Pot stocks are high on legalization in states
- Toronto Star
Cannabis stocks are on pace for their first back-to-back quarterly gains in four years, and investors are optimistic the rally has legs as states like New York move to fast-track legalization.
Bloomberg Intelligence’s Global Cannabis Competitive Peers Index has gained 33 per cent so far this year, adding to its 45 per cent surge in the fourth quarter of 2020. That consecutive increase is the first and also the biggest since 2017, before recreational marijuana use was legalized in Canada.
Tilray Inc.’s stock leads the index this quarter, gaining over 170 per cent, while Organigram Holdings Inc. surged over 170 per cent during the same period, aided by a $175-million (U.S.) investment from British American Tobacco Plc. Aphria Inc. has jumped 157 per cent.
The group got a boost from Reddit traders last month, with retail investors piling into U.S.listed shares of companies like Tilray and Sundial Growers Inc. Sales for the sector were up 13 per cent in the fourth quarter of 2020, according to data compiled from the Innovation Labs Cannabis Index, and quarterly sales are expected to keep rising this year.
Prospects for federal legislation such as the Secure and Fair Enforcement (SAFE) Banking Act, which would allow U.S. banks to work with state-legal cannabis companies, is driving some of the momentum in equities. But state-by-state legalization is the key factor right now, according to Charles Taerk, chief executive officer of Faircourt Asset Management.
“If you really take a look at the state-by-state growth, the total addressable market in the U.S. is growing while we’re waiting for legislation at the federal level,” Taerk said.