Pot investors are celebrating! Why? A lot of it has to do with the upcoming presidential election. Cannabis shares jumped last week when vice presidential candidate Kamala Harris said she and presidential nominee Joe Biden would look to decriminalize cannabis if they won. Harris is also one of the lead co-sponsors of the Marijuana Opportunity Reinvestment and Expungement Act. The U.S. House of Representatives was supposed to vote on this bill last month but delayed the vote until after the election. Among other things, this bill looks to expunge the criminal records and conduct sentencing review hearings of people currently serving time for cannabis-related crimes. But the cannabis sector got an additional tail wind hours later when Vermont greenlit legal sales. And the state passed a separate piece of legislation to automate the expungement of prior cannabis convictions. This duo sent cannabis shares charging higher. Over the past month, shares of the newly debuted AdvisorShares Pure US Cannabis ETF (NYSE: MSOS) and the Horizons Marijuana Life Sciences Index ETF (OTC: HMLSF) have taken off. The American multistate operator (MSO) ETF has jumped 16% as its Canadian counterpart has risen roughly 3.5%. And the majority of these gains have taken place since the vice presidential debate and the Vermont announcement. This adds to the momentum that U.S. cannabis will enjoy on election night, as five states have legalization measures on the ballot. And this is setting up to be an opportunity for growth at discount prices! The Undervalued Growth OpportunityI've long stated that I believe the global cannabis market will be worth $200 billion by 2030. I also believe the U.S. will make up a large chunk of that, at around $80 billion by then. Although there's been a recent pop, U.S. MSOs are still trading at attractive valuations. For instance, the American cannabis market is projected to top $37 billion by 2024. At the same time, the Canadian market is forecast to be worth around $5 billion by then. So let's break this down... The current market cap of Canopy Growth Corp. (NYSE: CGC) is $7.14 billion after last week's rally. Cronos Group's (Nasdaq: CRON) is a little more than $2 billion. Aphria's (Nasdaq: APHA) is around $1.8 billion. And the rest of Canada's "Big 7" - Aurora Cannabis (NYSE: ACB), Hexo (NYSE: HEXO), OrganiGram Holdings (Nasdaq: OGI) and Tilray (Nasdaq: TLRY) - have market caps of $1 billion or less. |
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