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Why 3 Small Pot Stocks Are Moving Higher Today

By Howard Smith - Dec 2, 2020 at 2:39PM

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The path toward legalization took another small step forward today.

What happened

Shares of companies in the marijuana industry are moving higher today, including Sundial Growers ( SNDL 1.26% ), HEXO ( HEXO -1.36% ), and Charlotte's Web Holdings ( CWBHF -1.48% ). As of 1:30 p.m. EST, shares are trading as follows:

  • Sundial Growers up 12.8%
  • HEXO up 4.7%
  • Charlotte's Web Holdings up 5.3%

So what

Shares of marijuana stocks have been moving higher since the U.S. election last month. Another boost came today when a United Nations commission voted to remove medical cannabis from the list of Schedule IV drugs created at the 1961 Single Convention on Narcotic Drugs. The convention that created the lists was attended by representatives from 73 countries, including the United States and Canada.

marijuana flag blowing in wind with sun behind

Image source: Getty Images.

Schedule IV is the highest level of drugs on the list, and is considered the most dangerous. Cannabis was classified alongside heroin and compounds containing fentanyl at that level. 

Today's vote doesn't mean any immediate change in the legal status of cannabis, as individual governments ultimately decide that. But the symbolic change was described as a "huge, historic victory," by one independent researcher for drug policy, according to The New York Times.  

Now what

Canadian cannabis suppliers like HEXO and the smaller Sundial Growers have much to gain if marijuana legalization continues to expand globally. Even as the industry grows, these businesses continue to pile on losses. HEXO reported a net loss of about $423 million in its fiscal year ended July 31, 2020. Sundial Growers reported net revenue of about $36 million in the nine months ended Sept. 30. That was down from almost $38 million in the prior-year period. 

Charlotte's Web doesn't grow or distribute marijuana. Its products contain cannabidiol, or CBD, which is a compound found primarily in the flowers and leaves of the hemp plant. The products are marketed as health and wellness aids, though. As a derivative of cannabis, any advancements in the research and reported medical benefits of marijuana will likely also support the CBD market. 

Investors in the pot sector have been optimistic of a more sympathetic U.S. government with a Biden administration. Shares of Charlotte's Web and HEXO have gained about 70% since the election on Nov. 3. And Sundial Growers' shares have rocketed almost 300% since then. 

But even with those extraordinary gains, all three remain down since the start of 2020. Investors may want more highs from these stocks, but they also need to be prepared for plenty of lows. The recent UN commission vote may be a step in the direction toward expanding legalization, but there will be plenty of volatility along the way.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Sundial Growers Inc. Stock Quote
Sundial Growers Inc.
SNDL
$0.62 (1.26%) $0.01
HEXO Stock Quote
HEXO
HEXO
$1.08 (-1.36%) $0.01
Charlotte's Web Holdings, Inc. Stock Quote
Charlotte's Web Holdings, Inc.
CWBHF
$1.33 (-1.48%) $0.02

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

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