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Why Marijuana Stocks Popped Today

By Rich Smith – Oct 9, 2020 at 12:26PM

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A President Biden would decriminalize marijuana.

What happened

Two days after Wednesday's vice presidential debate, marijuana stocks are on a tear -- and that's no coincidence.

For the second day in a row, shares of Canopy Growth (CGC -2.01%) -- already the biggest marijuana stock on the block at a $6.6 billion market cap -- are up. In 11:15 a.m. EDT trading Friday, Canopy stock gained 2.4%. Smaller players including Hexo Corp (HEXO -1.24%), Curaleaf (CURLF -6.97%) and Charlotte's Web (CWBHF 2.34%) are rising as well, up 2.3%, 9.1%, and 9.5%, respectively.

Marijuana plants

Image source: Getty Images.

So what

Notably, not all of the "marijuana stocks" named above are actually engaged primarily in the sale of marijuana, per se. Charlotte's Web, for example, focuses on producing "hemp-based cannabidiol wellness products." But positive sentiment seems to be lifting the entire sector today.

Why?

In the course of the debate, Sen. Kamala Harris promised that upon winning the 2020 election, she and Democratic running mate Joe Biden "will decriminalize marijuana, and we will expunge the records of those who have been convicted of marijuana." It was the only time marijuana was mentioned in the debate -- and the subject didn't come up once in the previous week's presidential debate -- but even so, it appears to have been enough to spark a rally in marijuana stocks that's continuing into today.    

Now what

And that certainly sounds like it should be good news for cannabis companies. Although it's true that many states have already legalized the use of cannabis for medical and/or recreational use, and hemp-derived products are widely available for sale in the U.S., the federal laws have not been changed. For that reason, banks fear prosecution and are largely unwilling to work with companies in the cannabis industry or finance marijuana-related ventures -- hobbling growth in the industry.  

Legalizing marijuana at the federal level would logically be a boon to the industry for this reason, just as expunging criminal records would remove some of the stigma from the product, encouraging its use and sale -- which is why marijuana stocks are rising today.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Charlotte's Web and HEXO. The Motley Fool has a disclosure policy.

Stocks Mentioned

Canopy Growth Stock Quote
Canopy Growth
CGC
$3.17 (-2.01%) $0.07
Hexo Stock Quote
Hexo
HEXO
$0.16 (-1.24%) $0.00
Charlotte's Web Stock Quote
Charlotte's Web
CWBHF
$0.58 (2.34%) $0.01
Curaleaf Stock Quote
Curaleaf
CURLF
$5.47 (-6.97%) $0.41

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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