As the US cannabis sector continues to evolve the Chart Guys are here to help you make informed investment decisions. Our focus today zeroes in on the top investment avenues within the industry, spotlighting the Advisorshares Pure US Cannabis ETF (MSOS) for its exceptional liquidity and trading volume on the NYSE, a rare find in the cannabis sector. We also discuss some of the companies leading the charge, from the market giants to emerging contenders, and even Canadian firms making significant inroads in the US.

Keep in mind that the US cannabis industry stands on the brink of transformative shift. In the near term, the spotlight shines on the DEA's potential rescheduling of cannabis to Schedule 3, following the recommendation from the Health and Human Services (HHS) department. This move could open the floodgates to enhanced research, increased institutional investment, and the development of FDA-approved cannabis products, marking a historic step in federal cannabis reform. Additionally, the SAFER Banking Act teeters on the edge of breakthrough, promising to revolutionize banking access for cannabis businesses. Looking further ahead, the horizon is dotted with pivotal developments such as mergers and acquisitions, up-listing of OTC stocks to major exchanges, and the continuous wave of state-level legalization.

The prospect of recreational cannabis legalization in Florida presents a compelling narrative within the US cannabis industry and we explain it in more depth here.

Key Investment Highlights

Top Investment Option

  • Advisorshares Pure US Cannabis ETF (MSOS): This is your go-to for investing in US cannabis stocks. It's traded on the NYSE and offers better liquidity and trading volume compared to individual stocks within its portfolio.

Learn more about how MSOS operates with swaps.

Major Companies to Watch

  • Big Players: TCNNF, GTBIF, CURLF are leading the market with their size.
  • Mid-Size Companies: CRLBF, VRNOF offer solid investment options with slightly smaller market caps.
  • Emerging Picks: AYRWF, TSNDF, HITI are smaller in cap, providing potentially higher risk but interesting opportunities.
  • Canadian Firms: CGC, TLRY, OGI, CRON are based in Canada but have significant interests in the US market.

Understanding Market Dynamics

  • Trading Platforms: Most US cannabis companies are traded over-the-counter (OTC), which means they experience less trading volume and liquidity. This highlights the importance of potential up-listing to major exchanges.
  • Stock Exchanges: MSOS, CGC, and TLRY are listed on major stock exchanges, offering stability and trading options.
  • How MSOS Works: This ETF helps investors by issuing new shares, selling them, and using the proceeds to buy stocks within its portfolio. It's a unique strategy worth understanding.
  • Multi-State Operators (MSOs): These companies operate dispensaries across various states, both for recreational and medical purposes, playing a crucial role in the industry.

Performance Insights and Future Prospects

  • Past and Present: TLRY and CGC saw massive interest before Canada's legalization but faced setbacks due to various challenges. However, their journey is ongoing.
  • Opportunities Ahead: TLRY, with its foothold in Germany (which is on the verge of legalizing cannabis in 2024), and both TLRY and CGC's potential benefits from US regulatory changes, represent critical areas to watch, despite their recent underperformance compared to US companies.

Immediate Catalysts

DEA Rescheduling Proposal: The Health and Human Services (HHS) department has recommended that the DEA reclassify cannabis to Schedule 3. This pivotal move could unlock numerous opportunities, including:

  • Enhanced research capabilities.
  • Increased institutional investment.
  • Development and FDA approval of cannabis-based products.
  • Improved tax benefits for cannabis businesses.

This recommendation represents the first significant federal gesture towards cannabis reform in years, potentially reshaping the landscape for investors and companies alike.

SAFER Banking Act: Long a topic of discussion within Congress and the Senate, the SAFER banking act has oscillated without resolution. However, recent rumors suggest potential progress as of this February. While scepticism remains, its passage could revolutionize banking access for cannabis businesses, marking a critical step towards mainstream financial integration.

Long-Term Catalysts

  • Mergers and Acquisitions: A DEA rescheduling could spur a wave of M&A activity, as companies seek to consolidate strength and expand their market presence.
  • Up-listing to Major Exchanges: The transition of OTC stocks to prominent exchanges such as NASDAQ or NYSE could dramatically increase liquidity and trading volume, echoing the success stories of CGC and TLRY.
  • State-Level Legalization: The continued legalization of medical and recreational cannabis at the state level will further bolster the market, expanding access and consumer bases across the country.
  • International Legislation: Changes in cannabis laws in countries like Germany and Ukraine signal a global shift towards acceptance and legalization, opening up new markets and opportunities for international expansion.