If you’ve been keeping an eye on the cannabis industry, you might have noticed that progress on cannabis legalization has been moving at a slower pace than anticipated, despite some positive developments. While cannabis has gained legal status for medical use in 37 states and is fully legal in 23 states, it still remains classified at the federal level alongside heroin and other drugs. However, there have been some noteworthy changes, such as Canadian Cannabis legalization in 2018, which has allowed American cannabis companies to list their shares on Canadian exchanges. Looking ahead to October 2023, there are some potential scrappy growth stocks to consider investing in, including Curaleaf Holdings, Green Thumb Industries, Verano Holdings, Trulieve Cannabis, Cresco Labs, Columbia Care, Glass House Brands, and WM Technology. While these stocks offer exciting opportunities, it’s important to note that they come with small market caps and carry downside risk. Keep an eye on Curaleaf Holdings, the largest publicly traded cannabis company, as it often acts as a bellwether for the industry.
Slow Progress on Cannabis Legalization
With the increasing popularity and potential benefits of cannabis, it may come as a surprise that progress on its Cannabis legalization has been slower than anticipated. Despite some positive developments, there are still significant hurdles to overcome. In this article, we will explore the current legalization status of cannabis, its federal classification, and highlight some positive developments in the industry.
Current Cannabis Legalization Status
When it comes to the legalization of cannabis, the landscape is a patchwork of varying laws and regulations. As of now, medical use of cannabis is legal in 37 states, while full legalization has been implemented in 23 states. However, it is important to note that these state-level legalizations do not override federal law, which still classifies cannabis as a Schedule I drug.
Medical Use Cannabis Legalization
The legalization of cannabis for medical use has gained significant traction in recent years. Many studies have shown its potential benefits in treating a variety of medical conditions, such as chronic pain, epilepsy, and nausea associated with chemotherapy. This has prompted state governments to take action and allow patients access to cannabis for therapeutic purposes. While the progress in this area is commendable, there is still a long way to go in terms of nationwide acceptance and standardization of medical cannabis use.
Full Cannabis Legalization
In addition to medical use, some states have taken it a step further and legalized cannabis for recreational purposes. The rationale behind this move is to not only address the needs of medical cannabis users but also to generate revenue and reduce the burden on the criminal justice system. However, full legalization remains a contentious issue with opposing viewpoints on the potential risks and benefits. This discrepancy between state and federal laws creates challenges for businesses operating within the cannabis industry.
Federal Classification
One of the most significant obstacles to cannabis legalization is its federal classification. At the federal level, cannabis is still classified as a Schedule I substance, alongside drugs such as heroin, LSD, and ecstasy. This classification indicates that cannabis is deemed to have a high potential for abuse and no accepted medical use. This classification has far-reaching consequences not only for individuals using cannabis but also for businesses operating in the industry.
Comparison to Heroin
The federal classification of cannabis as a Schedule I drug raises eyebrows because it places it in the same category as highly addictive and dangerous substances like heroin. This categorization is often seen as outdated and fails to reflect the evolving understanding of the therapeutic potential of cannabis. Many argue that this classification should be revised to reflect the current scientific evidence and public opinion.
Legal Implications
The federal classification of cannabis has legal implications for businesses operating in the industry. Despite state-level legalization, cannabis companies face numerous challenges, including limited access to banking services and the inability to take advantage of federal tax deductions. These obstacles hinder the growth and development of the industry, making it difficult for companies to operate on a level playing field. Additionally, individuals found in possession of cannabis can still face federal prosecution, even if they are complying with state laws.
Positive Developments
Despite the slow progress on cannabis legalization, there have been some positive developments in recent years that provide hope for the future of the industry. One notable development is the legalization of cannabis in Canada in 2018. This move not only opened up a new market but also allowed American cannabis companies to list their shares on Canadian exchanges.
Canadian Cannabis Legalization
Canada’s legalization of cannabis marked a significant milestone in the global cannabis industry. It became the first G7 country to legalize cannabis for recreational use, setting a precedent for other nations to follow. This move has created new opportunities for companies to expand their operations and tap into the growing demand for cannabis products. It has also helped normalize the industry and challenge the stigma surrounding cannabis use.
Listing on Canadian Exchanges
Canadian legalization has had a direct impact on American cannabis companies. With access to Canadian exchanges, American cannabis companies have been able to raise capital, expand their reach, and gain exposure to global investors. This has been a game-changer for the industry, allowing companies to grow and develop their businesses in ways that were previously not possible. While limitations still exist due to the federal classification of cannabis in the US, listing on Canadian exchanges has provided a much-needed boost to the industry.
Impact on American Cannabis Companies
The listing of American cannabis companies on Canadian exchanges has provided investors with an opportunity to invest in the cannabis industry without the legal and regulatory uncertainty associated with US federal laws. This has led to increased interest and investment in American cannabis stocks, driving up their value and creating new opportunities for investors. As a result, American cannabis companies have experienced significant growth and have become attractive options for those looking to diversify their portfolios.
Eight Potential Cannabis Stocks for October 2023
As the cannabis industry continues to grow, investors are looking for potential opportunities to capitalize on this emerging market. Here are eight potential cannabis stocks to consider for October 2023:
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Curaleaf Holdings (CURLF): Curaleaf Holdings is the largest publicly traded cannabis company and often acts as a bellwether for the industry. With operations in multiple states, Curaleaf is well-positioned to capitalize on the expanding cannabis market.
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Green Thumb Industries (GTBIF): Green Thumb Industries is a leading cannabis producer and retailer with a strong presence in multiple states. The company has a diverse portfolio of brands and products, making it an attractive option for investors.
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Verano Holdings (VRNOF): Verano Holdings is a vertically integrated cannabis company focused on cultivation, production, and retail operations. With a growing number of dispensaries and a strong market position, Verano Holdings has significant growth potential.
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Trulieve Cannabis (TCNNF): Trulieve Cannabis is a vertically integrated company with a focus on the medical cannabis market. With a strong presence in Florida and expanding operations in other states, Trulieve is well-positioned for growth.
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Cresco Labs (CRLBF): Cresco Labs operates in multiple states and is known for its cultivation, manufacturing, and retail operations. The company’s diverse product portfolio and strategic partnerships make it an attractive option for investors.
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Columbia Care (CCHWF): Columbia Care is a multinational cannabis company with operations in the United States and Europe. The company focuses on both medical and adult-use markets and has a growing footprint in key states.
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Glass House Brands (GLASF): Glass House Brands is a vertically integrated cannabis company with operations in California. With a focus on sustainable cultivation practices and a strong brand presence, Glass House Brands has significant growth potential.
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WM Technology (MAPS): WM Technology operates Weedmaps, a popular online platform used by cannabis consumers and businesses. As the cannabis industry continues to evolve, WM Technology is well-positioned to capitalize on the growing demand for online cannabis services.
Curaleaf Holdings as a Bellwether
Curaleaf Holdings is considered a bellwether for the cannabis industry due to its position as the largest publicly traded cannabis company. As such, its performance often sets the tone for the broader market. Investors and industry analysts closely watch Curaleaf’s growth, financials, and strategic moves to gauge the overall health and potential of the cannabis industry. While investing in Curaleaf comes with its own set of risks, it provides valuable insights into the direction of the industry as a whole.
Scrappy Growth Stocks with Small Market Caps
While the cannabis industry offers significant growth potential, it is important to understand the risks associated with investing in small-cap stocks. The stocks listed above are considered scrappy growth stocks with relatively small market caps. While this can mean higher potential returns, it also comes with increased volatility and liquidity risks. Investors should carefully weigh the potential rewards against the risks before making any investment decisions.
Risk Factors
Investing in the cannabis industry comes with inherent risks that investors should be aware of. Some of the key risk factors include regulatory uncertainty, the potential for changes in federal laws, supply chain disruptions, and intense competition. Additionally, the cannabis industry is still in its early stages, and market dynamics could change rapidly, leading to unpredictable outcomes. It is essential for investors to conduct thorough due diligence and carefully assess the risks before making any investment decisions.
Despite the slow progress on cannabis legalization, the industry continues to attract attention and investment. The positive developments, such as Canadian legalization and the listing of American cannabis companies on Canadian exchanges, provide a glimmer of hope for the future. As the industry evolves and regulatory barriers are addressed, there is a strong potential for continued growth and development in the cannabis sector. However, it is important for investors to exercise caution and conduct thorough research before diving into the world of cannabis stocks.
