Marijuana stocks and related ETFs, like the pure-play marijuana ETF ETFMG Alternative Harvest ETF (MJ - Free Report) , caught enough investors’ attention last year, courtesy of its mysterious rally in mid-2018 on Canada’s legalization of recreational marijuana in October.
Like other stocks and funds, MJ did go through some rocky stretches last year due to bubble fears and some downbeat earnings releases, but it’s been bouncing back nicely in the new year. So far, MJ is up around 40% since January.
In view of this, let’s take a look at whether the space will be able to maintain its rally in 2019.
Legalization Taking Place Globally
Cannabis is getting official approval from many U.S. states for recreational uses, in addition to medical usage. Though pot remains entirely illegal at the federal level, Michigan approved a ballot measure during the midterm elections for recreational use of marijuana to become the 10th state, while Missouri and Utah approved the legalization of medical marijuana. The total number of U.S. states greenlighting medical pot is now 33 (read: Why Marijuana Stocks & ETF Soared Today).
Meanwhile, Canada became the first major world economy and the second country after Uruguay to legalize recreational marijuana. Also, the opening-up of several medical marijuana markets on the international level is pending. Meanwhile, things are looking up in Germany, the United Kingdom and Mexico.
Growing Potential of Cannabis in the Beverage Industry
Per an article published on Bloomberg, the marijuana and alcohol industries are gradually becoming a one-stop destination for recreation. Dan O’Neill, the former CEO of Molson Coors Brewing Co. (TAP - Free Report) , believes that cannabis companies (once legalized fully in the United States) can see as huge of growth as alcohol after the ban ended, per a source.
The growing acceptance has led many brewers to come up with cannabis-induced beverages and ink deals with pot companies. Last August, U.S.-based Constellation Brands (STZ - Free Report) — a leading producer of alcoholic beverages — announced an expansion of its stake in the biggest listed cannabis company Canopy Growth (CGC - Free Report) (read: Follow Constellation Brands, Bet Big on Cannabis ETFs).
Soon after, there was news that the U.K.-based alcohol company Diageo Plc (DEO - Free Report) would take part in discussions with at least three Canadian cannabis companies to buy a stake or form a partnership with one of them. The Canadian arm of Molson Coors and Quebec-based pot producer Hydropothecary Corp. announced their plan to make non-alcoholic, cannabis-infused beverages, as beer sales slowed down in North America.
Soft drink behemoth Coca-Cola Company (KO - Free Report) is also reportedly "closely watching" the market for drinks infused with cannabidiol and is in talks with Canada's Aurora Cannabis (ACB - Free Report) .
2018: A Big Year for Cannabis Deals
Apart from the Constellation Brands deal in August, other major deals included Marlboro cigarette maker Altria Group’s (MO - Free Report) December announcement of an $1.8-billion investment in Canadian cannabis producer Cronos Group (CRON - Free Report) and Aurora Cannabis’ expansion in Mexico with the acquisition of Farmacias Magistrales S.A. This expansion will allow Aurora to have access to the newly legal Mexican medical marijuana market.
Notably, Aurora made some other big acquisitions last year, including the purchase of Saskatchewan-based CanniMed Therapeutics in May and Ontario-based MedReleaf in July (read: Cronos-Altria Deal Boost Marijuana ETF: Will This Continue?).
Moreover, there were deals like Aphria’s (APHA - Free Report) purchase of Nuuvera in March and Canopy Growth’s (CGC - Free Report) acquisition announcement of U.S.-based Ebbu Hemp. MedMen Enterprises lately agreed to buy medical cannabis company PharmaCann.
Bullish Analyst Take
Barclays is betting big on cannabis and revealed a position in Tilray (TLRY - Free Report) , the Canadian marijuana company, in the third quarter as well as boosted its bet on Cronos. The bank has also eyed CGC stock through investments in beverage giant Constellation Brands.
Zacks 2019 Marijuana Investors’ Summit: In addition to the companies you learned about above, we invite you to learn more about investing in pot stocks. On Tuesday, February 26, our team of experts will reveal what we believe is the single best way to make money from legal marijuana. Register Now for Free >>