While 20 million to 30 million unemployed Americans is a tough number to stomach, one bright sector of the economy will help many of those affected reinvent their careers - cannabis.
Leading companies like Cresco Labs Inc. (OTC: CRLBF), Curaleaf Holdings Inc. (OTC: CURLF), and Green Thumb Industries Inc. (OTC: GTBIF) are proving that cannabis legalization is a key part of getting people back to work and getting the economy back on its feet.
These companies are still selling. They are still building. And they are still hiring.
And because of three powerful forces converging on this industry, cannabis will soon prove to be the biggest builder of tomorrow's fortunes...[mmpazkzone name="in-story" network="9794" site="307044" id="137008" type="4"]
Cannabis Profit Force No. 1: Surging Revenue Despite Shut-Downs
Across the entire economy, no other sector is growing at 30% to 50% per year in the face of economic contraction brought on by stay-at-home orders.
For top cannabis companies, that translates to revenue surging 200% to 300% per year.
Results like these prove that cannabis stocks are defensive. Not only have cannabis sales been unaffected by economic contraction, but they have surged.
Take the leading cannabis company in Michigan as a prime example, where sales have climbed 100% higher from January levels.
The fact is that legal cannabis sales are up across the country, with 30% to 40% revenue growth per month in many places.
And this incredible growth, made possible by legalized marijuana sales, is getting the attention of politicians.
Cannabis Profit Force No. 2: Pressure to Rapidly Accelerate Legalization
I've always maintained that federal legalization is inevitable. But given the current state of employment, the rapidly building pressure to legalize will force congress's hand. Politicians can't afford to dither on the sidelines while unemployment claims continue to pile up.
They can't fiddle while Rome burns.
People want to work, and legalized cannabis provides a solution. One that doesn't require tax dollars to make it happen. All politicians have to do is get out of the way.
The revenue, capital investment, and job growth will spur politicians to rapidly advance legalization far more quickly than I ever imagined possible just a few short months ago.
And while surging revenue and accelerating legalization are pulling investors into cannabis stocks, nothing draws them in faster than profits.
Cannabis Profit Force No. 3: a Wave of Growth
For the better part of a year, the cannabis industry has desperately needed to tighten its belt.
In general, expenses have far outstripped revenue. And because cannabis companies had a hard time raising capital last year, many were right-sizing their expenses long before COVID-19 struck.
This was a blessing in disguise. The ones that worked the hardest are now well positioned to grow profits in line with their remarkable revenue growth.
In fact, of the 50 largest cannabis companies by market cap, I wouldn't be surprised to see half of them achieve profitability over the next 12 months.
It's the prospect of profits that is already getting the market's attention.
Greenlane Holdings Inc. (NASDAQ: GNLN), a cannabis house of brands, is up 147% from its March 18 lows.
GrowGeneration Corp. (NASDAQ: GRWG), a supplier for cannabis cultivators, is up 100% over that same period.
And Tilray Inc. (NASDAQ: TLRY), a leading Canadian licensed producer (LP), is up 231%.
Meanwhile, the S&P 500 Index has rallied 35%.
But this is just a start.
Given the confluence of factors converging on cannabis right now, I fully expect the stock prices of the top cannabis companies to trade five or even 10 times higher 12 months out. Wall Street is sniffing at the edges, and legalization will clear a path.
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About the Author
Don Yocham is Executive Director for the National Institute of Cannabis Investors (The Institute) and Director of Cannabis Investing Research for Money Map Press. Before starting his role with the Institute, he was the Head of Private Deals for the publication Cannabis Venture Syndicate. From his first foray into the trading pits of Chicago to introducing institutional investors to entirely new markets in the early 2000s, Don has pretty much covered the entire field of investing in his 25-year career. In the depths of the financial crisis, when the typical investor had lost more than half of their money, his portfolios were up.