Marijuana Banking, IPOs & Weed Votes: Will Hemp Grow Higher?

The much-awaited Cannabis Banking Bill was finally passed by the House Financial Services Committee on Mar 28. This opens up avenues for legal and effective financing for marijuana companies in the United States. Meanwhile, Walgreens WBA announced plans to sell weed-based products through its drug retail stores.

Interestingly, a number of marijuana companies are expected to go public this year. With both Canada and the United States becoming increasingly weed-liberal, a bump in weed stocks is widely expected.

Cannabis Banking Bill to Boost Gains for Marijuana Companies

On Thursday, the House Financial Services Committee voted 45-15 in favor of passing the Secure and Fair Enforcement Banking Act of 2019 or the SAFE Banking Act.

The bill seeks to safeguard the process of financial lending to cannabis companies in the country. This would not only protect the industry’s credit lines but also aid cannabis ancillary industries in the country. The ancillary sector has been suffering from financial uncertainties associated with the legal status of marijuana in the past.

Notably, 47 U.S. states with a population of 319 million people offer some form of legalized marijuana for sale. In 2018 alone, buyers in Colorado bought $1.55 billion worth of legal weed products. Moreover, the cannabis industry in California is expected to reach $5.1 billion by 2020. Therefore, offering secure financing to such a burgeoning industry would result in stunning gains for major players in the space.

Weed IPO Wave to Continue in 2019

Experts are of the view that the marijuana industry would generate as much as $5 billion in annual revenues over the next two years. With a host of marijuana companies listing themselves in 2018, the trend is likely to continue this year, courtesy of the favorable conditions. The marijuana-heavy exchange traded fund ETFMG Alternative Harvest ETF (MJ) has rallied 45.8% year to date.

It is largely expected that Pax Labs, the cannabis-focused vaporizer company, will soon go public. The company, which raised $20 million last October, is currently valued at $15 billion. Next on the list might be Harborside, in business as FLRish IP LLC. The California-based operator of a chain of retail pot shops’ CEO Andrew Berman said the company plans to go public soon.

Current players in the marijuana industry like Cronos Group CRON, Aurora Cannabis Inc. ACB, Innovative Industrial Properties, Inc. IIPR and Canopy Growth CGC have posted excellent year-to-date returns of 77.4%, 82.7%, 80% and 61.4%, respectively. Aurora, Innovative Industrial and Canopy possess a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

To Conclude

Per a CNBC report, Walgreens has announced plans to sell CBD creams, patches and sprays in nearly 1,500 of its stores in the country. The drugstore chain will be offering these cannabis-based products in Oregon, Colorado, New Mexico, Kentucky, Tennessee, Vermont, South Carolina, Illinois and Indiana.

Guam’s lawmakers voted in favor of a bill to legalize marijuana on Mar 27, making it the first U.S. territory to legalize weed this year. The bill allows adults who are 21 and above to possess, consume, cultivate as well as purchase marijuana from licensed retailers.

Increasing tolerance, financial protection, credit availability and legal votes have shaped America’s hemp industry lately. Such a development has more to do with growing awareness of its commercial and medicinal values. Establishment of stores, which sell recreational weed in the east coast, would go a long way in establishing a firm footing for the space.

Zacks' Top 10 Stocks for 2019

In addition to the stocks discussed above, wouldn't you like to know about our 10 finest buy-and-holds for the year?

From more than 4,000 companies covered by the Zacks Rank, these 10 were picked by a process that consistently beats the market. Even during 2018 while the market dropped -5.2%, our Top 10s were up well into double-digits. And during bullish 2012 – 2017, they soared far above the market's +126.3%, reaching +181.9%.

This year, the portfolio features a player that thrives on volatility, an AI comer, and a dynamic tech company that helps doctors deliver better patient outcomes at lower costs.