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Pot Stocks Surge on SAFE Banking Act Reintroduction
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Cannabis-related stocks jumped on Thursday amid a resurgence of the Secure and Fair Enforcement (SAFE) Banking Act in the U.S. Senate and House of Representatives, as lawmakers attempt to make a final push toward delivering financial services for the cannabis industry.
The legislation, touted by a bipartisan group including Sen. Steve Daines (R-MT), Sen. Jeff Merkley (D-OR), Rep. Earl Blumenauer (D-OR), and Rep. Dave Joyce (R-OH), would serve to shield financial institutions from federal prosecution for offering services to cannabis companies.
A thorn in the industry’s side, financial institutions have largely withheld services to cannabis businesses due to current laws. Most businesses have therefore operated on a cash-only basis, exposing them to unnecessary security risks. The SAFE Banking Act would help eliminate this barrier, allowing financial service providers to safely work with and lend to businesses operating in the cannabis industry.
Haven’t We Been Here Before?
The SAFE Banking Act has been approved by the House seven times over the past two congressional sessions, boasting significant bipartisan support. And while the legislation has faltered in the Senate, advocates remain optimistic that the bill will be signed into law this year.
Forty states as well as several U.S. territories have comprehensive medical cannabis laws, while twenty-two states have made recreational cannabis legal for adults. Multiple surveys in recent years show an overwhelming majority of Americans support marijuana legalization.
Biden Administration Approach
President Biden campaigned on the idea that no one should be incarcerated for using or possessing marijuana, and last year fulfilled that promise. The administration announced a pardon in October of all prior federal offenses of simple cannabis possession. Biden also urged all Governors to do the same regarding state offenses.
The Attorney General and Secretary of Health and Human Services were then directed to initiate a review process of how marijuana is scheduled under federal law, which currently classifies marijuana in Schedule I of the Controlled Substances Act – the classification meant for the most dangerous substances.
In December, President Biden signed into law the Medical Marijuana and Cannabidiol Research Expansion Act, which aims to provide federal support in facilitating marijuana research – including potential health benefits. This act accomplishes a number of objectives, not least of which is a potential pathway for the FDA to approve commercial drug production derived from cannabis.
Stocks to Watch
There’s no doubt that stocks in the industry have taken a licking over the past year, but the drastic move lower presents a unique opportunity looking ahead.
Canopy Growth (CGC - Free Report) is engaged in the production, distribution, and sale of cannabis and hemp-based products primarily in Canada, the U.S., and Germany. CGC products include dried cannabis flower, extracts and concentrates, beverages, gummies, and vapes. Canopy Growth sells its products under recognized brands such as Tweed, Deep Space, Martha Stewart CBD, and Storz & Bickel.
Image Source: Zacks Investment Research
CGC is a Zacks Rank #3 (Hold) stock. The company has missed earnings estimates in each of the past four quarters, with an average miss of -137.45%. Earnings are expected to see a big decline this year, from $0.4/share to a loss of -$4.50/share. CGC shares surged 5% in early trading on Thursday.
Image Source: Zacks Investment Research
While Canopy Growth trades on a major stock exchange like the NYSE, other recognized players in the industry such as Green Thumb Industries (GTBIF - Free Report) trade over-the-counter. Green Thumb Industries is engaged in the manufacturing, distribution, and sale of various cannabis products in the United States. The company offers cannabis flower as well as a host of packaged products such as concentrates, vapes, tinctures, edibles, and topicals. GTBIF sells its products under recognized brands such as Dogwalkers, Good Green, and RHYTHM.
Green Thumb Industries, a Zacks Rank #3 (Hold) stock, was up nearly 8% in early trading this morning. GTBIF also expected to see an earnings decline this year. For those looking to take a bit less risk, a cannabis-related ETF may be the best way to go. The AdvisorShares Pure US Cannabis ETF (MSOS - Free Report) is an actively-managed ETF with dedicated cannabis exposure focusing on U.S. operators.
The AdvisorShares Pure US Cannabis ETF attempts to take advantage of a quickly evolving cannabis marketplace by selecting securities that span multiple industries including agriculture, retail, real estate, and medical. The MSOS ETF was up more than 10% on Thursday morning. GTBIF is the largest holding in the MSOS ETF with a more than 25% portfolio weight.
Bottom Line
While there’s certainly risk involved investing in the cannabis space, significant upside potential is evident, particularly after many related stocks witnessed drastic drawdowns in the recent past. Getting through regulatory hurdles like the passage of the SAFE Banking Act will help these companies attract new investment. Make sure to keep an eye on the industry as steps are taken to pass new legislation.
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Pot Stocks Surge on SAFE Banking Act Reintroduction
Cannabis-related stocks jumped on Thursday amid a resurgence of the Secure and Fair Enforcement (SAFE) Banking Act in the U.S. Senate and House of Representatives, as lawmakers attempt to make a final push toward delivering financial services for the cannabis industry.
The legislation, touted by a bipartisan group including Sen. Steve Daines (R-MT), Sen. Jeff Merkley (D-OR), Rep. Earl Blumenauer (D-OR), and Rep. Dave Joyce (R-OH), would serve to shield financial institutions from federal prosecution for offering services to cannabis companies.
A thorn in the industry’s side, financial institutions have largely withheld services to cannabis businesses due to current laws. Most businesses have therefore operated on a cash-only basis, exposing them to unnecessary security risks. The SAFE Banking Act would help eliminate this barrier, allowing financial service providers to safely work with and lend to businesses operating in the cannabis industry.
Haven’t We Been Here Before?
The SAFE Banking Act has been approved by the House seven times over the past two congressional sessions, boasting significant bipartisan support. And while the legislation has faltered in the Senate, advocates remain optimistic that the bill will be signed into law this year.
Forty states as well as several U.S. territories have comprehensive medical cannabis laws, while twenty-two states have made recreational cannabis legal for adults. Multiple surveys in recent years show an overwhelming majority of Americans support marijuana legalization.
Biden Administration Approach
President Biden campaigned on the idea that no one should be incarcerated for using or possessing marijuana, and last year fulfilled that promise. The administration announced a pardon in October of all prior federal offenses of simple cannabis possession. Biden also urged all Governors to do the same regarding state offenses.
The Attorney General and Secretary of Health and Human Services were then directed to initiate a review process of how marijuana is scheduled under federal law, which currently classifies marijuana in Schedule I of the Controlled Substances Act – the classification meant for the most dangerous substances.
In December, President Biden signed into law the Medical Marijuana and Cannabidiol Research Expansion Act, which aims to provide federal support in facilitating marijuana research – including potential health benefits. This act accomplishes a number of objectives, not least of which is a potential pathway for the FDA to approve commercial drug production derived from cannabis.
Stocks to Watch
There’s no doubt that stocks in the industry have taken a licking over the past year, but the drastic move lower presents a unique opportunity looking ahead.
Canopy Growth (CGC - Free Report) is engaged in the production, distribution, and sale of cannabis and hemp-based products primarily in Canada, the U.S., and Germany. CGC products include dried cannabis flower, extracts and concentrates, beverages, gummies, and vapes. Canopy Growth sells its products under recognized brands such as Tweed, Deep Space, Martha Stewart CBD, and Storz & Bickel.
Image Source: Zacks Investment Research
CGC is a Zacks Rank #3 (Hold) stock. The company has missed earnings estimates in each of the past four quarters, with an average miss of -137.45%. Earnings are expected to see a big decline this year, from $0.4/share to a loss of -$4.50/share. CGC shares surged 5% in early trading on Thursday.
Image Source: Zacks Investment Research
While Canopy Growth trades on a major stock exchange like the NYSE, other recognized players in the industry such as Green Thumb Industries (GTBIF - Free Report) trade over-the-counter. Green Thumb Industries is engaged in the manufacturing, distribution, and sale of various cannabis products in the United States. The company offers cannabis flower as well as a host of packaged products such as concentrates, vapes, tinctures, edibles, and topicals. GTBIF sells its products under recognized brands such as Dogwalkers, Good Green, and RHYTHM.
Green Thumb Industries, a Zacks Rank #3 (Hold) stock, was up nearly 8% in early trading this morning. GTBIF also expected to see an earnings decline this year. For those looking to take a bit less risk, a cannabis-related ETF may be the best way to go. The AdvisorShares Pure US Cannabis ETF (MSOS - Free Report) is an actively-managed ETF with dedicated cannabis exposure focusing on U.S. operators.
The AdvisorShares Pure US Cannabis ETF attempts to take advantage of a quickly evolving cannabis marketplace by selecting securities that span multiple industries including agriculture, retail, real estate, and medical. The MSOS ETF was up more than 10% on Thursday morning. GTBIF is the largest holding in the MSOS ETF with a more than 25% portfolio weight.
Bottom Line
While there’s certainly risk involved investing in the cannabis space, significant upside potential is evident, particularly after many related stocks witnessed drastic drawdowns in the recent past. Getting through regulatory hurdles like the passage of the SAFE Banking Act will help these companies attract new investment. Make sure to keep an eye on the industry as steps are taken to pass new legislation.