Cannabis stocks are off to a hot start in 2019.
In the first three and a half weeks of the year the North American cannabis stock index is already up 30%. Take a look at the big rally below.
Canopy Growth Corp (CGC), the largest cannabis company in the world, is up 85%. Take a look at the big rally below.
This rally is being driven by a few key factors.
#1 cannabis stocks fell sharply in the fourth quarter. You can see that in both charts above. Canopy was down more than 50% from the 52-week high. After that decline the cannabis sector and Canopy were deeply over sold. When the New Year kicked in – investors took a fresh look at the cannabis sector and saw the lowest prices in almost a year. That was a signal to buy and a lot of capital has quickly rushed back into the cannabis sector.
#2 the outlook for the global cannabis sector has never looked better. The cannabis industry has scored a huge string of wins recently. For example, the Farm Bill legalizing hemp in the US for the first time in 50 years and New York’s desire to quickly legalize recreational cannabis. These fundamental events are huge catalysts for the industry and cannabis stocks.
What Should We Expect Looking Forward?
Looking forward I am expecting more gains.
#1 this looks like a trend change from a bear market in the fourth quarter into a new bull market in 2019.
#2 I see tons of legal catalysts ahead, for example I think the US will legalize medical cannabis in 2019.
#3 I am expecting to see a string of multi-billion dollar investments in cannabis from big alcohol, bit tobacco and big pharma.
#4 despite the big bounce many cannabis stocks are still trading well below the 52-week high. I expect that to attract more capital.
#5 the longer term trend in cannabis is still up. The current bull market in cannabis began in early 2015 after the cannabis sector rebounded out of a 12-month bear market. Take a look below.
We are seeing that play out right now with the rally. Once again the long-term trend is kicking in and giving the sector a big boost.
This is How I Manage Cannabis Stock Portfolio’s for My Wealth Management Clients
In the short run cannabis stocks can be extremely volatile. We just saw that in the fourth quarter. New shareholders got off to a tough start and long-time shareholders saw their gains cut in half.
That’s why I encourage my clients to be patient and take the long-term view on cannabis stocks.
Time is truly an investors best friend. The longer you invest, the probability of success increases. That’s true for the broader stock market and the cannabis sector. The long term trend is our greatest weapon and I am looking for that to drive cannabis stocks hard in 2019.
The Big Picture: Cannabis stocks are off to a ripping start in 2019. The rally has erased most of the declines from the fourth quarter. Cannabis shareholders have gotten a very nice boost in their accounts.
Your Investment Partner,
MikeThis report is for entertainment purposes only. Every investor should consult with an investment advisor before making investment decisions. The Vodicka Group, Inc. is not a broker/dealer. We do not receive compensation for mentioning stocks. At various times, the clients, publishers and employees of Vodicka Group, Inc., may buy or sell the securities discussed for purposes of investment or trading. Michael Vodicka owns shares of Canopy Growth Corp. (WEED).