The Legal Cannabis and Medicinal Marijuana Sectors

Forget Bitcoin.  The action in the Legal Cannabis and Medicinal Marijuana Sectors has been even more impressive,  Here are two interesting relevant articles, and then a look at some of the stocks in the sector.

Debra Borchardt , forbes.com

A new report on the cannabis industry has identified several emerging trends as more states boldly ignore the federal government and push forward with legalization. Massachusetts is the most recent state to begin establishing a legal market for adult use marijuana. Governor Charlie Baker, who was not on board with legalization, finally capitulated to the will of the voters and has agreed to sign on the new regulations.

The report from Salar Media Group and cannabis lifestyle website Civilized identified five key trends that have evolved from the industry and what they mean for future markets.

The first and most important is that cannabis legalization has pushed the frontiers of science. The report noted that as of 2015, there are roughly 22,000 published studies on cannabis. Last year, the first U.S. research institution was created to specifically focus on cannabis research. “The trend here is that cannabis is now being treated as a medicine with specific benefits and applications to specific diseases. This research will only continue to expand in the years ahead.”

Secondly, the cultivation of cannabis is leading to a greater stress on water and sustainability practices in agriculture. California passed the Medical Cannabis Regulation and Safety Act last year that contained requirements for water usage and prohibits the use of volatile or poisonous solvents in cannabis preparations. The report specifically calls out Humboldt’s Finest, an alliance of cannabis growers based in Humboldt County in California for following “a rain grown, sun grown cultivation technique that collects rainwater and storm runoff” to be used for watering the plants versus relying mostly on ground water.

The third trend is the advances made in genetic and intellectual property of the cannabis plants. Businesses will be using these genetic advances in order to define their product and make it more predictable and consistent. The report said, “The general direction here is for combining functional studies and molecular modeling to improve the scientific community’s understanding of the molecular basis for the physiological functions of CBD.”

The fourth trend is craft cannabis.  You’ve heard of craft beer, craft liquor and even craft mayonnaise. Now, there is also craft cannabis for picky cannabis connoisseurs. Farms and cultivators will hone special strains in limited batches and release them to great fanfare, not unlike a microbrew’s special beer. Similar to how Champagne region in France is home to the only sparkling wine that can use that name, Humboldt county in California will earn a special distinction. In that same vein is celebrity-branded marijuana. The trend has already started with Willie's Reserve and Marley Natural and is expected to grow.

The fifth trend is for more luxury cannabis brands. There are high-end dispensaries like Diego Pellicer and gold rolling papers. The report states that cannabis brands “are replicating what happened in liquor brands with the introduction of high-end, more expensive tequilas, dark liquors, vodkas and sake.” It also suggests that due to the stigma of marijuana, large mainstream corporations won’t want to get involved presenting more opportunities for cannabis-specific companies. These brands will also be able to command higher prices.

Other opportunities are being created for data companies to compile consumer research. Businesses like software management company BioTrack THC and cannabis delivery company Eaze are taking their data and creating custom cannabis consumer reports. The requirements from states to track plants from seed-to-sale have spawned a new industry of software development, while the lack of market data has opened the door for ancillary companies to tap their customer information and then, in turn, sell it.

Even though there is resistance from the Department of Justice’s new Attorney General, states are pushing back and fighting to retain their legalized marijuana. As the fight continues, these trends will continue to grow and gain importance. Especially if more states begin to legalize marijuana and if it eventually gets legalized at a federal level these trends will grow in magnitude.

 

 

Here's a look at the states that are most likely to enact marijuana reforms in 2018

Tom Angell,  Forbes.com

After four of five statewide marijuana legalization ballot initiatives were approved by voters in 2016, no additional states ended cannabis prohibition in 2017 (though New Hampshire did decriminalize possession of the drug and West Virginia allowed its medical use).  Now, a number of states are poised to legalize marijuana and approve other far-reaching cannabis measures in 2018.  If marijuana policy advocates' plans come to fruition in the new year, 2018 will bring about the first legalization laws passed by lawmakers; to date, all eight states to end cannabis prohibition did it through voter initiatives.

 

Vermont

The Green Mountain state appears ready to legalize cannabis very soon. House and Senate leaders and Gov. Phil Scott (R) have signaled in recent weeks that they are prepared to legalize marijuana shortly after the legislature reconvenes on January 3. Because the state operates on a biennium, all that is needed is one more House vote in favor of a previously-Senate-passed bill that the governor has pledged to sign. The legislation is different than other existing legalization laws because it would not create a system of taxed and regulated cannabis sales, at least not initially. It would instead legalize possession of small amounts of marijuana as well as low-level home cultivation, while a study commission would examine potential future legal commercialization.

 

New Jersey

Gov.-elect Phil Murphy (D) campaigned on legalization, and the Senate president says he’s ready to pass a bill in 2018. While some key lawmakers have signaled that they'd prefer not to rush into passing big changes to marijuana laws, the sponsor of a Senate legalization bill says he wants to get it to the governor's desk within the first 100 days of the new administration.  Murphy consistently pledged to end prohibition on the campaign trail, often describing it as an important piece of a broader criminal justice reform agenda, in addition to touting the tax revenue it would generate. Failing to shepherd a legalization bill to enactment in the Garden State would amount to a broken promise and likely be somewhat of an embarrassment for the new governor.

 

Michigan

Advocates are poised to place a marijuana legalization measure on the state's November ballot.  A similar proposal fell just short of qualifying in 2016, but the new effort is better-funded and has the support of national groups like the Marijuana Policy Project. Several surveys have shown majority support for legalization, including one this May that found likely voters back ending prohibition by a margin of 58 percent to 36 percent. If the measure is approved, Michigan would be the first state in the Midwest to end cannabis prohibition.

 

Oklahoma

Activists have already succeeded in collecting enough signatures to place a medical cannabis measure before voters. There was a chance the measure could have gone on the 2016 ballot but, because a dispute over the measure’s official ballot title with then-Attorney General Scott Pruitt (now U.S. Environmental Protection Agency administrator) was not resolved by the state Supreme Court in time, its consideration was delayed until the next election. Gov. Mary Fallin (R) says she will announce after the new year whether it will appear on the June primary ballot or will be considered during the November general election.  A 2013 poll found that 71 percent of the state’s likely voters support medical cannabis.

 

Utah

Activists are mounting a well-funded effort to qualify a medical marijuana measure for the state's November ballot. If approved, the proposed measure would allow patients with cancer, HIV/AIDS, multiple sclerosis, PTSD, chronic pain and other specifically enumerated conditions to use medical cannabis preparations, but they would not be allowed to smoke the drug.  An October Salt Lake Tribune survey found that 75 percent of the state’s registered voters back medical marijuana. If the conservative state, along with Oklahoma, approves medical cannabis it would send a strong signal that the issue is not a partisan one.

 

Missouri

The Show Me State could potentially see three separate medical cannabis ballot measures qualify in 2018.  Competing teams are currently working to collect signatures for measures that would allow patients to use medical marijuana with their doctors' recommendations. If one or more of the measures pass, the result could be in flux. Whereas the measure with the most votes usually prevails in instances of same-topic questions appearing on the same ballot, in this case two of the measures are constitutional amendments and one is a statutory change. Enacted constitutional provisions take precedence over statutes, of course, but if the statutory measure gets more votes than either of the proposed constitutional changes, it's not clear which would be enacted. Litigation would likely ensue.  A July 2016 survey found that voters favored an earlier proposed ballot measure by a margin of 62 percent to 27 percent.

 

Virginia

Gov.-elect Ralph Northam (D) made marijuana decriminalization a centerpiece of his campaign, often describing the issue in stark racial justice terms. Removing criminal penalties for cannabis appears to have bipartisan support in the state. Republican Senate Majority Leader Tommy Norment has pledged to file a decriminalization bill early in 2018. And the effort could get an additional boost by Democrats' surprising number of wins in House of Delegates races this past November. Depending on the results for two still-pending seats under review, the party could either have a narrow majority in the chamber or be tied with Republicans. The GOP has a two-seat majority in the Senate, but tie votes there would be broken by the Democratic lieutenant governor.

 

Other Possibilities

A team of wealthy individuals in Ohio announced this month that they will work to qualify a marijuana legalization measure for the state's 2018 ballot. A 2015 initiative pushed by the same group was overwhelmingly rejected by voters. That campaign generated opposition from many longtime legalization activists because it proposed creating an oligopoly on cannabis cultivation for the very investors who paid to put it on the ballot. Advocates were also turned off by the campaign’s usage of a cartoony mascot, “Buddie,” which raised concerns about appealing to children. The team has said that it learned from those mistakes.

While Vermont and New Jersey are seen as most likely to pass marijuana legalization bills through their legislatures in 2018, advocates are also working to build momentum for bills to end prohibition in a number of other states next year. Among those are Connecticut, Delaware, Illinois and Rhode Island, any or all of which could potentially send legalization legislation to their governor's desks in the coming months.

2018 is likely to be one of the most active years to date for marijuana legislation, and lawmakers in a number of states have already gotten a head start and begun prefiling bills for new sessions that begin in January.

 

 

BHT identifies meaningful trends and important supply and demand levels in the financial markets.  An understanding of these dynamics will add Alpha to any investment strategy.  The following are important factors to consider in the Legal Cannabis and Medicinal Marijuana Sectors:

 

Horizons Marijuana Life Sciences ETF – HMLSF has gapped up after breaking through resistance around the $12 level.  It is now overbought and had a reversal day on Friday.  If it heads lower there will probably be support around $12.  It has appreciated by +90% since early November.  The fund tracks the North American Medical Marijuana Index.

HMLSF US Equity (Horizons Mariju 2017-12-30 08-59-10.jpg

 

Aphria Inc – APH CN is overbought after gapping up.  There may be support around the $15 level if it heads lower because there was resistance there throughout most of December.  Aphria produces, supplies, and sells medical marijuana.

APH CN Equity (Aphria Inc) S&P 5 2017-12-30 17-16-01.jpg

 

Canopy Growth Corporation – WEED CN has become overbought and has run into resistance around the $30 level.  Although the stock has never traded at this level before, it is important psychologically.  The levels around $20 were resistance in November, so there will probably be some support there if it trades lower.  This stock is up over +1000% since the summer of 2016 when it was trading around $2.85.  Canopy Growth, through its subsidiaries, is a producer of medical marijuana.

WEED CN Equity (Canopy Growth Co 2017-12-30 09-23-10.jpg

 

Aurora Cannabis Inc – ACBFF US has appreciated more than +2,300% since April of 2016.  In the past three days it has gone from $6 to $8.  It is currently overbought.  Aurora is a licensed producer of medical marijuana. 

ACBFF US Equity (Aurora Cannabis 2017-12-30 09-46-19.jpg

 

GW Pharmaceuticals – GWPH ran into resistance and rolled over around the $135 level.  It also ran into resistance around this level in September and November of 2017, and again in February and March of 2017.  GW Pharmaceuticals researches and develops cannabinoid prescription medicines for the treatment of cancer pain, Multiple Sclerosis, and neuropathic pain.

GWPH US Equity (GW Pharmaceutica 2017-12-30 12-26-20.jpg

 

Scotts Miracle Grow – SMG gapped up and has become overbought.  If it heads lower there will probably be support around the $100 level because this was the top of the range and resistance throughout October.  It is also important psychologically.  Scotts Miracle Grow markets a full range of products for professional horticulture. 

SMG US Equity (Scotts Miracle-Gr 2018-01-05 17-30-11.jpg

 

MedReleaf Corp – LEAF CN is overbought.  It is trading around $21.  This stock had its IPO on June 7th, when it closed at $7.40.  MedReleaf manufactures and distributes medical cannabis.

LEAF CN Equity (MedReleaf Corp)  2017-12-30 12-59-34.jpg

 

Cronos Group Inc. – MJN CN gapped up on the last few days of the year and it is now overbought.  As recent as last summer it was literally trading for pennies.  Friday’s close was $9.57.  Cronos operates as an investment company and it invests in medical marijuana producing companies.

MJN CN Equity (Cronos Group Inc) 2017-12-30 16-26-06.jpg

 

CannTrust Holdings Inc – TRST CN is slightly overbought and is making a short-term reversal pattern.  There may be support around the $8 level.  This level was resistance in November and support in December.  CannTrust operates as a pharmaceutical company that develops and produces medical cannabis for the health care sector.

TRST CN Equity (CannTrust Holdin 2017-12-30 16-44-01.jpg

 

Insys Therapeutics, Inc. – INSY is testing resistance around the $10 level.  This level was also resistance during August, September, and October and it was support from February through May.  Insys develops cancer support drugs.

INSY US Equity (Insys Therapeuti 2017-12-30 16-57-28.jpg

 

CanniMed Therapeutics Inc. – CMED CN is overbought.  If it goes lower there will probably be some support around the $21 level.  This level was the top in November and December, including the last couple of trading days.  CanniMed is a biopharmaceutical company that focuses on producing pharmaceutical-grade cannabis through research and development, as well as through collaborations with external partners, including academic institutions and healthcare professionals.

CMED CN Equity (CanniMed Therape 2017-12-30 17-04-27.jpg