The midterms are over, and the big winner is… Marijuana.
This week, three states voted to legalize marijuana in some capacity. Michigan became the 10th U.S. state to legalize recreational pot, and is projected to become the fifth-largest marijuana market in the country with sales of roughly $1.4 billion by 2022.
Overwhelmingly conservative Utah also passed a medical marijuana measure. And Missouri passed an amendment that will allow medical marijuana sales and tax those sales at 4%.
The midterms also saw Democrats take the House, arguably increasing the likelihood that legislation to change federal laws regarding marijuana will advance in Congress.
And then the good news for the cannabis industry continued. Less than 24 hours after the polls closed, Attorney General Jeff Sessions submitted his resignation. Sessions was a vocal opponent of the legalization of marijuana, and acted to rescind policies put into effect under the Obama Administration that had kept the Justice Department from getting in the way of states that were legalizing the drug.
There’s a decent chance that Sessions will be replaced by someone who is less anti-pot, especially considering that President Trump has expressed support for medical marijuana and has shown a willingness to let states decide on laws regarding recreational legalization.
So with all this good news, which pot stocks are likely to benefit the most? My bet is on MedMen and Canopy Growth Corp. Here’s Why.
MedMen Enterprises (OTC: MMNFF)
MedMen Enterprises (OTC: MMNFF) is one of a small number of pot stocks that has actually gone up recently. In fact, the upscale cannabis grower and retailer is up nearly 25% in the past month.
What’s appealing about this company is that it already has a presence in several states in the U.S., which is quite an accomplishment considering that it is illegal to transport cannabis products across state lines. This means that companies operating in multiple states have to have production facilities in each of those states they sell their products in.
Given this, the best way for marijuana companies to expand in the U.S. is through acquisitions. And that’s just what MedMen has been up to.
Last month, MedMen announced an all-stock deal to buy PharmaCann for $682 million, which makes this the biggest cannabis deal in U.S. history. The PharmaCann deal gives MedMen 18 new licensed retail locations, 8 cultivation facilities, and effectively doubles the number of states the company can operate in putting the total at a solid dozen. The deal also makes MedMen the largest cannabis company in the country.
The company has spent heavily to expand its presence in the states, which could result in ongoing losses and a future need to dilute shareholders with bought-deal offerings in order to raise capital. But the U.S. market could reach up to $49 billion in annual recreational pot sales should the country fully legalize, which is increasingly looking like a possibility in the coming years. As more states legalize marijuana in some capacity, MedMen’s growth strategy and spending to get there may prove to be a very smart move.
Canopy Growth Corp (NYSE: CGC)
We’ve written about Canopy Growth (NYSE: CGC) several times on Marketfixx, and it’s little wonder why. CGC is the biggest pot company in Canada and is a huge player in the pot sector world wide.
While Canopy Growth is based in Canada, it still could see a big positive impact from changing marijuana laws and views in the U.S.
The company has a major U.S. partner in Constellation Brands (NYSE: STZ), a deal that gave it a $4 billion cash investment. And if Canopy can leverage this relationship to break into the U.S. market, it could see a massive positive change.
But don’t think Canopy Growth is just limited to North America. The company also has subsidiaries and partnerships globally, including in Australia, Brazil, Chile, Denmark, Germany, Jamaica, and Spain.
Canopy Growth is down nearly 10% in the last month, presenting a nice buying opportunity for this major pot stock.