How Investors Can Take Advantage of Cannabis Industry Volatility
On Monday, October 19th, we saw many leading Canadian marijuana stocks make big gains. This includes the popular companies, as well as the smaller pot stocks like Valens Corp. (VLNCF Stock Report), OrganiGram Holdings Inc. (OGI Stock Report) and TerraScend Corp. (TRSSF Stock Report). In addition, U.S. pot stocks like Cresco Labs Inc. (CRLBF Stock Report) and Innovative Industrial Properties Inc. (IIPR Stock Report), also locked in large gains. The latter seems to be due to a correlative effect with Canadian pot stocks. So, why the big gains on Monday? Well, the short answer is that there is no one reason.
As a whole, we have seen a great deal of volatility in the cannabis industry. This is something that just comes with the territory. Because the cannabis industry is still very much in its infancy, volatility is expected in the present and in the future. But, on Tuesday, October 20th, we saw marijuana stocks drop, defeating Monday’s big gains. While small daily price swings are not representative of the cannabis industry as a whole, it’s definitely worth looking into. As smart investors, we can often take advantage of these dips and rises in stock price. With this in mind, let’s take a look at why there is so much volatility in the cannabis industry.
Volatility Is No Stranger to Marijuana Stocks
If we look at the day to day pot stock prices, we see quite a lot of volatility. As mentioned before, this is simply something that is inherently there with marijuana stocks. But, there are several factors that add to this. For one, in the U.S., the upcoming election could be big news for the cannabis industry. Not only is there a presidential election going on, but there are also five states that are set to vote on cannabis legalization. While this largely has to do with U.S. marijuana stocks, all North American pot stocks seem to have a correlation with one another. In addition, many Canadian pot stocks have big operations in the U.S. whether through a subsidiary or on their own.
With this election also comes the potential of less restrictions on the U.S. cannabis industry. In the past, presidents have mostly been not in favor of legalizing cannabis. But, during the end of Obama’s presidency and into Trump’s, we have seen the growth of a cannabis industry that no one thought was possible. Now, we are also seeing that the legal cannabis industry is a major contributor of tax revenue to the states that have legalized it. From a federal standpoint, it only makes sense that they would at least consider overthrowing the current laws.
What Events Could Set Into Motion More Pot Stock Volatility?
In the next few months and into 2021, there are a few key events that could set even more volatility into motion. First, the upcoming U.S. election as stated before will have major impacts on the North American cannabis industry. Investors should watch for both the presidential election as well as what individual states decide to do. Next, there are several major marijuana stocks that are set to show their operating results in the next few months. This includes major Canadian pot stocks as well as U.S. ones. Operating results are a big deal as they help to show two things.
For one, the obvious result of this is the individual understanding of a given marijuana stock. Two, large pot stocks balance sheets help to reflect where the cannabis industry as a whole could be going. The last factor that investors should watch for is the effect of Covid-19 on the cannabis industry. In the past six months, Covid has had a huge and albeit positive effect on marijuana stocks. With no sign of slowing down in site, Covid could continue to have a big impact on the cannabis industry. These three factors are not nearly the only things affecting the future of marijuana stocks. But, they should help investors to get a head start.
Is Investing in Marijuana Stocks the Right Choice?
The answer to this question undoubtedly comes down to the individual investors. Those who are willing to invest in a very volatile market may find comfort with marijuana stocks. On the other hand, those who want a more stable investment could look for alternative or ancillary marijuana stocks to watch. With this in mind, it seems as though there is a marijuana stock for every type of investor. It simply comes down to knowing where to look to find value. All things considered, the hopes are that we can continue to see growth in the future of the cannabis industry and the present.
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