Cannabis Stocks: Here's How to Maximize Your Gains Amid Sector's Strong Resurgence

 | Feb 22, 2024 21:41

  • The cannabis sector experienced significant growth in 2019 but then went on to decline eventually.
  • However, the sector is now experiencing a robust resurgence this year, driven by rumors that the DEA may reclassify cannabis from Schedule 1 to Schedule 3.
  • In this analysis, we will look at how you can invest in the sector, both through stocks and with specialized ETFs, and maximize your gains amid this strong rebound.
  • If you invest in the stock market, get a 10% discount HERE , using the promo code INVESTINGPRO1. Find more information at the end of this article.

    • Cannabis stocks have been on a rollercoaster ride, going from a big boom in late 2019 to a crash in the following years.

    A pivotal moment for the sector came in October 2018 when Canada fully legalized cannabis, sparking a rally in stocks and ETFs.

    This was followed by another event in 2019 when the US regulations changed, leading to the decriminalization of recreational use in nearly half of the states in the country.

    This led to several companies going public, as the first investment funds and specialized ETFs were introduced.

    The frenzy was palpable, with many stocks tripling, while funds experienced remarkable gains of 100-150%. Eventually, the sector experienced a downturn as stocks and ETFs went out of favor with investors.

    h2 New Catalyst Could Garner Investor Interest/h2

    As of Monday's close, the cannabis sector is in the midst of a strong rebound.

    Behind this resurgence lies a significant rumor suggesting that the U.S. Drug Enforcement Agency (DEA) may reclassify cannabis from Schedule 1 to Schedule 3 substances.

    Why is this crucial? Schedule 1 includes substances like heroin and LSD, whereas Schedule 3 encompasses substances approved by the FDA, and accessible by prescription.

    Being in Schedule 1 restricts eligibility for credit or bank guarantees and prohibits interstate marketing. This development follows legalization efforts in the rest of the world.

    In Europe, Malta took the lead by legalizing cannabis cultivation, possession, and consumption within certain limits.

    Other European countries, including Croatia, Greece, Cyprus, Germany, Italy, Luxembourg, Norway, the Netherlands, and Finland, allow cannabis consumption for medicinal purposes.

    Given this scenario, it's essential to explore how to invest in cannabis, treating it as just another sector in the financial markets. Broadly, there are two avenues: investing in individual stocks or opting for ETFs.

    h2 1. Cannabis ETFs to Consider/h2
    • ETF AdvisorShares Pure US Cannabis

    Managing more than $900 million, AdvisorShares Pure Cannabis (NYSE:YOLO) was created in 2020, with an annual fee of 0.83%.

    Get The App
    Join the millions of people who stay on top of global financial markets with Investing.com.
    Download Now

    It invests in companies generating at least 50% of their revenue from the marijuana business. It has surged 17.5% in 2024 so far.

    • ETF MG US Alternative Harvest

    Created in 2015, with an annual commission of 0.75%, this ETFMG Alternative Harvest (NYSE:MJ) manages over $150 million. It invests in shares of the Prime Alternative Harvest index.

    The ETF has gained 6% YTD.

    2. Individual Stocks

    • Tilray (NASDAQ:TLRY)

    It is a Canadian company founded 2013 and was one of the first to receive a license to grow marijuana from the Canadian Ministry of Health. In 2018 it began trading on the Nasdaq at $17.