Recreational marijuana is now legal in 17 U.S. states, and medical marijuana has been legalized in 36 states.
The momentum created by the rapid legalization of marijuana in individual states will likely force the federal government to take action. As a result, many investors see lucrative opportunities for the Canadian marijuana companies that have quickly grown since Canada legalized marijuana in 2018.
Certain U.S. states, like Florida and Texas, are unlikely to approve adult use marijuana before the federal government. That was evident in April, when the Florida Supreme Court prevented the issue from coming to the ballot despite the fact that about 60 percent of Floridians support legalization.
This is a critical moment in the history of marijuana. The slow acceptance of marijuana as a safe substance for both medical and recreational use is a historic change with huge market implications.
It’s important to point out that a big part of the push for federal legalization in the U.S. is the racial justice movement. When the U.S. Senators Cory Booker, Ron Wyden and Chuck Schumer released a joint statement in February declaring their intention to move forward with cannabis reform, they targeted the War on Drugs as a particularly egregious example of domestic policy that disproportionately targeted people of color.
“The War on Drugs has been a war on people—particularly people of color,” the senators said in their statement. “Ending the federal marijuana prohibition is necessary to right the wrongs of this failed war and end decades of harm inflicted on communities of color across the country. But that alone is not enough. As states continue to legalize marijuana, we must also enact measures that will lift up people who were unfairly targeted in the War on Drugs.”
Smart investing doesn’t always dovetail with the latest movements for social justice, but that’s exactly what marijuana stocks provide investors.
On the business side, there’s increasing optimism about what U.S. legalization means for pot stocks, especially in Canada, which in many ways have a headstart on the infrastructure of marijuana production but also well capitalized.
Cannabis stocks surged in February as the Reddit users that flocked to GameStop also leaped to invest in the cannabis industry based on hopes that U.S. President Joe Biden and the Democratic Party will legalize cannabis at the federal level within the next few years.
If the U.S. does legalize marijuana in the near future, companies like Entourage Health, a Canadian cannabis producer, are poised to take full advantage of it.
In March, Entourage Health was added to Horizons Marijuana Life Sciences Index, the first ETF, or exchange-traded fund in the world to offer direct exposure to North American-listed stocks that operate in the legal cannabis industry.
The Index provides investors with exposure to the performance of many publicly listed life sciences companies with major business in the marijuana industry.
Because of the nature of current investing in cannabis companies, the biggest names that are listed on US exchanges such as the NASDAQ are Canadian based organizations. But, US based MSO have made movement by listing on Canadian exchanges in the recent year. Many American companies are forced into over-the-counter trading or “less liquid Canadian exchanges,” as explained in this Bloomberg column.
“This gives the Canadian operators a big advantage in capturing investors’ zeal for the lucrative growth opportunities afforded by pot, as evidenced by their steeper valuations: Canadian cannabis companies that trade on U.S. exchanges are valued at an average of 10 times sales, compared with 5 times for U.S. multistate operators,” according to the Bloomberg piece.
Entourage Health, in particular, has several advantages in the event of U.S. legalization, including:
- Indoor & outdoor cultivation, in-house extraction, product development & manufacturing.
- Quality products that include dried cannabis, cannabis extracts and cannabis vaporizes.
- Market leader in insured medical cannabis. Cannabis is often used as an effective pain reliever in the medical setting.
- Closed-loop model providing exclusive access to ~350,000+ potential patients, with over 2.2MM potential paid insured patients in the US
- Strategic institutional investor in the LiUNA Pension Fund.
For these reasons and many more, investors can look forward to a strong future for marijuana companies in Canada.