The momentum produced over the last year or so by marijuana stocks is expected to continue for the foreseeable future. There are a number of examples of cannabis stocks that have increased in value over 50 percent during 2019. If this isn’t reason enough for you to consider an investment in marijuana stocks, there are many other reasons to see value in cannabis.
The cannabis industry provides potential investors with a chance to invest in a market with tremendous growth potential that has been untapped for the most part. Because of this, pot stock prices are still low enough for the common investor to take advantage.
The cannabis market is presently estimated at $11 billion. This number is expected to more than double by 2022. Some experts expect the market to grow as high as $78 billion over time. One analyst estimates the market for cannabis is expanding by 23 percent per year.
The largest catalyst for the future growth of cannabis stocks is the eventual decriminalization of the plant. It is unclear when this decriminalization by the federal government will take place but it will spell good times for investors who take a chance on the cannabis market.
The Democratic Party agreed in 2016 to make the removal of marijuana from the list of Schedule one drugs a part of the party platform. Not all lawmakers are on board with the idea but the political climate is slowly changing in favor of federal decriminalization of cannabis. President Donald Trump has said in the past he supports state efforts to establish their own guidelines regarding the plant. He has not expressed, however, that he plans to push for federal decriminalization.
The States Act
Although federal decriminalization may still be a ways off, cannabis investors may soon be able to benefit from legislative relief. The States Act is a bill that has received support from both sides of the aisle and calls for the federal government to stay out of the state’s affairs concerning cannabis. Cannabis companies in states that legalize marijuana use would enjoy banking privileges and become unburdened by the excessive tax rates they pay at this time. Some political analysts expect Trump to express public support for the States Act if the issue is raised during the 2020 election cycle.
The States Act will be a great help to the cannabis industry because it would pave the way for a capital infusion that has so far been missing. Owners of cannabis businesses in America are taking a huge risk by operating a business that is technically illegal by federal standards. Likewise, banks would take a huge risk if they decided to lend money to these businesses. The explosive growth the cannabis industry is expected to experience in the coming years can only be fully realized if the industry has access to credit and capital. Banks and other institutional investors who have avoided the cannabis industry will be more willing to provide capital if the States Act passes.
Support From The States
While some lament what they see as the dragging of feet on the matter by the federal government, many state governments have created welcoming environments for the cannabis industry. Today, 22 states have agreed to legalize the use of medical marijuana for medical purposes. Ten additional states have legalized marijuana use for both medical and recreational purposes.
The approach by states will not affect federal legislature or encourage banks to provide services to cannabis companies. However, the climate created by many of these states allows cannabis companies to continue their growth while waiting or the federal government to sign off on the industry.
After taking into account the support seen at the state level for cannabis decriminalization, it is no surprise the same trend is beginning to be seen at the federal level. Political analysts say the rapid gain in political momentum in favor of cannabis is not a common occurrence. To put matters in perspective, one-third of Americans polled were in favor of marijuana legalization in 2003. The number of Americans in favor of legalized marijuana today has doubled.
Wall Street Attention
Cannabis stocks have been largely ignored by firms on Wall Street until recent times. Mainstream analysts and investors paid little attention to cannabis companies. Big-name Wall Street firms are now covering cannabis stocks. This exposure can only lead to investors becoming more comfortable with cannabis stocks. The more buy initiatives generated by this exposure will result in increased value for companies that dispense cannabis products.
Many savvy investors were able to invest in cannabis stocks as soon as the opportunity became available. These investors have been more than happy with the results. The success of past investors, as well as, the positive industry trends profiled above are more than enough reasons to seriously consider an investment in cannabis stocks.