Cannabis Stocks: Green Gold Rush or Risk Off?

Key Points

• Cannabis stocks, including Canopy Growth, Tilray, and Aurora Cannabis, have experienced significant gains over the past month, posting double to triple-digit increases.
• Positive developments in Washington, D.C., such as the push for the SAFE Banking Act and efforts to reclassify marijuana to a less hazardous substance, have contributed to the surge in cannabis stocks.
• Tilray, Canopy Growth, and Aurora Cannabis have seen remarkable increases in their trading volumes off the back of positive catalysts and momentum. 

The world of investing and trading is abuzz with excitement as one sector theme has recently emerged as a blazing hot topic of discussion: cannabis stocks. 

Over the past month, notable cannabis companies like Canopy Growth NASDAQ: CGC, Tilray NASDAQ: TLRY, and Aurora Cannabis NYSE: ACB have ignited the market, posting double to triple-digit gains. Moreover, the sector has seen a dramatic surge in trading volume recently, leaving investors at a crossroads. Is it time to exercise caution and take a "risk-off" approach in the cannabis sector, or should one dive headfirst into the green gold rush? 

Let's delve into the factors propelling the cannabis market to new heights, focusing specifically on three stocks. 

The Catalysts Behind the Breakout

A number of positive developments are unfolding in Washington, D.C. Lawmakers are actively pushing forward the Secure and Fair Enforcement (SAFE) Banking Act for a floor vote. Simultaneously, the U.S. Department of Health and Human Services is exerting pressure on the Drug Enforcement Administration (DEA) to reclassify marijuana to a less hazardous Schedule III controlled substance.

These significant steps are causing cannabis stocks to surge, sparking excitement among investors who are envisioning the potential for marijuana legalization. On August 29, reports indicated that the Department of Health and Human Services had initiated the process to reclassify marijuana, positioning it as less harmful than substances like cocaine or heroin. This could potentially mark the initial phase toward broader legalization. 

In a late-day announcement, the Department of Health and Human Services stated, "In alignment with scientific data, HHS promptly responded to President Biden's directive to HHS Secretary Becerra and submitted its scheduling recommendation for marijuana to the DEA on August 29, 2023."

3 Cannabis Stocks Making Moves

Tilray NASDAQ: TLRY

Tilray, a pharmaceutical and cannabis company established in 2013, is based in Canada and operates globally in regions like the United States, Europe, Canada, Australia, and Latin America. They specialize in the production and distribution of medical and recreational cannabis products, including dried cannabis, cannabis oil, capsules, and hemp-based food items, categorized under two segments: Cannabis (medical and adult-use cannabis) and Hemp (hemp food products and CBD products).

TLRY has staged an impressive turnaround in recent months, with the stock up almost 100% off its July low. More recently, over the past month, the stock has soared almost 30% and seen volume levels surge, thanks to the positive momentum behind the sector. Notably, TLRY has a 13.52% short interest, up 13.27% over the previous month.

Canopy Growth NASDAQ: CGC

Canopy Growth specializes in cultivating and distributing a wide range of cannabis products, serving both medical and recreational users. From dried cannabis to oils, soft gel capsules, and edibles, Canopy Growth offers diverse options to meet customer needs. Their goal is to destigmatize cannabis and provide safe, innovative products to a broad spectrum of users, including those seeking therapeutic benefits.

CGC’s recent stock performance is nothing short of incredible. Over the last month, the stock has surged almost 320%, pairing back most of its losses on the year. Its volume has surged to remarkable heights, with Monday's action seeing almost 280 million shares traded. 

Aurora Cannabis NYSE: ACB

Aurora and its subsidiaries are involved in the production, distribution, and sale of cannabis and cannabis-derived products globally. They operate in three segments: Canadian Cannabis, European Cannabis, and Plant Propagation. Aurora manufactures and sells medical and consumer cannabis products in Canada distributes wholesale medical cannabis in the EU and international markets, and supplies propagated plants in North America. They also distribute hemp-derived CBD products and offer a range of cannabis products.

Like the above two, ACB has also impressed lately, with shares up almost 72% over the last month and yesterday’s volume reaching 255 million shares. A truly staggering amount, given the stock, has an average volume of just 6.37 million. Notably, ACB has a considerable short interest, with 18.69% of the float sold short.