Why Marijuana Stocks Are Lighting Up the New Year

© Provided by The Motley Fool Why Marijuana Stocks Are Lighting Up the New Year

What happened

Marijuana stocks are entering 2021 on a high note, with shares of Aurora Cannabis (NYSE: ACB) leading the pack 12.5% higher as of 10:40 a.m. EST, Canopy Growth (NASDAQ: CGC) not far behind with a 7.5% gain, and Aphria (NASDAQ: APHA) up 5.2%.

So what

There’s no specific new news behind the momentum, but 2020 was a big year for the legal marijuana industry, with Arizona, Montana, New Jersey, and South Dakota all voting to legalize recreational marijuana use in their respective states through ballot initiatives. Mississippi voted to permit medical marijuana use and, according to a tally by CNN, this means that recreational use will soon be legal across 15 states, and medical marijuana in 36 states (once “regulatory structures” have been set up to permit this in the respective states.) 

This will be the job of state legislatures in the newly “legal” states this year. Meanwhile, at the federal level, the U.S. House of Representatives voted 228-164 last month to decriminalize cannabis nationwide. 

Now what

With voters in Georgia set to hold runoff elections for two Senate seats on Tuesday, control of the U.S. Senate also remains up for grabs — holding the potential for the Senate to echo the House’s endorsement this year, and for a new Biden Administration to sign marijuana decriminalization into law. 

In short, there’s plenty of reason for marijuana investors to be optimistic as the New Year gets underway. That being said, this is not a time for investors in the marijuana industry to be counting their chickens.

Why not? To gain control of the Senate, the Democrats must win both Georgia Senate seats up for grabs tomorrow. And even if that happens, the Senate party layout will read Republicans 50, Democrats 48, Democratic-leaning-independents (who presumably favor decriminalization) two, and Vice President-elect Kamala Harris casting the deciding vote in the event of a tie. In short, while federal decriminalization is a possibility this year, it’s a slim one.

Slow and steady, state-by-state legalization is more likely to win the race.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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