3 Marijuana Stocks Short-Sellers Are Liable to Target
Don’t look now, but marijuana stocks are absolutely on fire, once again. Following a dismal fourth quarter that saw many pot stocks lose a third or more of their value, the Horizons Marijuana Life Sciences ETF, a basket fund with more than four dozen pot stocks, has risen by 56% through the first five weeks of 2019.
One reason for this rally is the realization that the cannabis industry is a legitimate business model now. Sure, not all companies will necessarily be winners, but there are big growth projections attached to this industry. According to a co-authored report from Arcview Market Research and BDS Analytics, global weed sales should increase 38%, to $16.9 billion, in 2019 and push their way to $31.3 billion by 2022.
The other major factor pushing marijuana stocks higher is the growing possibility of reform at the federal level in the United States. Democrats have long had a more favorable view of cannabis than Republicans, and with Democrats taking control of the House for the first time in eight years, there’s speculation that we’ll see baby steps (e.g., banking reform) in the right direction toward an eventual legalization of pot.
Short-sellers could target these top pot stocks
As marijuana stocks rise, short-sellers are bound to come out of the woodwork. Put simply, a short-seller aims to make money from an optimist’s misfortune. This is an investor who makes money when securities go down and loses money when they head higher.
With valuations beginning to stretch, here are three brand-name pot stocks that short-sellers are likely to target in the weeks and months to come.
This should come as little surprise, but Cronos Group (NASDAQ:CRON), this year’s top-performing marijuana stock through Feb. 5, is likely going to attract added short interest in the weeks that lie ahead. Already with 12% of its outstanding shares held short, Cronos Group becomes a target of choice given its pedestrian production capacity relative to its market cap and the likelihood that profits will be marginal for quite some time.
Understandably, Cronos has been buoyed by an announced $1.8 billion equity investment from Altria (NYSE:MO). If completed, this will give Altria a 45% stake in Cronos, with the option to increase its stake to 55% by exercising warrants it will also receive. The possibility of an Altria buyout, or even a partnership to develop a line of pre-rolled joints or vape products, has…
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