Why Marijuana Stocks Are One of The More Common Sense Investments You Can Make in 2021

• As Raphael Warnock and Jon Ossoff won their respective elections in Georgia on Wednesday, and as Democrats gained control of both houses of Congress, it seems ever more likely that marijuana will be legalized on the federal level under the 2020 Biden Harris Administration.
• Here’s why you should position yourself ahead of the curve to capitalize on one of the more common-sense stock trades of the year:

Here’s what’s happened so far:

• In December the House passed the ″Marijuana Opportunity Reinvestment and Expungement Act,″⁣ or the MORE Act, by a 228 to 164 vote. This bill would legalize marijuana at the federal level and set up a process to expunge past convictions if affirmed by the Senate. The bill also includes provisions to boost entrepreneurship in the legal marijuana industry for people of color.
• In the 2020 election, every ballot initiative involving the decriminalization or legalization of marijuana was passed. Specifically, voters in New Jersey, Arizona, and South Dakota chose to legalize marijuana for adult recreational use. In total, 15 states including the District of Columbia have legalized marijuana for adult recreational use. Thirty-six states in the U.S. permit medical use of the drug.
• On January 6th, New York Gov. Andrew Cuomo announced his desire to legalize marijuana in New York. He cited a need to raise tax revenues as the state is currently running a $15 billion deficit brought because of the COVID-19 pandemic. Full recreational and medical legalization would generate around $300 million per year in tax revenues. Cuomo also highlighted that “too many people have been imprisoned, incarcerated, and punished” because of marijuana and that its prohibition has “exaggerated the injustice of the justice system.”

Why the decriminalization and legalization of marijuana will pass under the Biden Harris Administration:

• Government deficits are at all-time highs thanks to the COVID-19 pandemic. According to the Committee for a Responsible Federal Budget, the U.S. deficit for 2021 is already on track to reach $2.3 trillion, or 10.4 percent of GDP, higher than any year except 2020.
• Marijuana revenues can not only alleviate federal deficits but also be put towards other important projects.
• The Democratic party gaining control of all three major branches of government will make passing the bill much easier than before. Now that the Democrats control the Senate, it should be relatively easy to affirm the MORE Act in the Senate.
• Legalization has seen bipartisan support in the past.
• Passing a ‘softball’ marijuana weed bill will get Democrats rolling under the Biden Harris administration and create momentum for other future potential bills.
• It's bigger than marijuana. The legalization of marijuana has just as much to do with generating tax revenue as addressing racial inequities in criminal justice, business, and more. Legalization will likely include “requiring federal courts to expunge marijuana arrests and convictions and resentence and create services that will fund reentry services for formerly incarcerated people and substance-use treatment.” Legalization could also remove possession of marijuana as a cause for deportation.
• Precedent. 15 states including the District of Columbia have already legalized marijuana for adult recreational use. Thirty-six states in the U.S. permit medical use of the drug.
• Other states have taken even more progressive stances on drug policy. In November of 2020, Oregon became the first state in the United States to decriminalize the possession of all drugs.

How marijuana stocks are doing:

• On January 6th, industry leader Canopy Growth (CGC) was up 11.6%, Aurora Cannabis (ACB) rose 6.2%, Cronos Group (CRON) jumped 15.0%, Tilray (TLRY) was up 13.3%, Aphria (APHA) jumped 11.9%, and ETFMG Alternative Harvest (MJ), the largest marijuana ETF, jumped 8%. MJ has risen about 42.0% since the Nov. 3 election.
• Year to date (YTD), Canopy Growth (CGC) is up 13.1%, Aurora Cannabis (ACB) is up 8.1%, Cronos Group (CRON) is up 15.1%, Tilray (TLRY) is up 27.76%, Aphria is up 14.9%, and ETFMG Alternative Harvest (MJ) is up 11.0%.

Why you should invest in marijuana stocks right now:

• There are several factors (listed above) that will most likely lead to full-scale legalization within the next 4 years, if not way sooner.
• Legalization will bring in capital for the industry to grow. New capital will propel valuation and create general investing interest in the industry.
• Legalization will allow Canadian marijuana firms to list their stocks on US exchanges, which will create more liquidity for marijuana stocks.
• The global legal marijuana market is already growing rapidly without U.S legalization. The market was valued at $17.7 billion in 2019 and is expected to grow at a compounded annual growth rate (CAGR) of 18.1% until 2027.

• The United States will be a huge market for marijuana. North America accounted for 88.4% of marijuana revenue in 2019 (marijuana is fully legal in Canada).

• Legalization in the U.S. will drive product innovation and higher revenues.
• Legalization in the U.S. could spur global adoption, which would push valuations even higher.
• Marijuana companies have been banking on legalization for years and have well developed operating models ready.
• Despite the recent rally marijuana stocks are far still below their all-time-highs and have lots of room to run. Canopy Growth (CGC) is currently down 40.3% from its ATH, Aurora Cannabis (ACB) is down N/A%, Cronos Group (CRON) is down 60.5%, Tilray (TLRY) is down N/A%, and Aphria is down 52.7%, ETFMG Alternative Harvest (MJ) is down 58.5%.

How to mitigate risk when investing in marijuana stocks:

• Take a long-term focus. Investors who take a long-term focus are less likely to be affected by short-term price swings. Because marijuana stocks are volatile, an active approach can create undue stress and spur trading activity that is not in line with an investor’s long-term goals and that is detrimental to performance.
• ‘Setting and forgetting’ can be an effective approach to reap long term performance without undue short-term stress.
• Don’t make marijuana your largest or only asset allocation. While marijuana stocks have real investment potential, one should never only invest in one asset class or concentrate all of their assets into a young asset class such as marijuana.
• Dollar-cost averaging is a great way to reduce the risk of adverse price swings when investing in marijuana. By investing incrementally over time, buyers can spread out risk and take a more long term focus.
• Buy shares in an ETF. Buying a marijuana ETF like ETFMG Alternative Harvest (MJ) can be a good way of investing in the marijuana space with less volatility. ETFs are also good at creating a diversified exposure to an industry.

Disclaimer:

The opinions expressed in this article are solely my own and not that of any entity, company, or institution that I am associated with. This article was written by myself for the purpose of examining a key market trend. At the time of writing, I am long ETFMG Alternative Harvest (MJ) stock. Please do not take the opinions expressed in this article as fact. Investing in pharmaceutical stocks and other risky assets can result in losing some if not all of your investment. Investors should do their own thorough research. Please invest at your own discretion in a way that is appropriate for you.