Marijuana stocks are among the most polarizing stocks on the market.
On the one hand, many investors see the immense potential locked within pot stocks as cannabis legalization spreads globally. On the other hand, marijuana stock bears believe that the industry is overhyped and that full legalization in big markets like the U.S. is many years away—if it happens at all.
In that debate, many numbers—like price-to-earnings ratios, market valuations, and profit margins—are thrown around to make this or that point, but they all miss one fundamental number: 68.
That’s the percentage of Americans who support marijuana legalization. That’s a huge number that crosses the party divide, making it all the more impressive in our era of extreme partisanship. (Source: “Support for Legal Marijuana Inches Up to New High of 68%,” Gallup, Inc., November 9, 2020.)
Federal U.S. marijuana legalization is probably the single most important event on the horizon for the pot industry. I’d go as far as to say that the height of the pot stock market (or at least the highest potential for gains) we’ll ever see will likely occur in the immediate aftermath of U.S. cannabis legalization.
This isn’t to say U.S. marijuana legalization will be the last opportunity to score major gains from marijuana stocks. It’s just that it will, in my view, be the best time to see massive gains fast.
The market tends to agree with me. When Joe Biden swept into the White House and the Democrats won the majority in both houses of Congress following the runoff election in Georgia, support surged behind pot stocks.
Chart courtesy of StockCharts.com
Many believed that the newly-elected President Biden, alongside the Democrats in control of the House and Senate, would push through some manner of marijuana legalization, even if it would just end up being decriminalization.
To date, that hasn’t happened, and there are no signs of it happening any time soon. That explains the subsequent dip marijuana stocks experienced in early 2021.
Biden, recall, was the only major candidate seeking the Democratic Party presidential nomination who didn’t support pot legalization. Analysts knew that, of course, but many were hopeful that Vice President Kamala Harris, who does support federal U.S. marijuana legalization, would influence Biden. That hasn’t come to be.
And that brings us back to the 68% figure. That number, in modern U.S. politics, is virtually a miracle. The American people are not nearly as united on almost any other issue.
Of course, even if Republicans and Democrats do believe in legalizing marijuana, it’s important to remember that they have very different visions of what that will entail, which will no doubt be a sticking point.
Having said all that, there’s still massive, borderline supermajority support for U.S. pot legalization, and politicians cannot ignore that forever (or even much longer).
In Canada, Prime Minister Justin Trudeau rode a wave of pot-legalization support into the prime minister’s seat. There’s no reason the same scenario couldn’t play out in the U.S.
So what does that mean for pot stock investors? Simple: the best times are yet to come.
Whether it’s this presidency, the next one, or even the one after that, there’s simply little chance they’ll be able to hold out against the overwhelming tide of support for weed legalization.
What’s more, the younger generations in the U.S. have a much more accepting view toward marijuana than the older generations that grew up with the drug being constantly vilified.
As the demographic shift continues in the U.S., we’ll see the younger generations assume more political power and become larger segments of the voting base.
In other words, it’s not impossible that we’ll see that 68% number surge much higher in the coming years, hitting 75% or even 80% in just a presidency or two.
At that level of support, it will be impossible for politicians to ignore, meaning they’ll be forced to do something about marijuana at the federal level. What’s more, many U.S. states will have legalized pot by that point, which will make federal legalization pretty much just a formality.
For marijuana stock investors, the plan should remain the same: be patient.
Yes, there’s money to be made in day trades and by following the ebbs and flows of the volatile pot market, but the real money, the hundreds-of-points-of-gains money, is to be made on betting long on pot stocks and awaiting the eventual federal U.S. marijuana legalization.
For those who don’t want to wait for that eventuality, there will be opportunities along the way to unload marijuana stocks when share prices are high.
That’s because there’s a very good chance that other countries, like Germany, the U.K., or Mexico, could legalize pot well before the U.S., sending a jolt into the market and boosting share prices.
That boost won’t be nearly as big as the one that will happen when the U.S. legalizes cannabis federally, but it will create value. It will give buy-and-hold investors a chance to hop off if they need liquid capital.
All this to say that pot stocks continue to look very strong, with many opportunities to realize massive gains likely ahead.
Marijuana stocks continue to hold immense promise, even if analysts don’t see it. That’s because the future couldn’t be more clear to those paying attention: legalization is the way of the future.
With legalization comes the opportunity for shareholders to make massive gains. While the uncertainty lies with the date, the fact of the matter is that too many U.S. citizens (and citizens in other advanced economies, for that matter) want to see this done.
No matter how much you may have lost faith in politics, it’s hard for politicians to repeatedly say no to a 68% (and growing) consensus and keep their jobs, which is great news for marijuana investors.