Cannabis and hemp are back in the US headlines. And one local pot stock — Elixinol — is feeling a high…share price.
At time of writing Elixinol Global Ltd [ASX:EXL] is up 11%. Though it did peak even higher at a 12.28% gain prior in early trading.
A sizeable win for a company that has been in steady decline for the better part of four months. Not to mention the fact there was no official announcement.
Bills and surveys spark optimism
See, while listed on the ASX, Elixinol has a major US presence.
They are a major supplier of CBD-based products. One of the key ingredients in both cannabis and hemp.
Unlike THC — the part that is responsible for cannabis’ ‘high’ — CBD is far more restrained. It is associated with pain relief, relaxation and possible nutritive benefits. All without the psychoactive effects.
However, those psychoactive effects could soon be legal in America. The House Committee (a key group of politicians) has passed a bill to legalise cannabis.
Now, this doesn’t mean pot is suddenly legal. It is just the first step towards it.
From here the bill goes to the lower house of Congress. With the Democrats controlling a firm majority of the House, it is likely the bill should also pass here.
However, in order to pass into law the bill also needs to pass the Senate — a much tougher ask.
Controlled by cannabis opposed republicans, the bill will likely be shot down in the Senate. That is, unless the Republicans suddenly have a major change of heart.
Don’t hold your breath for that.
What this bill does tell us though is that support for legalisation is alive and well. Should a Democrat come out on top in next year’s election, we just may see cannabis made legal at the federal level.
That would be a huge boon to Elixinol and many other pot stocks.
In the meantime, Elixinol can still fall back on hemp. A crop that is legal and proving prosperous.
In fact, a recent survey by Whitney Economics shows that hemp could become a new pillar of US agriculture. As they note:
‘A top line finding, based on the data from the survey and on research of the overall market, once fully realized, the hemp industry is poised to become the fourth major crop and a foundation to agriculture in the United States.’
That is big. And more than likely the reason Elixinol is on the up today.
The real question though is whether this will sustain a long-term rally for local pot stocks.
Could we see a pot stock comeback?
Ultimately, we can’t ignore the fact that pot stocks have been hit hard recently. 2019 hasn’t been a kind year for the industry.
A lot of the hype has been sucked out of the market and traders have turned to other, hotter sectors.
However, that doesn’t mean you should ignore pot stocks. They are certainly speculative and prone to volatility, but there is potential.
Again, if we do see America commit to national legalisation, we expect it will spark interest once more. Furthermore, it could put pressure on our own politicians to debate the merits of cannabis as well.
There are a lot of unknowns and a lot of possibilities. That is why we think investors hungry for investable trends should keep pot stocks on their radar.
For Money Morning