Summer 2018 was a season of surprises - mostly great ones - for cannabis investing.
Not long ago, few foresaw Corona's parent corporation Constellation Brands Inc. (NYSE: STZ) investing $3.8 million in what was already the world's biggest cannabis producer in its second deal together in less than a year...
Or Coca-Cola Co. (NYSE: KO) starting negotiations with a cannabis company about a potential CBD-based beverage...
Or a British pharmaceutical developer getting the first U.S. Food & Drug Administration approval for a cannabis-based medicine.
Yet every one of those events happened... in short order.
With each time, cannabis stocks soared accordingly, especially for the companies directly involved.
Big news means major moves when it comes to cannabis investing.
But what I see as the biggest, most shocking developments of late haven't been happening in a board room. They've been happening in the shadows of the Capitol in Washington, D.C.
The U.S. cannabis policy thaw is already underway, and the ongoing developments associated with it are going to be game-changers for investors who don't wait for too long on the sidelines.
These are first-time events that herald a brand-new era of cannabis profits for shareholders.
We're talking about real movement in the slow and steady end of the longtime federal prohibition of marijuana.
Here are the three things I'm watching closest...
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But some of the biggest and best-funded companies in the world limit (or avoid entirely) doing business here, even in states that legalized cannabis.
After all, a U.S. Customs and Border Protection official did say in an interview that the agency was considering a visa ban on cannabis industry workers or major investors from Canada.
(That's an egregiously mixed message, given what we've heard from another agency and some powerful D.C. lawmakers... but I'll get to that in a minute.)
The kings and queens of the international cannabis industry are simply waiting for the federal government to give some sort of OK before those billions of dollars of investments and all that know-how can pour, not just trickle, into the U.S. market.
There will be bumps in the road, but the destination is clear: That day is coming.
You can see it in the wave of cannabis reform efforts that have gained traction with voters and, even more importantly, gained traction in Congress.
The biggest development in Congress was the House Judicial Committee passage of The Medical Cannabis Research Act.
The proposal, if passed in upcoming full House and Senate votes, would force Attorney General Jeff Sessions to authorize two research cannabis growers within one year of passage. At least three more would be required in each subsequent year.
Currently, only the University of Mississippi - which has working agreements with Emerald Health Therapeutics Inc. (OTC: EMHTF) - has a federal license to grow research-specific marijuana on United States soil.
This is a huge deal because the bipartisan bill, spearheaded by Rep. Matt Gaetz (R-FL), marks the first time a Republican-controlled committee has voted in favor of any legislation involving marijuana reform or loosening of restrictions already on the books.
And the industry is noticing the sea change.
"This kind of event liberalizes the ability to make the growth side monetized," Emerald Executive Chair Avtar Dhillon told us this week. "Any federal changes like this, and we're going to be all over it because it is such an important market. We see this as a big opportunity."
This comes on the heels of House and Senate passage of the 2018 Farm Bill, which includes Sen. Mitch McConnell (R-KY)'s Hemp Farming Act of 2018 designed to legalize industrial hemp. That law is in committee presently to finish off differences between the two versions of the legalization.
It doesn't stop there.
If you search for the words "marijuana" and "cannabis" and the current, 115th U.S. Congress, you'll find no fewer than 70 active proposals, ranging from cannabis company banking to veterans' use and from research efforts to decriminalization.
And most of them aren't just lone-wolf attention grabs from the likes of Senate Minority Leader Charles Schumer (D-NY) or Sen. Corey Booker (D-NJ). There are dozens of bipartisan efforts.
One that stands out is the Strengthening the Tenth Amendment Through Entrusting States (STATES) Act being pushed by a group that includes Congressional power players like Rep. Corey Gardner (R-CO), Rep. Rand Paul (R-KY), and Rep. Elizabeth Warren (D-MA). This would in a way replace the Cole Memo, which Sessions rescinded earlier this year.
The five-year-old Cole Memo prohibited the Justice Department from spending any money toward enforcing federal marijuana prohibition within states where medical or recreational use had been legalized. The STATES Act would essentially codify states' rights over the cannabis issue.
"Rescission of the Cole Memo had virtually no negative impact on the industry," said the memo's co-author John Vardaman in an exclusive interview with my team last week. "It has created more urgency by the members of the Hill. It's prompted Congress to look at this more seriously."
The wave of pro-cannabis bills shows just how much sentiment is changing among federal lawmakers. They're starting to see this as huge domestic business opportunity and potential medical treatment, especially for children, seniors, and veterans.
But the even bigger surprise happened just down the road... at the headquarters of the U.S. Drug Enforcement Agency (DEA).
This Law Enforcement Agency Catalyzed Huge Pot Stock Gains
I alluded earlier to the FDA's approval of a cannabis-based drug.
GW Pharmaceuticals Plc.'s (NASDAQ: GWPH) Epidiolex, a first-of-its-kind drug designed to treat seizures associated with variants of epilepsy, gained its approval on June 25.
Approval shattered the glass ceiling. It propelled a stock already trading at a robust $144.76 up by 18.4% through midday Tuesday.
But the big news associated with GW and Epidiolex keeps coming.
Because of the approval, regulators had to look at where the cannabidiol (CBD)-based drug was slotted in federal drug classifications.
On Thursday, the rescheduling that was announced marked an even bigger movement than anyone expected.
The DEA moved Epidiolex, which would have been considered a Schedule 1 drug (a category that includes heroin and LSD), to Schedule 5 (which includes Robitussin AC).
That's a monumental shift for a cannabis-based drug.
More importantly, it opens the door to something much bigger and much more significant than one new drug...
Here the DEA is acknowledging that a drug using CBD (the cannabinoid that differs from THC in that it doesn't get the user "high") has a medical value.
Which means the door is wide open to the rescheduling of all CBD-based products, sooner rather than later - and certainly sooner than anyone could have realistically predicted before this week.
As for GW shareholders...
They got to watch the stock jump as high as 10% in just one trading session. Shares hit an all-time intraday high of $179.65 before settling down slightly to just under $175 - on volume that was close to four times the daily average.
That's more than impressive for what's already a bona fide blue-chip cannabis stock.
And that's not all the DEA has been up to of late...
Federal Drug Police Poured Rocket Fuel on Another Cannabis Big-Cap
Despite a Customs agent's ill-considered musings about visa denials for Canadian cannabis industry folks, the DEA opted about a week ago to push forward without a Congressional Act.
Neither has there been any new, public green light from U.S. President Donald Trump - who, remember, acknowledged that positive contributions were being made by medical cannabis way back on the campaign trail.
The DEA quietly confirmed that it approved phase 1 and 2 clinical trials at the University of California San Diego School of Medicine that will analyze the effects of pharma-grade cannabis on adults suffering from tremors.
Shockingly, these researchers won't be using product from the University of Mississippi, as has been the case for every prior cannabis research project within U.S. borders.
The DEA approved Canada-based Tilray Inc. (NASDAQ: TLRY) to provide the capsule cannabis formulation the researchers said they needed for this specific study.
The already hot-running Tilray stock price made one of those big moves I was talking about. It gained 78.1% in the two trading sessions following the Sept. 18 announcement.
Anybody who said they predicted this moment was either working for Tilray or the Justice Department... or are lying through their teeth.
It all underscores that policy thaw I talked about earlier - and why you want to be invested in the right cannabis stocks before the next major shift in policy or enforcement happens.
First-mover advantages aren't just for companies that boldly enter an emerging space before it's fully mainstream; it's for investors in those companies, too.
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About the Author
Greg Miller started working on Wall Street in September, 1987, just a month before the “Black Monday” stock market crash.
During his career there, he became an expert in just about every kind of publicly traded security - from blue-chip and small-cap stocks to municipals, junk bonds, and derivatives. As a portfolio manager, Greg was responsible for over $500 million of assets in mutual funds and insurance company accounts.
After leaving the Street, he designed a successful options trading strategy and made lucrative tech investments for a financial publication. He has also helped develop new products and worked with other editors to hone their strategies. He’s always been dedicated to deep, fundamental research - and he always will be - because he believes buying the very best companies at the right price is the best way to amass wealth in the stock market.