On paper, cannabis stocks represent an incredibly viable investment opportunity, primarily because the marijuana industry practically didn’t exist before. Sure, people have grown and sold weed for a long time, but they’ve done so illicitly. Now with favorable social sentiment and political winds, though, legalization has gained momentum, turning the much-maligned plant into a taxable revenue stream. Still, many challenges remain. For instance, Canada was the first G7 nation to legalize marijuana for adult recreational use. Theoretically, this should have sparked a mini-economic renaissance, with “weedpreneuers” coming out of hiding to participate in a legitimate commercial enterprise. However, administrative backlogs and other unforeseen hurdles have put a dent in marijuana stocks. If you’re willing to accept these big risks, though, this sector may yield significant profitability. For one, these stocks should benefit from consumer demand due to rising relevance. As studies have shown, cannabis products — particularly those that are high in cannabidiol (CBD) and low in tetrahydrocannabinol (THC) — can reduce symptoms of depression and anxiety. Many folks suffer from these symptoms, especially in the wake of the novel coronavirus. Secondly, the U.S. may be moving toward full federal legalization soon. While Canada is apparently much more tolerant, we’re catching up. According to an April report from the Pew Research Center, now “Americans overwhelmingly say marijuana should be legal for recreational or medical use.” This is great news for cannabis stocks. Finally, there’s one more underappreciated argument that favors pot: decriminalization will open efficiencies in the economy. Currently, our labor force participation rate is at levels not seen since 1977 — and that’s not good. Part of the reason for this lack of participation may be that many people have criminal records for simple things like possession charges. Get some sensible criminal justice reform and we may see massive upswings in cannabis stocks. Before we dive in, though, let me bring up one caveat: cannabis stocks are also terribly risky. Personally, I’ve been burnt on more than one occasion with this sector. So, you should practice due diligence and vigilant money management here, too. Curaleaf (OTCMKTS:CURLF) Green Thumb Industries (OTCMKTS:GTBIF) Trulieve Cannabis (OTCMKTS:TCNNF) Ayr Wellness (OTCMKTS:AYRWF) Cresco Labs (OTCMKTS:CRLBF) Innovative Industrial Properties (NYSE:IIPR) Scotts Miracle-Gro (NYSE:SMG)
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