On Monday morning, Canadian cannabis firm Cronos Group Inc. (Nasdaq: CRON) was up an astounding 25% in mere hours.
At open Tuesday morning, Cronos was trading around $9.25. By noon, it had reached $11.63.
So why the sudden pop?
Well, the rumor mill has been swirling lately, and sources say that Altria Group Inc. (NYSE: MO), maker of Marlboro cigarettes, is looking to make a deal to buy Cronos.
This deal – if real – is still in the very early stages, and would make Altria a major legal cannabis player.
Hence, Cronos stock's incredible 25% pop in only a few hours. Of course, it didn't stay at this high – but it was certainly still up, by about 15%.
This rally isn't unheard of, especially in the marijuana sector. When Aurora Cannabis Inc. (NYSE: ACB) was rumored to have struck a deal with The Coca-Cola Co. (NYSE: KO), prices for Aurora jumped nearly 29%.
And when Canopy Growth Corp. (NYSE: CGC) signed a $3.8 million contract with Constellation Brands Inc. (NYSE: STZ), Canopy surged 19% in one day, then exploded another 30% and brought other pot stocks with it.
So, we know that buyout rumors send these stocks skyrocketing – and that's just one more reason to own them.
Altria has expressed interest in the cannabis market before – in fact, much before it was legal, even medically, in any state. In a memo sent in 1970, Altria execs recognized marijuana as an "alternate, perhaps a superior, method of satisfying the needs that cigarette smoking satisfies."
THREE STOCKS: Any one of these cannabis companies could potentially deliver a 1,000% windfall. Click here to learn more…
More recently, in 2016, Altria invested $20 million into Syqe Medical Ltd., an Israel-based company that produced 3D-printed cannabis inhalers.
Of course, this was after they announced that the company had "no plans to sell marijuana products."
Altria has also taken an interest in Juul, a tobacco company that makes e-cigarettes. There is nothing to say that these deals are or aren't connected – Altria has refused to comment.
We do know that cannabis and e-cigarette companies are growing rapidly. Counting both legal and black-market sales, the cannabis market has hit approximately $52.5 billion, according to Marijuana Business Daily. The e-cigarette market is projected to hit $6.6 billion, according to Wells Fargo, partly in thanks to the rising popularity of Juul's products.
So it's no surprise that Altria is looking to get into these markets. Since the 1970s, the tobacco industry's bottom line has been hit hard by public health laws and anti-tobacco campaigns. The laws restrict and heavily tax cigarette use, and campaigns such as D.A.R.E. have been introduced in schools to educate students on the dangers of cigarettes.
As a result, the industry's stocks have fallen precipitously. Altria specifically is down more than 20% in 2018 alone. However, with the rumors of Juul and now Cronos, Altria's stock has rallied about 5% in the past week.
Cronos, Aurora, and Canopy are only three of the pot stocks that have made waves recently. There are so many players on the field, so to speak, that it can be hard to make a sound investment.
About the Author
Michael A. Robinson is one of the top financial analysts working today. His book "Overdrawn: The Bailout of American Savings" was a prescient look at the anatomy of the nation's S&L crisis, long before the word "bailout" became part of our daily lexicon. He's a Pulitzer Prize-nominated writer and reporter, lauded by the Columbia Journalism Review for his aggressive style. His 30-year track record as a leading tech analyst has garnered him rave reviews, too. Today he is the editor of the monthly tech investing newsletter Nova-X Report as well as Radical Technology Profits, where he covers truly radical technologies – ones that have the power to sweep across the globe and change the very fabric of our lives – and profit opportunities they give rise to. He also explores "what's next" in the tech investing world at Strategic Tech Investor.