGC): 78%
Take a look at the gains in the chart below.
I See 3 Reasons Weed Stocks are Rallying
I see three reasons cannabis stocks have been rallying so big.
COVID Showed that the Cannabis Industry is Recession Proof: COVID has been a terrible tragedy and and every life lost because of it is a tragedy. Through this extremely challenging situation, the cannabis industry didn’t just stay afloat – it thrived. The cannabis industry was designated as essential in most states enabling dispensaries and greenhouses to remain open. Beyond that, sales spiked hard during the quarantine.
Investors learned that the young cannabis industry is basically recession proof. Now, with many parts of the economy still struggling, investors have a renewed interest in recession proof industries, and that has driven billions in new capital into weed stocks in the last few months.
Cannabis Sales are Booming: After a slower start than impatient investors wanted (including me), the young U.S. cannabis industry is starting to thrive. The early industry leaders are delivering huge sales numbers, huge sales growth and are on the verge of becoming profitable.
For example, Curaleaf Holdings (CURLF) has a shot at becoming the first U.S. cannabis company to deliver $1 billion annual revenue in the next twelve months.
The bottom line is that the young cannabis industry is now maturing very quickly and that is giving investors more confidence to sink some cash into the sector.
The 2020 US Election is a Big Catalyst for Weed Stocks with up to 7 States Voting on Legalization: This is the biggest catalyst for cannabis stocks since the 2016 U.S. presidential election when 8 states voted to legalize. That set off an enormous rally in cannabis stocks that lasted two years – and I expect the same cycle to repeat itself this time around.
Cannabis Stocks Still Have Plenty of Upside
Looking forward into the rest of the year I am expecting more gains from cannabis stocks. Here’s why.
- The 2020 U.S. election will continue to draw more attention to cannabis stocks.
- Despite the recent gains, many of the most promising cannabis stocks are still trading well below the 52-week high.
- Cannabis stocks are still grossly undervalued compared to other sectors, particularly tech stocks. I love tech stocks but they are pricey after a string of big gains in 2019 and 2020.
My plan is to stay aggressive with cannabis stocks for my clients and myself.
That means holding current shares, and looking to buy more shares on pullbacks or weakness.
I’ll be back in a few days with another update. Have a great day!
Disclaimer: This report is for entertainment purposes only. Every investor should consult with an investment advisor before making investment decisions. The Vodicka Group, Inc. is not a broker/dealer. We do not receive compensation for mentioning stocks. At various times, the clients, publishers and employees of Vodicka Group, Inc., may buy or sell the securities discussed for purposes of investment or trading. Author Michael Vodicka owns shares of Green Thumb Industries (GTBIF), Curaleaf (CURLF), Cresco Labs (CRLBF) and Canopy Growth Corp (CGC).