What's Next For Cannabis Stocks?

My title here may be attractive to folks who want to know what cannabis stocks will do today, this week or this month, and that is not what I am writing about. Instead, I want to lay out some longer-term paths that may lie ahead.

I started following the publicly traded cannabis stocks and learning more about the industry in 2013, so it's been more than a dozen years. I have learned a lot along the way about the industry, the stocks and myself. One of the big things that I have come to appreciate is the volatility of the stocks, which can be good for those prepared for it and dangerous to those who are not.

The New Cannabis Ventures Global Cannabis Stock Index, which currently has 23 members and will next be rebalanced at the end of June, is down 19.8% this year. It has declined by 94% since the peak from early 2021 to 5.52. It's a long and deep bear market, with an all-time low in the index set in early April. The index has increased 29.3% since its all-time closing low of 4.27 on 4/8, but there are no signs yet that the bear market is over.

For those looking to "capitalize on cannabis", I continue to offer services to subscribers at 420 Investor, and I also continue to do a lot with New Cannabis Ventures, which is a great free resource that includes a free weekly newsletter. While I am not publishing exclusively any longer cannabis stock content at Seeking Alpha, as I have written a few articles about the overall stock market, I do publish a blog consistently there and this has no restrictions on free access. I have been with Seeking Alpha since early 2007 as a publisher of content, and I began offering 420 Investor there two years ago.

The Big Issues for Cannabis Stocks

The biggest issue for cannabis stocks, but certainly not the only one is 280E taxation, which has been the law since the "Just Say No' days of the Reagans from the early 1980s. This is a silly tax requiring state-legal cannabis companies that grow, process or sell cannabis to pay a much higher tax than normal income taxes. These companies are required to pay the income tax rates on their gross profits (revenue less cost of goods sold), and they are unable to deduct business expenses. I have been writing a lot about this since late 2022 at New Cannabis Ventures. The first article laid it out as the biggest problem.

280E has been a hot topic lately, with the DEA receiving a request from the Department of Health & Human Services to move cannabis from Schedule 1 to Schedule 3 in late August 2023. In late April of 2024, the DEA shared that it was recommending that change, and the cannabis stocks exploded higher. Of course, it's not a done deal and appears unlikely at this time.

Another big issue is that American cannabis companies are not allowed to trade on the NASDAQ or the NYSE, so they trade over-the-counter (the OTC). This wipes out many investors, both retail (by choice) and institutional (by choice or by rules the institutions have).

Another big issue is that the cannabis ETFs and funds stink! I have written a lot about AdvisorShares Pure US Cannabis ETF (MSOS). Sounds like a great name, but it is a horribly run fund that is poorly managed. The price action has been horrible. While the Global Cannabis Stock Index has dropped almost 20% in 2025 through 5/16, MSOS has plunged 31.8%. Currently, it is down so much from its inception in late 2020, right before the peak of cannabis stocks in February:

The problems for the multi-state operators in the U.S. weigh on the companies that serve them, including the ancillary companies. Among these ancillary companies are the REITs, and they are facing write-downs as tenants crumble. The good news for many of these ancillary companies: They trade on the NASDAQ, seem cheap and have good balance sheets.

I don't mean to pick on just America, as there are problems internationally. The Canadian LPs face a maturing legal adult-use market, and they have a very bad tax system for cultivation. Perhaps it will improve. They do have international opportunities (like Israel, Germany and the Netherlands), but these have their own risks too.

While there are a lot of challenges already, another one has been and remains that the reported revenue growth has been slower or even down. There are a lot of reasons for this in my view, and I do explain them in my articles and to subscribers. People still love cannabis, which has a lot of benefits for medical conditions and is better than alcohol in my view and in the view of many.

What Might Happen

Cannabis stocks are quite risky, as I shared above, but they are very cheap. The market seems to have priced in a lot of the risk.

If 280E taxation stays in place, we could see more wipe-outs of companies, including perhaps some of the larger MSOS. There are two big challenges for them that go beyond just the taxation and the industry challenges. First, many of them have substantial debt, and that debt will be hard to refinance. Second, most of them are messing with their accounting as they challenge 280E taxation, so the bad balance sheets may actually be worse than they appear.

If 280E goes away, which really depends mainly upon what our President wants and pushes, it will be a great thing for the industry. MSOs will go up a lot, though some may sell stock to pay off their debt or raise additional capital. I think that they will buy more supplies, so this will be good for the ancillary companies. It will also be good for the REITs.

All over the world, cannabis beverages are gaining popularity, though they are not such a big market yet. In the U.S., this has become very interesting. The three largest MSOs by market cap and revenue are all making efforts to create these THC beverages through hemp. It points to a bigger issue, in my view: The regulation of the industry is terrible. First, cannabis remains federally illegal, while hemp is federally legal. The industry should be regulated by product, and hemp, by the way, is cannabis. Second, state-regulated cannabis companies face different regulations by state. The regulation has improved in some ways, but it remains very inconsistent. Third, cannabis beverages in state-regulated dispensaries haven't done well due to several reasons. They take up a lot of space, require extra equipment and aren't as much bang-for-the-buck as other products. The hemp-based products can be distributed outside of cannabis stores and done so nationally or internationally. It's a much better way to reach consumers!

I have followed Americans for Safe Access (ASA) for a long time, and I like and respect their move for cannabis become legal for medical purposes federally. It makes so much sense, though I am not sure if it will. The founder, Steph Sherer, has returned, and is working hard to make this happen. To me , it is the best way for complete cannabis legalization ahead, as this would likely follow like it did in Canada.

Finally, while there is nothing to suggest that the higher exchanges will make a move, but they may allow uplisting by cannabis companies in America. There is not law or rule that prevents this from happening, but they choose not to do so. It would be good if they were to change!

My Current View

My current model portfolio, available only to members of 420 Investor, is down 18.1% in 2025. The bad news is that it is down, though this could be good news for those not invested and looking to get in. I run this model portfolio with certain rules that prevent me from having "short" positions or too much cash. My goal is to do better than the Global Cannabis Stock Index.

The good news with my performance is that the decline in my model portfolio is less than the decline in the Global Cannabis Stock Index, which has been the case pretty consistently since late 2013. When the market is really flying, I rarely do better, but when it is really tanking I do. Last week's powerful advance was due to my large position in Village Farms (VFF), which is not in that index.

The model portfolio looks like this against the index as of the close on 5/16:

While I did cut my exposure to VFF, I still own some and two other Canadian LPs. It's really not a secret! I have written about both of the other ones on Seeking Alpha.

While I am underweight the Ancillary cannabis stocks (due to no REITs), my two positions outweigh the non-REIT Ancillary exposure.

I have increased my MSO exposure and own 4 currently, including two Tier 1 names, a Tier 2 name and another one. The two Tier 1 names are in the index, but they are the smallest of the 5 Tier 1 names in the MSOS ETF.

I have regularly advised my readers and subscribers to not go all-in one part of the cannabis sector, and I believe that I continue to be balanced with the 9 names I hold that range from 3.3% to 20.2% of the portfolio. My non-index exposure is only 11%, though I often have a lot more outside the index.

What I Ask of You

Of course, I would like everyone interested in cannabis stocks to subscribe to 420 Investor, but this is not a realistic expectation. If you are actively trading or investing in the space, though, I am happy to explain to you how 420 Investor can help you to understand cannabis stocks better.

For all of you who might be interested now or ever in cannabis stocks, I would like to know if any of these topics spark an interest:

• Who are the good cannabis stock CEOs (and the bad ones!)?

• Who in the media can be trusted about cannabis industry and the stocks?

• Which are the riskiest cannabis stocks and why?

Conclusion

I have consistently warned investors about the cannabis stock risks, and the current situation remains quite risky. Many who write about cannabis stocks are constantly discussing only why they are so great and will rally so much, but this is biased and represents self-interest very often.

I am very committed to this industry and to doing things the right way, and I will continue to be an expert in cannabis stocks. It's not always fun and requires a lot of effort, but I do enjoy it.

As expert as I am, I don't know the future. Do you? I am hopeful that the industry and the stocks do better, but this is not my only hope. I believe that cannabis is a good thing that has been handled very poorly by the government. Things are changing, and I hope for medical patients, consumers, companies and investors that things continue to do so.