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Despite overall optimism, pot legalization at the federal level still has few hurdles to cross. Last month, U.S. Senate Majority Leader Chuck Schumer released draft legislation of the Cannabis Administration and Opportunity Act, which would remove marijuana from the Controlled Substances Act. However, given that the bill does not yet have sufficient votes to push it through the Senate because some Republicans and moderate Democrats oppose the decriminalization of marijuana, the prospects of federal-level legalization look uncertain at best. Also, it is still unclear whether President Biden would sign the bill into law.
Amid this uncertainty, we think investors should avoid cannabis stocks with weak fundamentals and growth prospects. Canopy Growth Corporation (CGC), Aurora Cannabis Inc. (ACB), and Neptune Wellness Solutions Inc. (NEPT) are examples of cannabis concerns that are struggling to stay afloat due to their weak financials. Therefore, we believe these stocks are best avoided now.
