If you haven’t heard yet, pot stocks could be gearing up for October. The reason behind it may be just as important as the reason to watch marijuana stocks before Canadian legalization. You see, what is happening in October is an evolution of sorts. This time it will culminate all we’ve watched over the last few years into one market.
What’s happening in October? As you know, Canada legalized adult use of cannabis in 2018. This year it is slated to legalize cannabis-infused edibles by October 2019. Since Canadian pot stocks tend to hinge on growth, it’s important to note some key trends. As one analyst has put it, marijuana stocks are leaning either asset-intensive or asset-light (Stifel’s Andrew Carter). That basically compares different approaches of JV deals in the latter or acquisitions in the former.
What’s Next For Pot Stocks & Cannabis Industry Evolution?
No matter which angle a company takes, one thing is certain, which is the new laws will likely shake up the market. Look how successful the U.S. market has been for vapes thus far. Cronos Group (CRON) for example has taken aim at this niche and its own line for vaping THC products. Other companies are gearing up in different ways.
Canopy Growth (CGC) has long been a forward thinker. It was the first major cannabis company to garner large investments from mainstream corporations. We’re talking about Constellation Brands (STZ), the maker of Corona and Modelo beers. Though no outlines have been formalized, it’s assumed Canopy and Constellation would create a beverage product to sell.
This also puts Hexo Corp (HEXO) in a spotlight of sorts as well. As opposed to Constellation’s “asset-intensive” approach, Hexo went asset-light. The company has created a joint venture with Molson Coors (TAP) for cannabis-beverages. Another asset-light example is Tilray (TLRY). The company has a partnership with Anheuser-Busch InBev (BUD) to research cannabis drinks.
Dixie Brands (DXBRF) has also done a deal with beverage company AriZona. Instead of a JV or acquisition, Dixie did a licensing deal. The deal has Dixie manufacturing marijuana-infused products distributed to legal retailers. There’s also an option for AriZona to purchase an “ownership stake” in Dixie for up to $10 million.
Are Marijuana Stocks Ready For Another Ride?
Whether you like marijuana stocks or are just looking to put a starter list of pot stocks together, take into account industry events as well. Many times, the cannabis industry can act like any close-knit sector in that one “big event” could spark a sector move. Keep in mind that move can be in either direction.
Recently we saw a string of bad earnings come from just a few companies. Even though the companies had no direct relationship with most of the market, the one thing tying them together was, well, the market itself. That caused a consolidation trend. Similarly, positive earnings from a few of the other “big dogs” had an opposite reaction. In any case, October could be a key month to have in the back of your head.