Thousands of stores to open in Canada in cannabis gold rush

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In the marijuana news today is the gear-up for Canadian marijuana legalization that will likely see thousands of stores open up virtually overnight, peddling weed in what I’m deeming the “pot gold rush.”

Applications have been flooding in all over Canada for licenses to open up marijuana storefronts, with the province of Alberta alone receiving nearly 700 applications. (Source: “Calgary sees over 200 cannabis store applications as total nears 700 province-wide,” The Calgary Herald, July 3, 2018.)

Alberta is the fourth-largest province in Canada, with Ontario and Quebec accounting for the majority of the population and likely to have thousands of stores open up in those provinces.

The huge number of marijuana stores opening is both a blessing and a curse. The blessing is that it clearly shows a hunger for the industry to get itself moving. With hundreds of stores potentially coming online overnight on October 17, consumers will certainly not have to look far to find their legal marijuana fix.

On the flip side, the huge number of applications could create a backup on the government’s side of the equation. That would lead to delays in marijuana storefront openings and could potentially hamper what marijuana bulls are hoping is a smooth rollout.

Alberta will likely see a few hundred stores opening when all is said and done, but that is still a good many retail locations in Canada’s fourth largest province.

There are also certain restrictions in place by cities within Alberta, like Calgary which requires a buffer distance of 300 meters between stores and 150 meters from schools and other sensitive locations.

So what does this mean for marijuana stocks? A lot, actually.

The pot gold rush is coming for Canada, and soon. With the Canadian marijuana legalization date set in stone at October 17, barring some unforeseen (and, frankly, implausible) development, the ramp-up to legalization is going to create a ton of opportunities for marijuana investors.

The number of storefronts opening is simply another few hundred reasons to be excited about the potential that this market has to see another huge marijuana growth spurt in the next few months.

The industry thrives off massive figures like the ones we’re seeing in Alberta. When more information releases about how the Canadian marijuana legalization process will take shape, we’re only going to see interest continue to build.

Of course, this could lead to a situation where hype begins to take over and drive marijuana stocks through the roof, only to have them come crashing back down a few months, weeks, or even days later as we’ve seen countless times in the industry.

In fact, I’d wager that this is how it will play out, with a huge rush in the months preceding October 17, followed by a correction.

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But overall, these figures show that the Canadian marijuana industry is for real and that, in the grand scheme of things, we’re going to see strong growth out of the industry following Canadian marijuana legalization.

Mirroring the strong marijuana news today in Canada, the marijuana stock market seems to have rebounded nicely from last week.

While we’re not seeing any staggering gains to begin the week, the numbers are positive and, in some cases, quite strong.

Starting with Canopy Growth Corp (NYSE:CGC), which is up about one percent on the week so far, although it has started today down about four percent.

If that four-percent drop holds, then we’ll be singing a different tune tomorrow. But as it stands now, the week has started off on a decent note for CGC stock.

What is desired is moderate and sustainable gains following the roller-coaster ride that took place to end June. The huge growth and equally big decline in the waning weeks of last month are not the types of movement investors want to see out of the industry leader. They would much prefer more measured but solid gains that accumulate over time into double- and triple-digit growth.

Of course, the rapid swings are going to be unavoidable for the near future as the industry is headed towards another period of high volatility due to the approaching Canadian marijuana legalization date.

Aurora Cannabis Stock

Following in the footsteps of CGC stock is Aurora Cannabis Inc (OTCMKTS:ACBFF, TSE:ACB). Aurora Cannabis stock has followed roughly the same trajectory as CGC stock, if only differing by degrees. This week, the company is so far up about one percent, although slightly behind Canopy Growth Corp.

On the flip side, Aurora Cannabis stock is down about two percent in early morning trading, but that is stronger versus the four percent that Canopy has fallen. Of course, starting the day down is no guarantee of how the day’s trading will end, but overall the week is looking to be rather muted for Aurora Cannabis stock, which is a good thing.

The industry needs a week or two to recover from last month’s extreme volatility. Massive swings week to week hardly engender investor confidence, not to mention that those swings make playing the marijuana market particularly difficult due to the unpredictability.

CRON Stock

In a bit of twist, the successful outlier so far this week appears to be Cronos Group Inc (NASDAQ:CRON). CRON stock is up about two percent in early morning trading, adding on to its already strong four-percent gain to start the week.

CRON stock has been one of the more unpredictable and, frankly, weaker performers in 2018. Ever since it joined the Nasdaq to much fanfare, the company has been unable to register anything remotely resembling sustained gains.

CRON stock is down about 12% on the year and has been one of the more difficult companies to predict. As such, I’ve cautioned investors from being too trusting of CRON stock, but this week, it’s showing itself to be one of the more enticing picks.

While I still have my doubts about Cronos Group long-term, it is a good pick if for one reason: as a hedge. CRON stock has developed a penchant for stock movement outside the industry norm. Which is to say that CRON stock doesn’t follow the industry trends quite like Canopy Growth and Aurora Cannabis

With that in mind, CRON stock may prove valuable moving forward as a company that can serve as a type of insurance, should the industry take a collective dive. It’s not immune to industry trends, mind you, but it has proven itself to be less susceptible to them.

Analyst’s Take

Canadian marijuana legalization is going to rock the marijuana industry. That is without doubt.

We’re likely to see massive swings both up and down in the leadup, and I expect that volatility in the industry is going to hit extremely high levels.

As such, marijuana bulls will be better served by steady gains in the interim rather than the huge swings, if only so value can be consolidated before the big movements begin to hit in October.

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