Yesterday, I told you about the megatrend we see forming in the legal cannabis market.
Just like bitcoin a few years ago, skeptics have left legal cannabis for dead while ignoring positive news and growing tailwinds in the sector…
For example, the U.S. presidential election is just around the corner. But picking the president isn’t all that will be on some states’ ballots on November 3.
Residents in five states will also be able to vote on cannabis legalization measures. At PBRG, we’ve been following this space for over a year now, and we know that once a state legalizes cannabis, the extra tax revenue creates pressure on neighboring states to do the same.
It’s a domino effect – and can be very lucrative for well-positioned investors.
Think about it like this: as the underlying market for legal cannabis expands to new states, the revenue and profit opportunities for the best companies in the space expand as well. And that’s exactly what we’re counting on over the next few months if these ballot measures are approved.
The five states voting on cannabis laws are Mississippi, South Dakota, Montana, and two big ones – Arizona and New Jersey. Here’s what we see happening if these states swing in favor of legalization:
South Dakota and Montana will open up the Midwest market.
Arizona will continue growing the momentum in the southwest that began with Nevada and California.
New Jersey, the 11th-most populated state in the country, could be the domino to tip its larger neighbor New York over the edge, expanding legal cannabis further into the lucrative and densely populated Northeast.
Any one of these dominoes falling would be significant. And if a few fell, it would grow the addressable U.S. market by around 20% overnight.
Plus, it doesn’t matter who wins the presidential election.
Neither President Trump nor Joe Biden have shown any interest in attacking the legalization trend sweeping the country. And considering nearly two-thirds of Americans support legalization, it’d be political suicide.
As each new state falls in line, hundreds of millions in sales opportunities open up. We’ve already seen great progress in Maine and Vermont, which became the 10th and 11th states to legalize recreational marijuana and begin sales earlier this year.
In fact, Maine reported $250,000 in sales from its first weekend of selling cannabis legally.
So the trend will keep surging, with states continuing to lead the charge. And we’ll be ready and waiting to profit on the back of some key tailwinds…
A Green Wave Is Coming
On the heels of growing momentum, recreational use has surpassed medical use for the first time, with sales on track to hit roughly $10 billion this year. And states like Florida and Colorado continue to set sales records month after month.
Overall, legal cannabis sales are on pace to hit $15 billion in the U.S. this year – a 40% rise from 2019.
And just in the past few weeks, more bullish news about the sector has emerged. Here are some highlights:
Amazon announced its foray into cannabidiol (CBD) products with a pilot program in the U.K. This is a massive first step for the world’s largest e-tailer. A successful pilot could lead to a larger rollout as states and countries loosen up on selling and shipping CBD products.
Mexico is on track to finalize legalization in December, making it the largest recreational and medical open market on the planet.
Illinois just notched record sales of $431 million plus $86 million in tax revenue last month.
And despite some operational challenges, Canada’s sales continue to march higher each month, hitting a $186.9 million record in August (the most recent complete figures).
Now, despite all of this positive news, the price action in legal cannabis stocks is still volatile…
But it reminds me of the crypto space, where even the best names can gyrate wildly and drop as much as 80% or more before recovering the paper losses and moving higher as their use and adoption grow.
In fact, we’re already seeing this take hold in the legal cannabis space. The benchmark we use to measure the sector − Horizons Marijuana Life Sciences ETF (HMLSF) − is up 7% in the last month versus around a 5% rise for the S&P 500. Legal cannabis stocks are outperforming a resurgent stock market − a great sign.
At the same time, the usage of cannabis for both medical and recreational purposes is exploding. And adoption and access continue to rise as more states and countries legalize.
There’s no stopping this trend. And it’s only a matter of time before sentiment catches up to the impact these catalysts will have on the industry as a whole… and adds rocket fuel to the share prices of the best companies.
We’ll monitor these developments, others like them, and the results of the November ballot measures.
And if you want a simple way to play this trend, consider HMLSF. It holds a basket of top legal cannabis names… And it’ll give you exposure to the entire space before the rest of the market catches on.
Analyst, Palm Beach Daily
P.S. The current setup in legal cannabis reminds me of another megatrend Wall Street is ignoring… crypto and blockchain.
PayPal, Facebook, and Amazon have already placed their bets, but it’s not too late… You can still position yourself for life-changing crypto gains before mass adoption takes off.