The "blue sweep" that has taken hold of U.S. politics of late provides a very interesting thesis for investors to jump on this asset class right now. Expectations that a Democrat-controlled government could finally enact cannabis legalization south of the border has stoked investor interest in cannabis stocks once again. These are highly speculative assets that tend to trade on news, so investors who bought the recent dips have been handsomely rewarded.
I do think some of the speculation-related gains these stocks have made in recent weeks and months is indeed warranted. I do think legalization has become more likely with a blue sweep of the U.S. government, and this is something that benefits cannabis players broadly. That said, there is a wide discrepancy among Canadian cannabis players in this regard. Some have large amounts of exposure to the U.S. market, and others have completely divested from their U.S. operations in recent years due to regulatory hurdles in Canada.
For investors looking for cannabis stocks to put on their watch lists, I’d recommend focusing on the companies with maximum exposure to the U.S. market. Many of the smaller players in Canada are just domestically-focused, so the fact that their stock prices rose doesn’t really reflect the reality of their long-term potential gains they might make. Barring acquisitions, many Canadian cannabis players don’t have a visible path to capitalizing on potential U.S. legalization right now. Therefore, this is a stock picker’s sector, so pick your watch list stocks accordingly.
Invest wisely, my friends.
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