Stock markets rise as marijuana stocks show new signs of life
The stock market’s advance slowed on Thursday, but it did not come to a complete stop, which was enough to satisfy most market participants with the outcome of the trading session. The same broad themes that we have seen driving the markets higher have been repeated today, with hopes for better days to come. the Dow Jones Industrial Average (DJINDICES: ^ DJI), S&P 500 (SNPINDEX: ^ GSPC), and Nasdaq Composite rose about 0.5% to 1%.
Today’s stock exchange
It has been a while since marijuana stocks were at their peak. Still, the sector had a big bump on Thursday, and some investors seem to have new hope that a big change in the industry could finally happen in the not-so-distant future.
Big move higher for pot stocks
Inventories in the cannabis sector rose, and the best-known cannabis producers posted particularly attractive gains. Tilray (NASDAQ: TLRY) led the group to the rise with an increase of 18%. Canopy growth (NASDAQ: CGC) followed by an increase of 14%. Aurora Cannabis (NASDAQ: ACB) increased by 11%, while Cronos Group (NASDAQ: CRON) and Aphria (NASDAQ: APHA) each posted a gain of 10%.
the increase in marijuana use came in the aftermath of the US vice-presidential debate Wednesday night. Explaining the Democratic Platform, Senator Kamala Harris said a Biden-Harris administration would decriminalize marijuana possession and seek to clear the criminal records of those convicted of marijuana-related crimes.
This is something that American marijuana investors have long hoped to see. Currently, marijuana remains illegal nationally, although federal authorities have generally avoided seeking to prosecute people in states that have approved marijuana for medicinal or recreational use.
A more affirmative statement that the use of the pot was no longer a federal crime would have dramatic consequences. Perhaps more importantly, U.S. cannabis companies would have better access to capital markets as stock exchanges have been reluctant to let domestic companies list their shares due to existing criminal laws.
One size does not fit all
On Thursday, pretty much the entire cannabis industry grew at the same pace. But that doesn’t mean there won’t be winners and losers no matter what happens to US law at the federal level.
Many marijuana companies have struggled amid the coronavirus pandemic as they attempt to adjust to a very different operating environment. Aurora Cannabis, for example, continues to spend money on expenses at such a rapid rate that analysts who follow the stock fear it will have little chance of profitability over the next three years. That’s a much longer wait than most cannabis investors expected to endure.
Some stocks, however, have done well. Innovative industrial properties (NYSE: IIPR), for example, saw its cannabis-related real estate business flourish, and shares rose even as most cannabis growers collapsed.
Even among farmers, there are better run businesses. Trulieve Cannabis (OTC: TCNNF) produced incredible price gains, leaving many of its peers in the dust. Florida-centric Trulieve’s business model has been a blockbuster. It is also expanding its success to other states.
Marijuana stocks have given investors a big rollercoaster ride in recent years, and it hasn’t all been fun. At least today, however, there is hope that things will improve for the cannabis industry.
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