Don’t be fooled by Tuesday’s big stock market jump. The coronavirus bear market won’t be over anytime soon. Instead, investors should brace themselves for things to get even worse before they get better.

That might sound pessimistic, but I’m just being realistic. I’d like for the stock market to take off immediately as much as anyone. However, there are three reasons why I think that stocks are more likely to fall even more than they already have before they bounce back in a sustained uptrend.

1. COVID-19 cases will soar

The sad fact is that cases of COVID-19 are going to soar over the next few weeks. Even with the drastic actions taken by governments, businesses, non-profit organizations, and individuals to “flatten the curve” and slow the spread of the novel coronavirus, a lot more people are going to be infected, with many becoming severely ill.

That’s not just my opinion; it’s what health experts are warning will happen. Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases (NIAID) since 1984, stated this week, “It’s certainly going to get worse before it gets better.” He said that shutdowns and working from home could be needed for eight more weeks and potentially longer as the number of COVID-19 cases in the U.S. skyrocket.

The stock market responds to the psychological state of investors more than anything else. If investors are fearful, stocks are likely to fall. And if a large number of Americans are diagnosed with COVID-19 in the coming weeks with a significant number of fatalities (which, unfortunately, seems likely), you can bet that investors will be fearful.

2. The impact of any government stimulus won’t be immediate 

Tuesday’s big rebound resulted primarily from reports that the Trump administration was considering a massive government stimulus package to help prop up the economy during the coronavirus pandemic. It’s understandable why investors cheered the news. The package could pump close to $1 trillion into the economy through checks sent to individual Americans and financial assistance for businesses.

Both the White House and Congress would like to move quickly. However, what politicians want to do doesn’t always translate to what actually happens. There could be some political gamesmanship that prolongs how long it takes to finalize a deal.

More importantly, the impact of any government stimulus won’t be immediate even after whatever bill emerges is signed into law. While U.S. citizens and businesses wait for government financial aid, investors will continue to hear worrisome numbers about the number of COVID-19 cases. Bad news right now outweighs good news on the way for most people.

3. Next earnings season will be brutal

Analysts are only now beginning to crunch the numbers on just how much businesses will lose as a result of the coronavirus pandemic. Obviously, some sectors will be hit harder than others. Disney, for example, could lose nearly $500 million dollars from the NBA season cancellation alone. It seems reasonable to expect that the next earnings season will be absolutely brutal.

The first wave of earnings reports will begin to trickle in starting in mid-April. Over the next few weeks after then, most major companies will report their quarterly updates. 

Stocks almost always fall when earnings decline or when companies revise their guidance downward. Look for many companies to report lower earnings in their first-quarter updates and lower their full-year and second-quarter guidance. Even if the stock market rallies somewhat over the next few weeks, I suspect the dismal earnings season will nip the rebound in the bud temporarily.

What investors should do

With the coronavirus bear market likely to last longer than anyone wants, is it OK to buy stocks now? Absolutely. If you’re a long-term investor, buying high-quality stocks at current prices will almost certainly enable you to make a great return over the coming years.

But my suggestion is to ease into buying stocks. One great idea is to invest part of your money every time you receive a paycheck, whether that’s weekly, biweekly, or monthly. If you have a big cash stockpile, spread your investments of the money over several weeks or months.

As for what kinds of stocks to buy, nearly every sector has some great bargains right now. I personally like healthcare stocks, especially shares of companies that have excellent long-term growth prospects and offer products that will be in high demand both now and in the future.

Teladoc Health has been one of my favorites for quite a while. I like it even more now with telehealth gaining widespread adoption in the wake of the coronavirus pandemic. My view is that telehealth will continue to pick up momentum. As the largest provider of telehealth services in the world, Teladoc is likely to benefit from this trend big-time.

I also am bullish on Bristol Myers Squibb. The big pharma stock has been beaten down, but its business really shouldn’t be impacted very much by the COVID-19 crisis. BMS has several blockbuster drugs with fast-growing sales and a pipeline that’s loaded with potential winners thanks to its acquisition of Celgene last year. As icing on the cake, the company’s dividend yield now stands at 3.5%.

Again, though, you can find a lot of great stocks to buy now and over the coming months. The coronavirus bear market will almost certainly get worse before it gets better. But it will get better. 

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Keith Speights owns shares of Bristol Myers Squibb, Teladoc Health, and Walt Disney. The Motley Fool owns shares of and recommends Bristol Myers Squibb, Teladoc Health, and Walt Disney and recommends the following options: long January 2021 $60 calls on Walt Disney and short April 2020 $135 calls on Walt Disney. The Motley Fool has a disclosure policy.

If there’s one person investors should listen to during a market correction, it’s Warren Buffett. At age 89, Buffett has lived through quite a few downturns. And he’s made out pretty well: His net worth is in the ballpark of $85 billion.

Through the years, the Oracle of Omaha has given a lot of great advice in his annual letters to Berkshire Hathaway shareholders. He has even written about a specific approach for how investors should handle a “super-contagious” disease.

It’s not what you think

Warren Buffett has been interviewed in recent days about his thoughts about what investors should do in response to the global coronavirus outbreak. His take was that it wasn’t a good idea to buy or sell stocks based on daily headlines. But that’s not the advice I’m referring to.

In early 1987, Buffett wrote to Berkshire Hathaway shareholders about what to do in the face of an epidemic. This was, of course, way before the outbreak of the novel coronavirus that’s causing worldwide concerns today. It was even before the avian flu, Ebola, SARS, or MERS made the news.

But more than 30 years ago, Buffett addressed two “super-contagious diseases.” He told readers that there are “occasional outbreaks” of these diseases and that they will “forever occur.” Buffett admitted, though, that “the timing of these epidemics will be unpredictable,” cautioning to “never try to anticipate the arrival or departure of either disease.”

What were these two diseases? Fear and greed among investors. Buffett stated that his goal to deal with these “epidemics” was “to be fearful when others are greedy and to be greedy only when others are fearful.”

Time to be greedy

There’s no question that plenty of investors are fearful right now. The so-called fear index — the CBOE Volatility Index (VIX) — has skyrocketed over the past couple of weeks. When the VIX goes up a lot, it’s a clear sign that many investors are scared. If you think that Warren Buffett was right in 1987, though, that means it’s time to be greedy.

Gordon Gekko, the fictional character in the 1987 movie Wall Street played by actor Michael Douglas, famously stated that “greed is good.” The line has been slammed through the years as being representative of an unhealthy fixation on making money.

But I think that Buffett’s definition of greed is different than Gordon Gekko’s. When Buffett wrote about being greedy when others are fearful, he was referring to buying stocks at an opportunistic time. A time like now.

The reality is that the market correction has left quite a few stocks valued at very attractive levels. My Motley Fool colleague Jeremy Bowman recently wrote that Walt Disney stock “may never be this low again.” I don’t know if Jeremy will be proved right or not, but I think he’s absolutely correct that Disney is a great stock to buy with its share price hammered by coronavirus worries.

When Buffett wrote to Berkshire shareholders in 1987, the stock market was soaring. Instead of fear, there was euphoria. He somewhat sarcastically noted, “What could be more exhilarating than to participate in a bull market in which the rewards to owners of businesses become gloriously uncoupled from the plodding performances of the businesses themselves.”

Now, though, the opposite scenario is taking place for stocks like Disney. To paraphrase Buffett, Disney’s share price has become gloriously uncoupled from the great performance of the business itself. There are other stocks for which this is true as well. Buy them. Be greedy in the Warren Buffett way.

What Warren Buffett doesn’t know

There’s one other thing Buffett wrote in 1987 that I think is especially relevant right now. He stated, “We have no idea — and never have had — whether the market is going to go up, down, or sideways in the near- or intermediate-term future.” Amen to that.

Keep that in mind as you contemplate whether you should buy now or wait to see if the stock market will fall even more before scooping up shares of wonderful businesses like Disney. Buffett doesn’t know what’s going to happen next with the stock market, and neither do you.

What we can all know, though, is that there’s a lot of fear right now. And it’s causing stocks with tremendous growth prospects to be priced more attractively than they’ve been in quite a while. Don’t let this “epidemic” be wasted.

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Keith Speights owns shares of Walt Disney. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares) and Walt Disney and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), long January 2021 $60 calls on Walt Disney, short April 2020 $135 calls on Walt Disney, and short March 2020 $225 calls on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.

It’s not always a great thing to get what you wished for.

The marijuana industry has looked forward to Jeff Sessions stepping down as U.S. attorney general ever since he was named to the position by President Trump. Their wish came true last week: Trump asked for and received Sessions’ resignation. The immediate reaction by marijuana stocks was tremendous — even for Canadian marijuana stocks like Canopy Growth and Tilray that weren’t really impacted all that much by Sessions’ departure.

But the celebrations could be short lived. The names of the potential candidates to replace Jeff Sessions have begun to leak out to the press. Based on the list of picks that have been identified, the new attorney general could prove to marijuana stocks that the grass isn’t always greener on the other side. Here are five top candidates Trump is reportedly considering and the stance of each on marijuana.

IMAGE SOURCE: GETTY IMAGES.

1. Alex Azar

Several sources have included current Secretary of Health and Human Services (HHS) Alex Azar as a possible replacement for Jeff Sessions. Azar’s background includes serving as a clerk for former Supreme Court Justice Antonin Scalia, serving as general counsel and deputy secretary of HHS during the George W. Bush administration, and working as an executive with Eli Lilly.

Azar doesn’t sound like a proponent of relaxing marijuana laws. In March, he stated that “there really is no such thing as medical marijuana.” He added: “There is no FDA approved use of marijuana, a botanical plant. I just want to be very clear about that.” His comment came before the FDA approved GW Pharmaceuticals‘ Epidiolex, a cannabidiol (CBD) product made from marijuana, for treating two rare forms of epilepsy.

2. Pam Bondi

CNN, The Wall Street Journal, and other news organizations have listed Florida Attorney General Pam Bondi as a top pick to take Jeff Sessions’ spot. Bondi previously served as an assistant state’s attorney in Florida.

After a circuit judge ruled that Florida’s ban on smoking medical marijuana was unconstitutional, Bondi’s office filed a 57-page document supporting the ban. The Florida attorney general’s office also argued against the circuit court decision before an appeals court. However, Bondi did issue an emergency rule on Nov. 1, 2018, to clear the way for patients in Florida to obtain Epidiolex. 

3. Chris Christie

Former New Jersey governor Chris Christie has been a close advisor to President Trump for several years and has expressed interest in the U.S. attorney general position in the past. Christie could now be a leading contender to replace Jeff Sessions.

While he was governor of New Jersey, Christie stated that supporters of marijuana legalization wanted to “poison our kids” and referred to potential tax revenue stemming from sales of legalized marijuana as “blood money.” During his 2016 presidential campaign, he promised to crack down on states that had violated federal laws by legalizing marijuana. However, Christie recently stated that “states have the right to do what they want to do” on marijuana.

4. Rudy Giuliani

Another famous advisor to President Trump who was interested in being named U.S. attorney general two years ago could be in the running. Former New York City mayor Rudy Giuliani has been listed by multiple news organizations as a potential Trump favorite to head the U.S. Department of Justice.

As mayor of New York City, Giuliani took a hard-line approach on marijuana, directing the police to make arrests for possession of small amounts of the drug. He has also fervently opposed the legalization of marijuana, including medical marijuana, in the past.

5. John Ratcliffe

NBC News has reported that Rep. John Ratcliffe (R.-Texas) is another potential front-runner to replace Jeff Sessions. Ratcliffe previously served as U.S. attorney of the Eastern District of Texas.

Ratcliffe cosponsored the Charlotte’s Web Medical Access Act that would have exempted CBD from federal marijuana prohibitions. However, he has voted against all other major marijuana reform legislation so far in his congressional career.

How much does it matter?

There are other potential candidates to fill the U.S. attorney general slot as well. The big question for marijuana stocks is: Does it really matter who Trump picks?

For Canadian marijuana stocks like Canopy Growth and Tilray, the answer to that question really is “no.” These companies don’t operate in the U.S. and won’t until federal marijuana laws are changed. The U.S. attorney general can’t change those laws.

The primary way that the U.S. attorney general can impact the large Canadian marijuana growers is by preventing or blocking exports of medical cannabis to be included in clinical studies conducted in the U.S. But even under Jeff Sessions, both Canopy Growth and Tilray were allowed to supply medical cannabis for U.S. clinical studies.

But what about for U.S. marijuana businesses? Jeff Sessions’ replacement will determine how aggressively the Department of Justice will prosecute current federal marijuana laws. Sessions chose to rescind Obama-era policies that kept the DOJ from intervening in states that had legalized marijuana.

However, it’s important to remember that President Trump himself has indicated a willingness to support legislation that would leave marijuana laws to the individual states. It doesn’t seem likely that the new attorney general, regardless of who it is, would oppose Trump in this area. He or she is likely to walk a tightrope on another front — the ongoing Mueller investigation — and probably would be eager to be in alignment with the president in other areas.

In the big scheme of things, the next U.S. attorney general might impact marijuana stocks less than expected by many. But it’s entirely possible that the current precarious environment for the U.S. cannabis industry put into place by Jeff Sessions won’t get any better for a while to come.

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Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Marijuana turned out to be one of the biggest winners on election day in the U.S. last week. Michigan residents voted to legalize recreational marijuana. Missouri and Utah voters passed ballot initiatives that legalized medical marijuana. Democrats regained control of the U.S. House of Representatives, which should increase the prospects for federal marijuana reform.

However, there’s another major election victory for marijuana that few are talking about. Billionaire businessman J.B. Pritzker won the Illinois gubernatorial race. And it could lead to more good news for the U.S. cannabis industry.

IMAGE SOURCE: GETTY IMAGES.

Land of Lincoln, land of weed?

Pritzker handily defeated Illinois’ incumbent Republican governor Bruce Rauner. And he did so on a definitively pro-marijuana platform. 

A month before the election, Pritzker stated that, if elected, he planned to “put in place a framework to license businesses to sell marijuana to consumers for recreational use.” With his victory now in hand, he intends to get the ball rolling on the legalization of recreational marijuana soon after he’s sworn in as the next governor of Illinois in early 2019. 

Illinois already allows the legal sale and use of medical marijuana. However, the state imposed strict regulations that made it challenging for businesses to get up and running successfully. Legislation signed by Rauner earlier this year will allow patients who are prescribed opioids to use medical marijuana, a move that will expand the state’s medical cannabis market.

Arcview Market Research and BDS Analytics estimate that medical marijuana sales in Illinois will total nearly $150 million this year. By 2022, that figure is projected to increase to $400 million. However, these estimates don’t factor in the possibility that Illinois could legalize recreational marijuana. 

Illinois’ population is nearly one-third the size of California, which is projected to generate $7.7 billion in legal marijuana sales by 2022. It’s possible that Illinois could eventually claim a legal marijuana market of around $2.5 billion, or more, if Pritzker delivers on his pledge to legalize recreational marijuana.

Potential winners

Another multibillion-dollar cannabis market would certainly make some businesses big winners. Several marijuana stocks appear to be top candidates for that group.

Chicago-based Green Thumb Industries could be in great shape to profit from the opening of a legal recreational marijuana market in Illinois. Green Thumb Industries (GTI) currently focuses only on marijuana markets in eight states, including Illinois. The company’s operations span the supply chain from cultivation, to manufacturing, to wholesale and retail. GTI was one of three marijuana stocks that billionaire investor Leon Cooperman disclosed last month that he had personally bought. 

MedMen Enterprises is another potential winner if Illinois legalizes recreational marijuana. The company ranks as the largest U.S. cannabis retailer. MedMen announced in October that it plans to acquire PharmaCann, one of the largest medical cannabis producers and dispensary operators in the U.S., and it’s headquartered in Oak Park, Illinois. The PharmaCann deal will give MedMen a presence in 12 states, including Illinois.

MariMed should also have a nice opportunity in Illinois with the potential legalization of recreational marijuana. The company focuses on helping marijuana growers by designing and developing production facilities, and by providing professional management services.

Although MariMed isn’t based in Illinois, the company built and leases a cannabis production facility in the state. It also acquired Betty’s Eddies last year. Betty’s Eddies is the most popular brand of cannabis edibles in Illinois.

A few hurdles

There are still several hurdles to jump before the election of J.B. Pritzker truly turns into a victory for marijuana stocks. Pritzker must first be sworn in. He then must successfully advance legislation to legalize recreational marijuana. 

There are two things working in his favor. First, Illinois doesn’t require a constitutional amendment to legalize recreational marijuana. All it takes is for the bill to pass the state’s Senate and House of Representatives. Also, Democrats enjoy supermajorities in both legislative chambers. That will make it much easier for Pritzker to advance his agenda.

Assuming such legislation is passed in 2019, it will still probably take between 12 and 18 months before recreational marijuana is available legally in Illinois. Still, the odds of that happening are pretty good now. The Illinois gubernatorial results could end up handing the marijuana industry one of its biggest wins of the 2018 U.S. elections.

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Keith Speights has no position in any of the stocks mentioned. The Motley Fool US has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

This article was originally published on Fool.com

Canada stood at the center stage of investors’ attention for months during the lead-up to the country’s legalization of recreational marijuana in October. But now there are two emerging opportunities that could be much more significant over the long run.

In just the last few days, major developments have occurred in Mexico and Thailand that could potentially change the dynamics of the global cannabis industry. Leaders like Canopy Growth , Tilray, and Aurora Cannabis just might be poised for additional growth sooner than expected. Here’s what you need to know about these two largely under-the-radar stories — and why they could be huge news for marijuana stocks. 

IMAGE SOURCE: GETTY IMAGES.

Mexico’s monumental court decisions

Medical marijuana is already legal in Mexico. Arcview Market Research and BDS Analytics project that the country will become the fifth-largest international marijuana market in the world outside of the U.S. and Canada by 2022. Even then, though, total medical marijuana sales are estimated to be less than $100 million.

But the opportunity in Mexico could change as a result of recent decisions by the country’s Supreme Court. On Oct. 31, Mexico’s highest court issued two rulings that effectively overturned the country’s prohibition of recreational marijuana. The Mexican Supreme Court stated in a news release translated by drug policy think tank Transform that “the fundamental right to the free development of the personality allows the persons of legal age to decide — without any interference — what kind of recreational activities they wish to carry out and protect all the actions necessary to materialize that choice.”

Technically, recreational marijuana will remain illegal in Mexico for now. However, the country’s legislators have 90 days to revise Mexican law. There are two primary approaches that the Mexican Congress could take. It could opt to legalize only the personal use of recreational marijuana but not the sale of the drug. On the other hand, legislators could also decide to establish a national system for recreational marijuana sales.

The former alternative wouldn’t open up the Mexican market to companies operating in the cannabis industry. But the latter option could very well do so. Even before the country’s Supreme Court rulings last week, prominent politicians, including Interior Secretary Olga Sanchez Cordero, have expressed support for the legalization of recreational marijuana. 

A Thai win for marijuana possibly on the way

While countries in North America, South America, Europe, and Africa have moved forward with the legalization of medical marijuana, that hasn’t been the case in Asia. But this could soon change.

Thailand could potentially legalize medical cannabis, according to international news agency Agence France-Presse. Jet Sirathraanon, who chairs Thailand’s National Legislative Assembly public health committee, confirmed that a draft bill for the legalization of medical cannabis — but not recreational marijuana — is under consideration.

What makes this especially notable is that Thailand is well known for its tough antidrug laws. Individuals convicted of drug trafficking face harsh penalties in the country, up to life imprisonment and even death.

Should Thailand ultimately legalize medical marijuana, it would be the first country in Asia to do so and could possibly lead to more Asian countries following its lead. South Korea is already considering the relaxation of its laws to allow importing of cannabidiol (CBD) drugs that have been approved in other countries.

Potential impact

What would these developments mean for marijuana growers like Canopy, Tilray, and Aurora? All three companies have built operations in countries with medical marijuana markets, notably including Germany. You can bet that they would jump at the chance to enter Mexico and Thailand.

Just look at the population sizes of these countries. Thailand’s population of 69 million is larger than the United Kingdom — and the U.K. is currently projected to be the second-largest international medical marijuana market outside of North America. Mexico’s population of 129 million is roughly 3.5 times the size of Canada’s population.

Mexico would arguably be the easier market for the big Canadian marijuana growers to target. Canopy already has a Latin American subsidiary. Tilray made a key acquisition last month to solidify its presence in Latin America. And Aurora’s string of acquisitions includes South American cannabis leader ICC Labs. 

However, should Thailand legalize medical marijuana, the big Canadian players would no doubt quickly establish partnerships to capitalize on the potentially lucrative opportunity there. It’s possible that Canopy, Tilray, and Aurora could leverage their operations in Australia to jump into the Thai market. 

All of this is speculation for now. Mexico could legalize recreational marijuana use only and not sales. Thailand might not move forward with its legalization efforts for medical cannabis. But there’s a real possibility that the global cannabis market could quickly become larger sooner than most people expected. If so, it would be huge news for the leading marijuana stocks.

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Keith Speights has no position in any of the stocks mentioned. The Motley Fool US has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Well, that didn’t take long. Many expected that President Trump would replace Jeff Sessions as U.S. Attorney General after the U.S. elections on Nov. 6. But for Sessions to be booted out the very next day after the elections was a quicker move than anticipated.

Sessions became the public face of opposition to marijuana legalization as a result of his history of critical comments about the drug and his overturning of Obama-era policies that kept the U.S. Department of Justice (DOJ) from intervening in states that had legalized marijuana. Almost immediately after his ousting, the cannabis industry began to celebrate. 

The replacement of Sessions could turn out to be good news for cannabis-related businesses operating in the U.S. Hold the champagne for Canadian marijuana stocks, though. There’s some big news that could be great for these stocks — but it has nothing to do with Jeff Sessions’ departure.

IMAGE SOURCE: U.S. DEPARTMENT OF JUSTICE.

Overrated impact

Some observers were quick to attribute Wednesday’s gains for Canadian marijuana stocks like Aurora Cannabis, Canopy Growth, and Tilray to Jeff Sessions’ ouster. And it’s true that these stocks did jump after reports surfaced about Sessions being replaced as U.S. Attorney General. But the reality is that marijuana stocks had already moved much higher on Wednesday, even before the Sessions news broke.

More important, though, is the fact that the exit of Jeff Sessions has little to do with most Canadian marijuana stocks. That’s certainly the case for Aurora, Canopy Growth, and Tilray. None of these companies have significant operations in the U.S. 

The only notable interactions between Jeff Sessions’ DOJ and Canadian marijuana companies were positive ones. In September, the U.S. Drug Enforcement Administration (DEA), which falls under the DOJ, granted approval for Tilray to provide a cannabinoid drug to the University of California San Diego Center for Medicinal Cannabis Research to use in a clinical trial. In October, the DEA allowed Canopy Growth to export medical cannabis to the U.S. for a clinical study, also.

For the U.S. cannabis industry, the departure of Jeff Sessions indeed is good news. But for now, at least, the leader of the U.S. DOJ is about as relevant to Aurora, Canopy Growth, and Tilray as the person who serves as the U.S. Secretary of Energy. (It’s former Texas governor Rick Perry, by the way.)

The truly big news

There was news this week, however, that truly could be important to the major Canadian marijuana stocks. And this news was the primary reason stocks like Aurora, Canopy Growth, and Tilray generated nice gains on Wednesday, well before the Jeff Sessions story hit the wires.

The truly big news was related to the potential ramifications of the U.S. elections. It wasn’t that Michigan voted to legalize recreational marijuana, although that was certainly a major development. It wasn’t that Missouri and Utah voted to legalize medical marijuana, which also were important stories in their own right. No, the key outcome from the U.S. elections for Canadian marijuana stocks was that the odds of changes being made to U.S. federal laws prohibiting marijuana just improved significantly.

Come January 2019, Democrats will claim a majority in the U.S. House of Representatives. Nearly 70% of Democratic voters support marijuana legalization, according to a recent Pew Research Center survey. That’s a lot higher than the 45% of Republicans who support marijuana legalization. It stands to reason that a Democrat-controlled House is much more likely to pass marijuana-reform legislation than a GOP-controlled House.

Does this mean that changes to U.S. federal laws on marijuana will be a shoo-in? Not at all. Even if legislation passes the House, it also has to be approved by the Senate and signed by the president. However, the chances of three hurdles being jumped increase when the probability that the first hurdle will be cleared increases.

No overrating of this impact

What would happen if the U.S. changes its federal laws to either legalize marijuana nationally or at least leave the issue to the states (which is more likely)? The impact on Canadian marijuana stocks would be enormous. 

Consider that the total Canadian marijuana market should be around $5.5 billion by 2022, according to Arcview Market Research and BDS Analytics. The marijuana market in the rest of the world outside of Canada and the U.S. should add another $3.1 billion. But the U.S. is likely to claim marijuana sales of $23.4 billion within the next four years.

The current valuations of Aurora Cannabis, Canopy Growth, and Tilray are ridiculously high if the companies can’t compete in the U.S. But they don’t look nearly as absurd if the U.S. market opened up for business for them. 

Jeff Sessions is gone, but that really doesn’t matter for the top Canadian marijuana growers. The yellow brick road leading to opening the lucrative U.S. market for these companies starts in the U.S. Congress. To mix metaphors between The Wizard of Oz and the Beatles, it could be a long and winding road.

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Keith Speights has no position in any of the stocks mentioned. The Motley Fool US has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

This article was originally published on Fool.com

If you’re highly skeptical of the multibillion-dollar market caps of some of the most well-known marijuana stocks, there are other alternatives. Two that immediately jump to mind are The Green Organic Dutchman (NASDAQOTH:TGODF) and Innovative Industrial Properties (NYSE:IIPR). The former sports a market cap of a little less than $1 billion, while the latter claims a much smaller market cap of just shy of $400 million.

Innovative Industrial Properties has performed better so far in 2018 and with much lower volatility than The Green Organic Dutchman. But which of these two marijuana stocks is the better pick for investors now?

IMAGE SOURCE: GETTY IMAGES.

The case for The Green Organic Dutchman

You could argue that a big reason to buy The Green Organic Dutchman (TGOD) stock is that the company has already weathered its worst headwinds. Big partner Aurora Cannabis opted not to exercise an option to buy a bigger stake in TGOD last month. The company’s initial public offering (IPO) stock lock-up period expired last week without a big sell-off. And the huge sell-off of marijuana stocks as Canada’s legal recreational marijuana market opened appears to be over.

With these problems behind it, what are the positive factors to buy TGOD stock? For one thing, the company should be able to sell every gram of cannabis it can produce for a while to come. As many predicted, there were widespread product shortages in Canada as the country’s recreational marijuana market opened.

As of now, TGOD can’t produce any cannabis. However, the company expects to complete its Ontario and Quebec facilities in the first half of 2019. Together, these two facilities will enable TGOD to produce 156,000 kilograms annually. Add to that total another 14,000 kilograms from its Jamaica facility that should be ready to go by the end of this year.

One competitive advantage for TGOD is that it’s one of only two certified organic cannabis producers in Canada. This should give the company an edge with customers who prefer organic products. Also, organic products command premium prices.

TGOD is gearing up to compete internationally as well. The company owns nearly half of Jamaican cannabis company Epican, which has already opened one dispensary in the country, with plans to launch four more. TGOD wholly owns HemPoland, a Poland-based company that markets a well-known cannabidiol (CBD) brand in Europe. In addition, the company has a 50-50 joint venture in Mexico, which is projected to be one of the five biggest international medical marijuana markets outside of the U.S. and Canada.

The case for Innovative Industrial Properties

Why consider investing in Innovative Industrial Properties (IIP)? One reason is the company’s unique business model. IIP is a real estate investment trust (REIT) that provides capital to medical marijuana businesses. The company develops properties for use in producing medical cannabis and then leases the properties to tenants. IIP currently has nine tenants.

Another big plus for IIP is that it focuses on the huge U.S. market. IIP operates in seven states: Arizona, Maryland, Massachusetts, Michigan, Minnesota, New York, and Pennsylvania. Three of these states — Arizona, Massachusetts, and Michigan — should have marijuana markets topping $1 billion by 2022, according to Arcview Market Research and BDS Analytics. 

IIP also has plenty of opportunities to expand. Thirty U.S. states already allow the legal use of medical marijuana. And the medical marijuana markets in the states where the company already operates continue to grow.

Unlike many companies in the cannabis industry, IIP is profitable. It also has a strong balance sheet with no debt. The company’s leases are long term, with a weighted average lease length of 15 years and an average yield on invested capital of 15.7%. This should provide a steady stream of cash flow for IIP.

IIP also stands out from most marijuana stocks in that it pays a dividend. As an REIT, the company must return at least 90% of pretax income to shareholders in the form of dividend payments. IIP’s dividend currently yields an attractive 3.42%. 

Better buy

This decision is, in my view, practically a no-brainer. The Green Organic Dutchman has a market cap of nearly $1 billion with absolutely no revenue. Meanwhile, Innovative Industrial Partners claims healthy and growing revenue and profits. I think that IIP wins over TGOD.

It is important to note that marijuana remains illegal at the federal level in the U.S. This could present problems for IIP in the future. However, my take is that the likelihood of federal antimarijuana policies easing is greater than the likelihood of further restrictions. I think IIP could provide a good way for aggressive investors to profit from the growth in the U.S. cannabis industry.

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Keith Speights has no position in any of the stocks mentioned. The Motley Fool US recommends Innovative Industrial Properties. The Motley Fool has a disclosure policy.

This article was originally published on Fool.com

If you don’t like one part of the cannabis industry, there’s always another to invest in. Two companies that provide examples of the alternatives available to investors are Aurora Cannabis (NYSE:ACB) and MedMen Enterprises (NASDAQOTH:MMNFF). Aurora ranks as one of the largest Canadian marijuana producers, while MedMen is the largest cannabis retailer in the U.S.

So far in 2018, MedMen wins hands-down when it comes to stock performance. But investors are more focused on the future than the past. Which is the better marijuana stock now — Aurora or MedMen?

IMAGE SOURCE: GETTY IMAGES.

The case for Aurora Cannabis

Aurora Cannabis could be crowned the king of capacity in the global cannabis market. The company claims a funded annual production capacity of over 500,000 kilograms (about 1.1 million pounds). But that doesn’t include Aurora’s acquisition of ICC Labs, a deal that will boost its capacity even more.

Make no mistake about it: Capacity is critical to success. Neither Aurora nor any of its peers can generate revenue without products to sell. The key, though, is to have enough demand to absorb all of the production capacity.

That’s definitely not a problem right now. Aurora is able to sell all it can produce in its home country of Canada. However, the company’s current production capacity isn’t anywhere close to where it will be over the next couple of years. 

Aurora is certainly a major competitor in the Canadian medical and recreational marijuana markets. The company lined up supply agreements with provinces comprising 98% of the country’s total population. While Canada presents a significant opportunity, Aurora knows that its long-term fortunes depend on international expansion.

That’s why Aurora has established itself as a key player in medical marijuana markets across the world. The most important of these markets, for now, is Germany. Aurora’s acquisition of Pedanios in 2017 gave it a strong foothold in the German market. Thanks to its partnerships, joint ventures, and other acquisitions, the company also has operations in several other countries, including Australia, Brazil, Colombia, Denmark, Italy, Malta, Mexico, South Africa, and Uruguay. 

Aurora’s current market cap of around $7 billion looks really steep based on the company’s past sales. But if the global market becomes as large as some observers predict — upwards of $100 billion — Aurora’s share price should still have plenty of room to run.  

The case for MedMen Enterprises

The primary investing argument for MedMen Enterprises is pretty straightforward. The U.S. remains by far the biggest marijuana market in the world. MedMen is the top retailer in the U.S. As the U.S. market grows, so will MedMen.

There’s no question that the U.S. is the 800-pound gorilla in the global marijuana market. Legal marijuana sales are projected to top $22 billion by 2022. There’s also no question that MedMen is the top retailer in the U.S. cannabis market. The company currently operates 14 retail cannabis stores in three states.

But MedMen should soon become much larger. The company recently announced that it was buying PharmaCann for $682 million, the biggest acquisition in the history of the U.S. marijuana industry. This deal will make MedMen the largest U.S. cannabis company, with 66 retail locations and 13 cultivation/production facilities.

It’s where those retail dispensaries and cultivation facilities are that makes MedMen especially attractive. The company already operates in the biggest prize of all — California — plus Nevada and New York. MedMen’s acquisition of Treadwell Nursery also puts the company in Florida, which is projected to be the No. 3 marijuana market in the U.S. by 2022.

The PharmaCann deal, though, will give MedMen a presence in additional states: Illinois, Maryland, Massachusetts, Michigan, Ohio, Pennsylvania, and Virginia. When the acquisition is finalized, MedMen will operate in 12 states that together generate more than half of total U.S. marijuana sales.

But MedMen isn’t limiting itself only to the U.S. The company also partnered with Cronos Group to launch retail cannabis stores in Canada. 

Better marijuana stock

The cases for both Aurora Cannabis and MedMen rely on key growth assumptions. I think that the growth assumptions for MedMen are more realistic over the next few years. And that gives MedMen the edge over Aurora.

Aurora, at least for now, can’t establish operations in the U.S. That puts the company at a big disadvantage when it comes to growth potential. While the situation might change in the future in a way that allows Aurora to enter the U.S. market, there’s no guarantee if or when it will happen.

Probably the main obstacle for U.S. marijuana growth projections to be achieved is the possibility of the federal government cracking down on cannabis-related businesses in states that have legalized marijuana. I think the likelihood that this scenario will occur continues to decrease. That’s good news for MedMen.

MedMen stock is still expensive, though. I’d personally prefer to see the company finalize the PharmaCann transaction and generate significant revenue and earnings before calling the stock a surefire buy. However, I think MedMen is the better marijuana stock when compared to Aurora, and is one for investors to keep on their radar screens.

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Keith Speights has no position in any of the stocks mentioned. The Motley Fool US has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Have you ever noticed that the food at a fast-food restaurant never looks as good as it does on the restaurant’s TV commercials? It’s not necessarily false advertising. Maybe some of those burgers really do sizzle, with moisture delicately falling off the crisp piece of lettuce.

Most of them don’t, though. But the fast-food restaurant has an incentive to portray its food in the most attractive light, so that’s exactly what it does.

The truth is that every company tries to present its products in the most attractive way possible. Marijuana growers such as Aurora Cannabis, Canopy Growth and Tilray certainly do. But the products these companies sell to investors isn’t actually cannabis. Instead, it’s growth.

There’s a dirty little secret that key players in the cannabis industry won’t tell you about the “products” they sell to investors: The growth they pitch isn’t as attractive as it might seem.

IMAGE SOURCE: GETTY IMAGES.

Near-term growth slower than you might think

Investors eagerly awaited the launch of the Canadian recreational marijuana market. Canada’s Parliamentary Budget Officer (PBO), which performs similar functions as the U.S. Congressional Budget Office, estimated that the Canadian marijuana market would be around $4 billion. The PBO’s range was $4.2 billion to $6.2 billion Canadian.

Will total revenue for Canada’s recreational marijuana market hit that level in 2019? Don’t count on it. Arcview Market Research and BDS Analytics project that legal cannabis spending in Canada will total closer to $2.7 billion next year.

The reality is that it takes time for a new market to ramp up. Colorado’s recreational marijuana market provides a good case in point. So does California, which saw lower initial sales than expected with the launch of its recreational marijuana market this year.

We’re already seeing product shortages in Canada. The country’s provinces are still working out the kinks in their processes. Aphria CEO Vic Neufeld warned there could be significant problems even before Canada’s recreational market opened. His predictions appear to be coming true.

Remember, too, that marijuana growers are still not anywhere close to their projected production capacities. Aurora Cannabis, for example, talks about funded annual capacity of more than 500,000 kilograms. Right now, though, the company’s actual capacity is a lot closer to 50,000 kilograms per year. 

The huge market opportunity is way in the future

Most of the big Canadian marijuana growers don’t focus just on the Canadian market, though. They’re fully aware that their companies’ market caps can’t be justified based on the domestic opportunity.

That’s why Tilray CEO Brendan Kennedy went on CNBC a couple of months ago playing up the $150 billion global cannabis industry and the possibility for multiple marijuana companies with $100 billion valuations. It’s why Canopy Growth founder and co-CEO Bruce Linton appeared on CNBC as well talking about how cannabis could disrupt a $500 billion global market.

Were these executives plucking numbers out of the air? No. A United Nations report has stated that the global marijuana market totals around $150 billion. If you include alcohol, cigarettes, and pharmaceuticals markets that could potentially be disrupted by cannabis, a figure of $500 billion isn’t unrealistic.

But will Aurora, Canopy, Tilray, and others compete in a $150 billion market in the next five years? No. How about 10 years from now? It’s still only a maybe.

That $150 billion U.N. statistic includes illegal sales of recreational marijuana. To get to a legal market of that size would require a whole lot of countries to legalize recreational weed. So far, the grand total of countries to do so is two — Canada and Uruguay. 

Mexico could be added to the list soon. The country’s Supreme Court recently overturned a ban on recreational marijuana. However, there’s no guarantee that Mexico will legalize the sale of recreational marijuana. It could simply allow the legal use of the drug.

The bottom line is that the long-term growth that marijuana executives would like for you to focus on is likely way in the future. While the global cannabis industry will certainly expand over the next five years, it won’t come anywhere close to the level of growth you might envision based on public comments from some CEOs.

What’s an investor to do?

Paying a premium for a big marijuana stock like Aurora, Canopy, or Tilray could be fine for investors with a lot of patience. If the global marijuana market increases to anywhere close to $150 billion, all three of these companies should be worth a lot more than they are now.

Another alternative is to focus on smaller marijuana stocks with less lofty valuations that have better realistic prospects for growth over the next three to five years. Origin House appears to fit the bill, for example.

The company is the largest cannabis distributor in California. Origin House’s market cap currently stands at around $500 million. With the California market projected to more than double by 2022 and opportunities for the company to add more brands to its lineup, Origin House should be able to generate annual revenue of around $325 million by 2020 and even higher after then.

Regardless of which path you take, understand the reality of growth prospects for the stocks you buy. And know that those burgers you see on TV probably won’t be what you get in the drive-through, either.

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Keith Speights has no position in any of the stocks mentioned. The Motley Fool US recommends Origin House. The Motley Fool has a disclosure policy.

This article was originally published on Fool.com

When most investors think about marijuana stocks, one like Canopy Growth Corporation(NYSE:CGC) probably comes to mind. The company cultivates and produces cannabis products, including flower and oils. But while The Scotts Miracle-Gro Company (NYSE:SMG)is still best known for its consumer lawn and garden products, it too has become a marijuana stock by emerging as the leading supplier to the U.S. cannabis industry.

There’s no contest between these two stocks when it comes to year-to-date performance. Canopy Growth is up close to 80%. Scotts is down more than 25%. But which of these stocks is the better choice for long-term investors?

IMAGE SOURCE: GETTY IMAGES.

The case for Canopy Growth

Any argument about the merits of investing in Canopy Growth has to start with the tremendous growth opportunity for the global cannabis industry. Countries around the world have legalized medical marijuana. Canada and Uruguay have legalized recreational marijuana, along with 10 U.S. states plus the District of Columbia. Some project that the global marijuana market will top $100 billion and perhaps a lot more within the next 15 years.

Canopy Growth appears to be in the best position of any company to capitalize on this market. It currently has 4.3 million square feet of licensed growing space in Canada. With its subsidiaries, Canopy claims a whopping 5.6 million square feet of growing space.

Production capacity is one key to success for Canopy Growth. Its distribution channels are another. Canopy lined up supply agreements for the recreational marijuana market in all of Canada’s provinces and territories that have announced supply plans. The company is moving forward aggressively with its retail strategy as well.

Earlier this year, major alcoholic-beverage company Constellation Brands invested $4 billion in Canopy Growth, boosting its stake in Canopy to 38% with an option to acquire even more shares. This deal solidified Canopy Growth’s status as the leading player in the cannabis industry and gave the company a big cash stockpile to expand its operations. Constellation Brands and Canopy Growth plan to launch cannabis-infused beverages in Canada when regulations are finalized for these types of products. 

Canopy Growth already has a presence in multiple international medical marijuana markets, including Australia, South America, Africa, and Europe, particularly in Germany. The company is poised to enter any other countries with federal laws that allow the legal sales of marijuana.   

The case for Scotts Miracle-Gro

Growth for the global cannabis industry is also a key part of the investing thesis for Scotts Miracle-Gro. But the focus for Scotts is on the U.S. market.

That’s actually a big plus for Scotts. The U.S. currently generates roughly 85% of total legal marijuana sales worldwide. That percentage will decline somewhat over the next few years as the markets in other countries expand. But the U.S. will continue to be the big prize for marijuana businesses for a long time to come.

Thanks to a string of acquisitions, Scotts Miracle-Gro has become the go-to supplier for U.S. marijuana growers. The company’s Hawthorne Gardening subsidiary provides a wide range of products, including fertilizers, hydroponics, lighting systems, irrigation systems, and ventilation systems.

Hawthorne Gardening makes the lion’s share of its money now in California. That’s not surprising, since it’s the largest marijuana market in the U.S. by far. However, the company has tremendous growth potential in other states — especially those that legalize recreational marijuana.

Still, Scotts Miracle-Gro’s marijuana-focused business generates only around 8% of the company’s total revenue. The rest comes from its core lawn and garden business. Scotts is launching new products and raise prices in 2019, moves that should boost its revenue. And with warmer weather conditions likely in future years, the company’s lawn and garden sales could enjoy solid growth.

There’s one more reason for investors to like Scotts Miracle-Gro as well — its dividend. Scotts’ dividend currently yields 3.11%, a nice bonus on top of the company’s growth prospects.

Better buy

If you’re a more conservative investor, Scotts Miracle-Gro is probably the better pick for you. The company generates a steady cash flow, it’s profitable, and it pays out a solid dividend. 

On the other hand, more aggressive growth investors will probably like Canopy Growth. If the global marijuana market gets anywhere close to the levels many expect, Canopy will skyrocket. The major downside for Canopy Growth is that its valuation already assumes a lot of growth. Should anything arise that derails the company’s growth trajectory, its stock would almost certainly plunge.

But trading off risk for reward comes with the territory for investors. For those who don’t want to take on as much risk, go with Scotts Miracle-Gro. For investors comfortable with higher levels of risk, consider Canopy Growth. Both marijuana stocks should be winners over the long run.

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Keith Speights has no position in any of the stocks mentioned. The Motley Fool US recommends Constellation Brands. The Motley Fool has a disclosure policy.