Recreational Marijuana Stocks

By Everett Winter

Introduction

If you invest any time into the stock market, it would have been hard to miss the buzz around the so-called "pot stocks". And it isn't surprising. One of the front runners, Canopy Growth Corporation (WEED), has gained 390% in the past year. These mainly include stocks in recreational Canadian marijuana companies, due to the prime minister, Trudeau, stating that recreational use of marijuana will be legalized for all age 18+ by July 2018. Companies have already been hard at work due to the leniency and investors have noticed. The three major front runners right now are Canopy Growth Corp. (WEED), Aurora Cannabis Inc. (ACB), and Aphria Inc. (APHQF).

2017: The Year in Marijuana Stocks

This will be kept brief as I'm sure you are more interested in the future. All of the aforementioned front runners were modest at the start of 2017, well under $10/share. It wasn't until very late in the year, November, that we saw the first glimpse of the approaching gains. During the month of November, the three front runners gained a loose approximated average of 35% to 130% for Aurora Cannabis. All three maintained a steady but modest climb until December 20th, where they exploded, nearly doubling their value in 10 days. By the end of 2017, the buzz was everywhere.

Aurora Cannabis Throughout 2017

2018: Thus Far, And What Is To Come?

Only a few days in to 2018, pot stocks took a hit when Jeff Sessions, an avid critic of legalization, essentially removed the Obama-era barrier on prosecutors investigating cases in US states which have legalized marijuana. The cannabis community obviously felt this blow, but the effects could even be felt in Canada, where the stocks we are concerned with reside. This catalyzed a short downturn in the marijuana industry. However, soon after, Aphria and Canopy Growth resumed their impressive rate of growth. However, Aurora has not quite recovered as of today (January 10th). However, a fair amount of predictive analysts feel that Aurora Cannabis will outperform the other two in the long term, due to their quality of management and their 9.9% stake, $245M investment from Constellation Brands Inc. (STZ), a beer, wine, and spirits company, indicating interest of partnership in creating marijuana infused beverages or extracts. However, it is difficult to trust this for short-term profits. There are several other stocks in the peripheral industries. Two popular ones being 22nd Century Group Inc. (XXII), a tobacco company which is developing growth methods to modify levels of nicotine in tobacco and THC levels in marijuana, and Innovation Industrial Properties Inc. (IIPR), which works on management of specialized cannabis facilities. Nearly all major stocks in the industry are showing promising rises for Canada's legalization. However, this doesn't come without skeptics.

Downsides

The buzz around pot stocks has its critics. Many say it is potentially a bubble, and that the excitement has created a dangerous situation for uneducated investors. Another common criticism is that it is wrong to support such an industry. The medical community is particularly concerned about legalization. The Quebec Association of Psychiatrists has expressed its disapproval, and Karine Igartua, president of Quebec psychiatry group states,

"When you expose a growing brain to cannabis,
you actually change the way it grows and matures."

It is impossible for us to accurately predict the detrimental effects of legalization, as many claim positive health impacts as well.

What do you think? Where is the industry going? Is it a bubble? Will it explode?

This is my first post. Feel free to criticize :)