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2 Pot Companies That Should Make Lots of Green From the "Green Wave"

By Eric Volkman - Jan 30, 2021 at 12:00PM

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This pair of cannabis purveyors already has a head start in five new American markets.

All five states with marijuana legalization on the ballot last Election Day saw those measures pass by wide majorities. A pair of U.S. cannabis companies is particularly well poised to take advantage of this.

Longtime contributor Eric Volkman identifies these potential big winners, in conversation with healthcare and cannabis bureau chief Corinne Cardina. This video clip from Motley Fool Live was recorded on Dec. 22, 2020. 

Corinne Cardina: There are going to be some states with new cannabis markets. Tell us about what the "green wave" is that we saw in November and what that means for the sector.

Eric Volkman: OK. The green wave simply refers to five states that in the November election, the citizens of them voted to legalize marijuana to some extent.

Four out of the five legalized recreational cannabis. One of them, South Dakota, totally flipped the switch -- they legalized both recreational and medical cannabis. They both had been illegal before. Mississippi, in a somewhat complicated and funky vote, voted to allow medical marijuana.

So that's five states altogether which is an almost 50% increase. While actually if we just looked at recreational, it's about a 40% increase from the number of states that had previously done so, which was 11.

Cardina: This speaks to that piecemeal approach that the U.S. is taking. What pot stocks are out there that are actually poised to benefit from some of these new markets? It does take a little bit of time for these states to open up these new legalized markets. They have to set up systems. It's not like, "OK, we voted, you can go crazy." It's going to take some time.

Volkman: Yeah. We have some points to remember.

Cardina: Are there any cannabis stocks that you think are really wellpositioned in any of these markets; New Jersey, Arizona, Montana, South Dakota... and then for Mississippi, it would be the medical market.

Volkman: Yeah. I think the one that everybody's getting excited about on the green wave -- and I think it's justified -- is Curaleaf (CURLF -1.39%).

Curaleaf, they're on the retail side. They're the top pot stock in terms of recent revenue. I'm looking at my cheat sheet here. They have 93 dispensaries across 23 states; that includes New Jersey, because New Jersey was one of the five [in the green wave]. They already had a medical marijuana industry, they had legalized that.

It's rather small, but it's there and Curaleaf has a presence in New Jersey which I would make a pretty good bet is going to be a strong market, especially for recreational. [Curaleaf has] three licenses in New Jersey.

They also have a pretty good presence in Arizona, another state that legalized recreational. It had nine licenses and eight dispensaries open in Arizona. So [the stock] is a nice one to punch because out of the five states in the green wave, New Jersey and Arizona are the most populous, and to my mind, they have the biggest potential for really having a good, thriving, proper recreational market.

Of course, there's a big caveat there. That's implementation and how these states are going to work the laws and if they're going to do licensing properly or they're going to hold back and be difficult for no reason.

I'm optimistic about it. I think again, there's a vested interest in getting industries up and running and not bothering them as much as possible. States need money. Everybody needs money. States need jobs. They need more commerce.

Those two states, Arizona is a western state. And in the west, I think there's more of a recreational marijuana culture.

As for New Jersey, the advantage Jersey is going to have at least in the opening months of its recreational legalization is that it's a neighbor to New York. New York still hasn't gotten its act together with recreational. Come on, New York! I'm a New Yorker, I'm from there.

They likely will. Governor Cuomo has been talking about it off and on over the past few months. But he seems pretty determined one way or another, and there's a lot of political support where a lot of people in the state want it, like New Jersey.

But while it remains technically illegal there, I think you're going to get some marijuana tourism, New Yorkers coming over the border to buy from places in North Jersey -- maybe some of the bigger cities or some of the places that are close to New York, like Hoboken, for example. So yeah, Curaleaf I think is a big one.

In terms of Arizona specifically, you have Harvest Health & Recreation (HRVSF), which has an already produced strong presence there. I don't think it's going to be too much of a problem for them to ramp up to recreational weed because it's essentially the same product.

I mean, medical marijuana, the potency might be a little bit different. It might be more of an exclusive product but still, it's marijuana in some form or another and put it on the shelf and there it is. Harvest has... let's see, do I have the number here in my cheat sheet?

OK, I don't know how many dispensaries Harvest already has in Arizona, but it's a relatively high number, and I think it's only going to go higher as that market opens. Harvest is right there and they have the means to expand as they see fit.

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Stocks Mentioned

Harvest Health & Recreation Inc. Stock Quote
Harvest Health & Recreation Inc.
Curaleaf Holdings, Inc. Stock Quote
Curaleaf Holdings, Inc.
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