The marijuana stock rebound in 2020 has run into a brick wall, but the fundamentals supporting the industry continue to improve.
Coming into 2020, the bull thesis on marijuana stocks looked pretty compelling.
Cannabis demand trends in Canada were set to improve on the back of more aggressive retail store openings and new product launches. Supply trends were also set to improve as companies reduced production expansion. Revenue and profits — which were slammed in 2019 — were consequently positioned to move higher, creating an environment overgrowing with pot stocks to buy. That’s why, though mid-January, the ETFMG Alternative Harvest ETF (NYSEARCA:MJ) was up nearly 10% year-to-date.
Then, the coronavirus pandemic hit. The global economy came to a screeching halt. Stocks everywhere fell off a cliff. Marijuana stocks especially, because these companies are, for the most part, heavily indebted, cash poor and richly valued.
But just as quickly as the pandemic hit, the rout is fading. The economy is gradually normalizing. And stocks — particularly marijuana stocks — are rebounding with vigor. The ETFMG Alternative Harvest ETF is up more than 50% from its March lows.
I’d stick with this big rally in pot stocks. It’s only going to heat up in the second-half of 2020, as the aforementioned bull thesis comes back into focus. Revenue trends will improve on the back of more store openings and new products. Margin trends will improve thanks to curbed production and cost-cutting measures. Profit trends will materially improve alongside higher revenues and margins.
And pots stocks will soar.
With that in mind, some of the best marijuana stocks to buy for a second-half 2020 rebound are:
article via @investorplace.com