Improving Fundamentals Light a Fire Under Pot Stocks
By John Persinos
To a greater degree than legalization, it's capitalism that's driving the marijuana industry. Let's look at the improving fundamentals that have lit a fire year to date under pot stocks.
So far this year, the marijuana industry has been experiencing greater consolidation through mergers and acquisitions (M&A). This trend has been apparent for the past few years and his significantly picked up steam in the new year.
This trend, driven by various factors including regulatory changes, market maturation, and competitive pressures, is reshaping the landscape of the cannabis sector. While some may view consolidation skeptically, there are compelling reasons why this wave of M&A activity is proving to be a boon for marijuana investors.
At the same time, marijuana companies are generally reporting healthier profits and sales, with less debt on their balance sheets.
Marijuana stocks have rebounded so far this year from their slump in 2023, as business fundamentals improve, state legalization accelerates, and the federal government discusses the possibility of rescheduling weed.
The benchmark marijuana exchange-traded fund (ETF), the AdvisorShares Pure Cannabis ETF (YOLO), has racked up a year-to-date gain that far exceeds that of the benchmark SPDR S&P 500 ETF Trust (SPY). See the following graphic, with data from Yahoo Finance as of market close February 8:
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