As the meteoric rise of Tilray (TLRY) draws in more and more investor dollars, it's hard to believe that there might be additional catalysts to drive legal-cannabis stocks higher. But there are. For instance, experts say looming U.S. deregulation of some cannabis-related products offers even more opportunities for the already blossoming industry.
"It's a perfect storm," Jon Brandon, co-CEO of Foria Wellness, a cannabis- and hemp-focused wellness- and sexual-enhancement-product company, told Real Money. "The efficacy of cannabis products is being shown, regulations are falling and capital is eager to flow into the space."
The storm for the sector has indeed been perfect lately. Tilray, the new poster child for cannabis stocks, rose nearly 100% at one point Wednesday and has gained almost 1,000% since its July initial public offering. And the Horizons Marijuana Life Sciences Index ETF, a Toronto-listed exchange-traded fund that trades under the ticker symbol "HMMJ" and includes some of the largest weed stocks, is up 8.7% this week. Those gains come even though the index doesn't include Tilray.
More Deregulation Ahead
Anti-pot regulations that have been easing in recent years in the United States and elsewhere seem poised to pull back even more so.
For example, Canada plans to completely legalize recreational marijuana next month -- good news for Canadian-based cannabis names like Canopy Growth Corp. (CGC) . And in the United States, the U.S. government's latest farm bill (officially known as the Agriculture Improvement Act of 2018) will likely soon legalize the sale of non-psychoactive industrial hemp, which comes from essentially the same plant as marijuana.
That's why Brandon feels the burgeoning cannabis market still has room to expand and for investors to get involved. "When you remove artificial constraints [and] break down legal barriers, the professional money is paying attention," he explained. "People are feeling that now is the right time to get in."
As Real Money noted Tuesday, the Pew Research Center found that the percentage of Americans who favor legalizing pot has grown to 61% today from just 12% in 1969.
Brandon told Real Money that this sentiment shift is indicative of a global change in attitudes toward marijuana. "We're at a tipping point culturally," he said. "You can look at what's happening in South America, Europe, Canada and [the United States]. The forces in place now seem much more open and welcoming."
But Don't Get Too Stoked on Pot
Still, playing individual cannabis stocks will remain a risky move -- often little more than speculating on a hot stock that's trading at or near new highs. Real Money columnist James "Rev Shark" DePorre pointed this out Wednesday, writing that "if you are playing Tilray, just be aware that you aren't trading a stock. Rather, you are betting on what other traders might do."