Everything is priced in. The Market is irrational, and the Market overreacts. Past performance is not an indicator of the future.
Alright, now onto the good stuff. Weed stocks. They’re currently sitting at their all time lows, and it’s my regarded prediction that this area of the market could be open to significant upside over the next few months.
The Political Catalyst
With President Biden forfeiting the race, Kamala Harris is taking the Democratic nominee, and quickly taking the lead in the polls which will send some ripples through the market. Harris has historically been pro-cannabis
“Harris frequently speaks about the racial disparity in marijuana law enforcement and indicates her readiness to push forward with full-scale legalization,” he said.
In fact, while initially not a cannabis reform advocate, Harris has recently changed her stance, actively supporting legalization and co-sponsoring several proposed reforms in the last few years, such as the SAFE Banking Act, the Marijuana Justice Act and the MORE Act.
While Kamala Harris has not yet made a clear, public stance on cannabis policy in the early days of her Presidential bid, I believe if she does try to lean on this stance to gather support for the vote, that it could see an increase in market interest in this area.
The Cannabis Reschedule
Proposed earlier this year, and with the commentary period ending on July 22, 2024, this reschedule could have significant impacts for the cannabis industry in the USA. Rescheduling from Schedule I to Schedule III which could have a major positive financial impact on businesses that trade in cannabis.
While this hasn’t come into law yet, things are looking positive, and I believe this too could contribute to price increase in the weed stock area.
Following a comprehensive review by the US Department of Health and Humans Services (HHS) on cannabis’s safety and subsequent recommendation to the Drug Enforcement Agency (DEA), the DOJ published an NPRM to reschedule cannabis. Currently, cannabis is classified as a Schedule I drug, which is reserved for substances like heroin and peyote that are considered highly addictive and lacking medical value. The DEA’s decision to reschedule cannabis as a Schedule III drug, indicating a moderate to low risk of dependency, will not legalize marijuana but will mark a significant move towards reducing federal limitations and recognizing the potential for cannabis’s therapeutic and medical benefits.
Rescheduling cannabis could alleviate some financial burdens for cannabis businesses. Currently, those in the cannabis business face prohibitive tax burdens due to Section 280E of the Internal Revenue Code, which does not allow certain business deductions for businesses trafficking a Schedule I or II drug. As a result, these businesses often encounter higher income tax rates and often encounter higher costs and less favorable terms for loans and insurance due to the risks associated with Schedule I substances. Removing cannabis from Schedule I could significantly reduce these financial and operational challenges for those in the cannabis industry.
The stocks themselves
I’ve found a few interesting cannabis related stocks, but for now I’m just going to be taking a dive into TILRAY (TLRY) as I think their prospects look really positive.
Tilray is currently sitting at [ 1.79 ], with a historical high in 2024 of [ 2.6 ]. Looking back further to try to gauge how election sentiment has previously affected this, I can see it hit a high of [ 7-8 ] in the lead up to the 2020 election, going even further in early 2021.
Earnings just came out, beating expectations with a net 26% revenue growth, this had a slight positive effect on the stock price, which has since subsided. Recently, they’ve been granted a trading license into the German market, which I believe will have significant positive effects on future earnings reports
On July 29, 2024, Germany granted a cannabis trading license to Tilray’s Aphria RX GmbH (Aphria RX) (1). Through obtaining the cannabis trading license, Aphria RX will be able to distribute and sell a variety of medicinal cannabis products to medical wholesalers, pharmacies, and hospitals located in Germany.
Technicals
I’m not really good at astrology for finance nerds. Here’s some candles and lines.
Stonks go up???
Price at last years election
AdvisorShares Pure US Cannabis ETF – MSOS
For more diversified exposure to various cannabis stocks, I’ve been keeping an eye on the ETF MSOS, which holds it’s largest positions in Curaleaf, Terrascend and other cannabis related holdings.
MSOS is currently sitting at [ 7 ], with a historical high in 2024 of [ 10.21 ]. Looking back further to try to guage how election sentiment has previously affected this, I can see it was sitting around [ 30] in the lead up to the 2020 election.
AdvisorShares MSOX 2x Daily
Because who doesn’t like a bit of extra leverage? MSOX is a 2x leveraged etf for MSOS, if you’re into that sort of thing.
Other cannabis related tickers to keep an eye on – ACB, CNBS