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Why Marijuana Stocks Are on Fire Today

By Rich Smith - Dec 30, 2020 at 3:30PM

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All eyes are turning to Mexico.

What happened

Marijuana stocks bounced higher in Wednesday trading. As of 2:35 p.m. EST, shares of Aurora Cannabis ( ACB 6.87% ) had risen 2.4%, while larger Aphria ( APHA ) and Canopy Growth ( CGC 4.83% ) had notched bigger gains of 3.7% and 4.4%, respectively. For a change, this time the strength seen in marijuana stocks has nothing to do with marijuana legalization in America.

This time, it's all about Mexico.

Mexican flag emblazoned with a marijuana leaf and the words LEGALIZE MARIJUANA

Image source: Getty Images.

So what

As The Wall Street Journal reports, the Mexican Congress is set to transform Mexico into "the world's largest legal cannabis market" in an upcoming vote that will legalize recreational use of the drug "throughout the supply chain, from farming to distribution and consumption."

Mexico's Senate has already signed off on the legislation. Senators are currently working with their counterparts in the lower house of Congress to agree on a joint bill, with even more lenient restrictions on the amount of marijuana a person can carry in public, which could be approved as early as next month.  

Now what

If advocates for the legislation have their way, Mexico could soon become the third country after Canada and Uruguay to completely legalize marijuana for recreational purposes (medicinal marijuana has been legal in Mexico since 2017). More importantly, with a population of 129 million -- roughly three times that of the populations of Canada and Uruguay combined -- Mexico will become by far the largest country in the world to have legalized the drug.

And perhaps even more important, once Mexico and Canada have both legalized marijuana, the United States will be bracketed by countries where the drug is legal. It will also the only member of the United States-Mexico-Canada trade agreement to have not legalized the drug... yet.

If you're wondering what happens after that, look no further than New York, where Gov. Andrew Cuomo last month mused that, with marijuana about to become legal next door in New Jersey, the only thing New York has to lose now from not legalizing weed is tax revenue.

I think you can expect the U.S. Congress to come to the same conclusion.

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

Canopy Growth Stock Quote
Canopy Growth
CGC
$10.64 (4.83%) $0.49
Aurora Cannabis Stock Quote
Aurora Cannabis
ACB
$6.38 (6.87%) $0.41
Aphria Stock Quote
Aphria
APHA

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