In this Marijuana Market Update, I talk about new developments in Washington surrounding the MORE Act and how it affects cannabis stocks.
I also give you the top five stocks in our Cannabis Power Ratings universe.
MORE Act Buoys Cannabis Market
Last week, the U.S. House of Representatives unveiled an overview of the Marijuana Opportunity, Reinvestment and Expungement (MORE) Act.
This will be the third time the House has discussed the MORE Act. The bill passed the House in 2020 but stalled in the Senate.
The newest iteration of the bill cleared the Judiciary Committee in September 2021, and now the House Rules Committee will take up amendments to the bill sometime this week.
The MORE Act aims to decriminalize marijuana on the federal level by removing it from a list of controlled substances under the Controlled Substances Act. It also removes criminal penalties for individuals who grow, sell or possess marijuana.
It also opens the door to allow the Small Business Administration to issue loans and services to legitimate cannabis-related businesses. And it eliminates barriers for cannabis businesses to receive financial services through traditional banking that was otherwise barred.
The release of the report from Congress last week had a profound effect on cannabis stocks.
The Money & Markets Cannabis Index tracks the value of more than 180 cannabis-related stocks. It equally weighs these stocks to create an index value tracking the broader cannabis market.
In the last 12 months, the index has plummeted, dropping as much as 49%.
But, from March 14 to March 28, the index ticked up more than 9% — mostly thanks to the release of Congress’s MORE Act report.
The index value sits at $56.33 — down 43% from a year ago but up from its lowest point earlier in March.
Larger cannabis operators saw the same upturn in stock price.
I looked at three different cannabis companies listed on U.S. exchanges:
- Tilray Brands Inc. (Nasdaq: TLRY).
- GrowGeneration Corp. (Nasdaq: GRWG).
- Sundial Growers Inc. (Nasdaq: SNDL).
All three have been down over the last 12 months, but Tilray’s and Sundial’s stocks rose over the last week, thanks to the increased buzz surrounding the legislation.
But before you start selling off things to invest in cannabis, realize it’s still politics.
Despite MORE Hopes, Legalization Is Still Far Off
The MORE Act has had little trouble passing the House. The challenge has been the U.S. Senate. The bill has stalled once. It will likely stall again.
Initially, the MORE Act stalled in the Senate because Democrat leaders vacillated between passing comprehensive legalization and banking reform in different measures … or banking before legalization.
Whether this new iteration of the bill solves that is anyone’s guess. Still, the updated MORE Act does address some issues brought up in the previous round, according to Marijuana Moment:
- It maintains federal penalties for those who distribute cannabis to someone under 21 and for distributing within 1,000 feet of a school, college or playground.
- It creates a civil penalty for making cannabis with artificial or natural flavor.
The bill also creates a 5% federal excise tax on cannabis. By the fifth year of implementation, that tax would reach 8%. It would also develop a process to expunge non-violent federal marijuana convictions.
The Senate recently approved a bill to promote cannabis research, but research isn’t legalization.
Cannabis investors are a little gun-shy when reacting to headlines.
As seen before, when lawmakers push legalization, cannabis stocks skyrocket only to fall to Earth when nothing happens.
I want this time to be different, but the realist in me suggests it will be the same song and dance.
The Money & Markets Cannabis Power Ratings’ Top 5 Stocks
Now, let’s look at the Money & Markets Cannabis Power Ratings’ top five stocks this week:
The Power Rating considers several metrics related to momentum and value and brings together a total score. The system ranks cannabis companies against each other rather than the broader market to be fairer.
This week’s top five are:
- TILT Holdings Inc. (OTC: TLLTF) — A cannabis company providing products and services in the U.S., Canada, Israel, Mexico, South America and the European Union. It currently trades with a price-to-sales (P/S) ratio of 0.66 and a price-to-book (P/B) ratio of 0.45. It’s one of the few cannabis stocks that has not reached a 52-week low in the last four months.
- Lifeloc Technologies Inc. (OTC: LCTC) — I’ve received some tweets about this company. It creates hand-held and fixed breathalyzers for law enforcement and the workplace. It is currently pushing a breathalyzer for the cannabis market. It is also trading up from its 52-week low set back in October. Its P/S ratio is 1.43 and its P/B ratio is 1.53.
- Decibel Cannabis Co. Inc. (OTC: DBCCF) — A Canadian cannabis operator that sells products under the Quest brand. It did not have the same uptick as other cannabis operators due to congressional announcements, but it currently is trading with a P/S ratio of 0.82 and a P/B ratio of 0.83.
- VPR Brands LP (OTC: VPRB) — This company sells e-cigarettes, vapes and pocket lighters. The stock is trading up after a fall in January. Its P/S ratio is currently 1.04. VPRB’s P/B ratios were not available at the time of publication.
- Indiva Ltd. (OTC: NDVAF) — Another Canadian producer of cannabis in pre-roll, flower, capsule and edible forms. Its P/S ratio is 1.26 and its P/B ratio is 2.94.
These aren’t buy recommendations from me, only ones to look at and consider for your portfolio.
Of them all, I am the most intrigued by Lifeloc Technologies. There are very few players attempting to develop a cannabis breathalyzer.
Lifeloc already has solid relationships with law enforcement and other companies, so getting a product to market could mean remarkable things for its stock in the future.
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Where to Find Us
Coming up this week, we’ll have more on The Bull & The Bear podcast, so stay tuned.
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- Ask Adam Anything — Where I get to sit down with Chief Investment Strategist Adam O’Dell and ask him any question (from you or me) and get his insights into the stock market.
- Investing With Charles — Green Zone Fortunes Co-Editor Charles Sizemore and I talk about all things related to stocks and the economy, including comparing stocks to give you the best investment advice.
- The Bull & The Bear — Our weekly podcast where I show you the trends and analysis that move the market.
All of these series are on our YouTube channel.
Also, you can follow me on Twitter (@InvestWithMattC), where I’ll give you even more insights, not just in the cannabis market.
Matt Clark, CMSA®
Research Analyst, Money & Markets
Matt Clark is the research analyst for Money & Markets. He is a certified Capital Markets & Securities Analyst with the Corporate Finance Institute and a contributor to Seeking Alpha. Prior to joining Money & Markets, he was a journalist and editor for 25 years, covering college sports, business and politics.