The backstory: Marijuana legalization is becoming a thing. With a bunch of states legalizing cannabis for medicinal use, and a few legalizing for recreational use too, there’s been a push for legalization at the federal level.
Moreover, Canada is looking to legalize cannabis, potentially as soon as 2018.
Constellation Brands (STZ) is the most recent company looking to get into the cannabis biz, and it could potentially tap into the multi-billion dollar industry. Yeah, that’s right the owner of Corona, Black Velvet Whiskey and Casa Noble tequila is partnering with a cannabis company to potentially develop and market cannabis-infused beverages.
What to know: Constellation Brands signed an agreement to acquire a minority stake in Canopy Growth Corporation (TWMJF), one of the most well-respected publicly-traded providers of medicinal cannabis products. If there’s widespread cannabis legalization, both Constellation Brands and Canopy Growth are poised to grow significantly, and continue remarkable runs higher.
STZ is up over 40% year-to-date, and doesn’t look like it’s stopping yet.
TWMJF, which trades on the OTC markets — so be careful, because it’s a market for traders and investors with extremely high risk tolerance — is up more than 150% since June, and looks like it could continue to run.
How I’m going to play it: I’ll wait until there’s news and a specified date for Canada to legalize marijuana across the country. Moreover, I’ll be focused on legalization news in the U.S., looking for positive catalysts before getting in long. At that point — knowing these stocks could be due for a slight pullback — I’ll wait until my charts tell me it’s a good time to buy. I’m probably going to stick with a play in STZ, staying away from TWMJF, until (if ever) it winds up being listed on a major exchange.