Cannabis stocks started the year very strongly, but topped out in early February along with other speculative groups like electric vehicles and special purpose acquisition companies, or SPACs.
The biggest problem for the group is that legislation on the national level has not advanced as many proponents had hoped it would. The legalization of cannabis will help to drive the sector in years to come, but the Biden Administration has not exhibited any urgency in dealing with this issue.
The bigger issue in the short term is the SAFE Banking Act. The SAFE Banking Act was passed in the House in April, but has stalled in the Senate. This act allows banks to conduct business with cannabis enterprises and will also help to move cannabis stocks to a full listing on the stock exchanges. Currently, most of the top cannabis names are forced to list their stocks on the over-the-counter market. Some brokers will not allow transactions in these stocks, and many banks will not deal with them until these rules are clarified.
Lack of legalization may actually benefit some of the cannabis stocks that are licensed as medical providers. They will retain their market shares and build a bigger foundation, but it is the SAFE Banking Act that would provide the catalyst for these stocks to really move.
There are various rumors about the Republicans drafting their own SAFE Banking Act, but the situation is mired in politics, and there is nothing currently on the agenda. That can change very quickly, and some of the pot names seem to be anticipating that action.
My favorite multistate-operators in the cannabis sector are Cresco Labs (CRLBF) , Curaleaf Holdings (CURLF) , Green Thumb Industries (GTBIF) , and Trulieve Cannabis Corp (TCNNF) . All these names are held by the AdvisorShares Pure US Cannabis (MSOS) exchange-traded fund. In addition, I have positions in Village Farms International (VFF) , Agrify Corp (AGFY) , and Urban-gro (UGRO) , which are supplies of greenhouse services and grow supplies.
The key to the cannabis sector in the short term is the SAFE Banking Act. If and when that is passed, this sector is going to move very quickly.