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The Perfect Storm For Cannabis Stocks

The Perfect Storm For Cannabis Stocks

“This is a nascent secular bull market that is about to really reshape the economy.” Pot stocks may provide a generational trade opportunity according to Tony Greer of TG Macro and Todd Harrison, founder and Chief Investment Officer of CB1 Capital. Those stocks might provide an incredible blend of both value and growth potential.

“MSO’s (Multi-State Operators) have valuations in the bottom third of all industries, but the highest revenue growth rate of any industry,” Greer explained from a chart shared by Harrison.

The Macro View: The 2020 election moved the cannabis industry a few more steps forward.  Arizona, Mississippi, Montana, New Jersey and South Dakota all passed legalization initiatives. New Jersey could be the most significant as it opens up the northeast – New York won’t want to lose out on tax revenue to a neighboring state.

Where Cannabis is Legal

Even with a divided government, Harrison is confident progress will continue. The immediate hurdles that are in need of attention include banking access and IRS Tax clause 280E. Once those artificial barriers are removed, the market could flourish. Even if the federal government does not change marijuana from a schedule 1 to a schedule 2 drug, the seas of change are in motion, Harrison believes. 

“The total addressable market continues to increase. Globally, nationally, the consumer is there. You do not have to go out and teach people about what this product is and why they use it,” Harrison explained.

Investment ideas:  There are a handful of names that Harrison recommends people look at. He and Greer and are quick to point out, that you must remember your time frame when looking at these names, but the ‘FAANGified’ names (the top-tier listings) include:

  • VFF – Village Farms
  • MSOS – MSO ETF
  • GTBIF – Green Thumb
  • CURA – CuraLeaf
  • TRSSF – Terrascend 
  • TCNNF – Trulieve
  • CCHWF – ColumbiaCare 

There are few proxy plays that include IIPR, GRWG and SMG. If you traded cannabis stocks in their first bull run, you may notice that some familiar names are not on this list. Harrison points out, those are the Canadian stocks.  This time, you will want to play the U.S. based stocks.

“By and large, the pure plays here are the MSOs. Those are the ones you are going to really reward the investors who do the work, he explained.”

Watch the full interview – 34 Minutes

RELATED CATEGORIES: Big Calls, Market Analysis, Political Economy, Stock Market

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Mark Yusko is the Founder, CEO and Chief Investment Officer of Morgan Creek Capital Management. He is also the Managing Partner of Morgan Creek Digital Assets.

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