Despite enormous challenges weed stocks ended up having an incredible year in 2020.
Many of our favorite stocks delivered huge returns in the last 12 months.
Cresco Labs (CRLBF) +89%
Curaleaf Holdings (CURLF) +124%
Green Thumb Industries (GTBIF) +194%
Canopy Growth Corp (CGC) +50%
Innovative Industrial Properties ((IIPR) +132%
Take a look at the gains in the chart below.
chart from tradingview.com
Those impressive gains were driven by a few key factors.
- Weed stocks were oversold after steep losses in 2019 and early 2020.
- Weed stocks were undervalued after steep losses in 2019 and early 2020.
- Cannabis industry designated as essential in most U.S. states during COVID.
- Cannabis industry emerged as recession proof during the COVID recession.
- Five more U.S. states voted to legalize cannabis in November 2020.
Looking forward I believe the stage is set for more gains in 2021 because of three powerful catalysts.
Here are more details from a recent report I wrote for Cannabis Stock Trades.
#1 – Cannabis Stocks Have Major Upward Momentum
The cannabis sector has strong upward momentum right now and this is a bullish signal for more potential gains. Here are some more details from Reuters.
In prior bull markets, when the S&P 500 takes out its previous bull market high, the index has experienced a median gain of 38% over the span of 26 months before topping out, according to Bespoke Investment Group data.
Many cannabis stocks hit new all-time highs in the last three months and historical data on the S&P 500 demonstrates that this frequently leads to more gains in the next two years.
#2 – 7 More U.S. States Could Be Going Legal in 2021
Five more U.S. states voted to legalize cannabis in November. This alone is a huge catalyst for cannabis stocks in 2021. However, it gets even better. It looks like up to seven more U.S. states could be legalizing in 2021. That includes huge potential markets in New York and Pennsylvania.
#3 – Democratic President and Congress Should Advance Cannabis Legislation
New Democratic President, Joe Biden, isn’t considered to be a big advocate of cannabis legalization. Nonetheless, I think this argument misses the point. With the Democrats taking the presidency, the House, and the Senate, I see a high probability of major cannabis reform in 2021.
The Big Picture on Weed Stocks in 2020 and into 2021
2020 turned out to be a great year for cannabis stocks, rebounding from weakness in 2019 and early 2020.
Looking forward I am expecting more gains in 2021 because of three powerful catalysts – including upward momentum, democrats taking the presidency and both chambers of congress and up to seven more U.S. states voting to legalize.
My plan is to stay aggressive. That means looking to buy more shares on any weakness.