What happened

Have you heard the news? The majority leader of the United States Senate, Chuck Schumer, wants to legalize weed -- and not just on a state-by-state basis, but across the entire country, through national legalization.

Wall Street has definitely heard the news, and late yesterday afternoon, investment bank Craig-Hallum released a note encouraging investors to pile into marijuana stocks, predicting that marijuana legalization could result in as much as "3x upside" in certain stocks.  

Marijuana plants

Image source: Getty Images.

So what

It's not surprising, therefore, that stocks on Craig-Hallum's buy list are enjoying outsize gains today, the first trading day after the report was made public. Two names on that list -- Green Thumb Industries (GTBIF -2.91%) and Curaleaf (CURLF -2.43%) -- are already up 4.4% and 5%, respectively.

Two other names -- Canopy Growth (CGC -1.01%) and Cronos Group (CRON -0.42%) -- not on Craig-Hallum's buy list but mentioned today in a story on TheFly.com describing the list, are up 7% and 9.4%, respectively.

And a fifth cannabis company, Charlotte's Web (CWBHF 0.23%), is coming along for the ride, up 7.1%.

Now what

Commenting on the proposed legislation, Craig-Hallum said that marijuana reform appears to be arriving both sooner than anticipated and "far more comprehensive and favorable for existing operators." Indeed, the analyst went so far as to call this proposed law the "best case scenario" for marijuana investors.

Just how good could that best case get? Asserting that marijuana stocks have hit bottom and are now bouncing, C-H predicted that as early as 2022, investors could see "three-times plus" upside to the share prices of Green Thumb and Curaleaf in particular. I'm not 100% clear what the analyst means by that, but it sure seems to sound like it's predicting 300% profit potential in those two stocks, which is more than enough to get investors excited about them today.

Similarly, Canopy Growth, as the largest publicly traded marijuana company, would likely benefit significantly from legalization, and even Cronos -- primarily a supplier of hemp-derived supplements and cosmetic products -- is also involved in the cultivation, manufacture, and marketing of cannabis.

If there's one really curious thing about today's rally, though, it's how it has swept up shares of Charlotte's Web in the stock-buying frenzy. I mean, technically, yes, I suppose you could call it a "cannabis stock." But Charlotte's Web focuses almost entirely upon the production and sale of "hemp-derived cannabidiol" -- CBD oil -- in various forms. When you consider that CBD is pretty much legal already in the U.S., I'm not sure that the marijuana legalization bill making its way through Congress will really benefit Charlotte's Web stock ... at all.