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Michael Brush

Michael Brush

Chief Analyst, Cabot Cannabis Investor

Michael Brush is an award-winning Manhattan-based financial writer who writes a stock market column for MarketWatch. He is editor of Brush Up on Stocks, an investment newsletter. Brush previously covered the stock market, business and economics for the New York Times, the Economist Group, MSN Money, and Money magazine.

Brush attended Columbia University Business School (Knight-Bagehot Fellowship program), and the Johns Hopkins University School of Advanced International Studies (SAIS).

He is the author of Lessons from the Front Line (published by John Wiley), a book offering investing insights based on the experiences of leading professional money managers he’s met on the job.

Brush has received several awards for excellence in journalism including the Best in Business award from the Society of American Business Editors (SABEW), the American Society of Magazine Editors’ National Magazine Award for General Excellence in New Media, and awards for excellence in local news coverage in Pennsylvania, where he started his career.

From this author
After the close Friday, we learned that the Senate banking committee has scheduled a vote on key cannabis sector banking reform on September 27.

Of course, we do not know that the committee will stick to its schedule. But it is likely, so I will assume that will be the case. This timing suggests a possible course of action for cannabis holdings.
Monday after the close, sources close to the Senate banking committee said the panel will delay its vote on key cannabis banking reform known as the SAFE Banking Act. Some investors had expected the vote to happen next week. This update probably helps explain sector weakness Tuesday.
Rescheduling news at the end of August prompted a major rally in the shares of cannabis companies. Insiders expect it to take effect faster than you might think.
With the marijuana sector being discounted, now is a good time to consider investing. Let’s examine all 8 marijuana ETFs, and the 3 I like.
You are receiving this unscheduled update due to recent strength in cannabis names. Your regularly scheduled update will be published on September 13.

For all of the past year, I have been steadfastly bullish on cannabis names. The group was hated, but several underlying trends told us that was likely to change. This set it up as an ideal contrarian play.

Now, the steady buying I’ve been suggesting is paying off.
One down, one to go.

Cannabis stocks soared today (August 30) on news that Health and Human Services (HHS) recommends cannabis get downgraded to Schedule III under the Controlled Substances Act, from Schedule I.

I predicted this a few days ago on the Cabot website, and in my last Cabot Cannabis Investor update on August 9.
Between record state-level cannabis sales, improving price compression and positive polling, there are signs of hope that cannabis stocks may finally get out of the doldrums.
Industry experts are calling for incremental progress towards cannabis legalization when lawmakers return from recess in September. Here’s how it could shape up.
Cannabis legalization is an ongoing battle for politicians, but consumers’ cannabis spending is heating up as more and more states join the flower-friendly ranks.
At least four states posted record cannabis sales in June and July, Illinois, Maryland, Massachusetts and Missouri.

These sales trends and ongoing legalization around the world are why global cannabis sales will hit $104 billion a year by 2030, says a recent report from Vantage Market Research. That would represent an annual growth of 26% a year from 2023 to 2030.

Despite these positive trends, cannabis stocks are being held back by delays in reform efforts in Washington, D.C.
Politicians in Washington, D.C. let cannabis investors down once again.

Commentary from lobbyists and Senators had suggested the Senate banking committee might make progress on cannabis sector banking reform (allowing banks to work with companies) in late July.

That turned out not to be the case. I cautioned at the time that a risk here is that the actions of politicians are hard to predict. But it was worth having exposure, in case there actually was progress on so-called SAFE banking, which seemed possible at the time.
Cannabis-friendly states are showing strong sales growth while legalization progresses and states tamp down on the illicit markets.
In a letter outlining his near-term agenda, Senate majority leader Chuck Schumer (D-NY) says passing bank reform favoring the cannabis sector is a top priority.

The letter to Senate colleagues confirms what lobbyists and cannabis company executives have been reiterating for the past several weeks: July could be a turning point for the group, offering legislative developments that push marijuana stocks much higher.

This sets up cannabis as a potentially good short-term swing trade, but it also confirms the bullish long-term prospects for the group.
Marijuana stocks rallied (prematurely) in June now that cannabis banking reform is once again a priority, but there’s a better way to play it.
Politics and cannabis investing go hand in hand, and if it becomes a wedge issue, the politicians may finally catch up to the voters’ position.
Lawmakers’ return from holiday recess could put SAFE banking back in the news and set up a trading opportunity in cannabis stocks.
There is a potentially nice trading opportunity setting up in cannabis near-term.

When Washington, D.C. lawmakers return from their July 4th break on July 10, they are likely to get down to serious business on the SAFE Banking Act.

This proposed law would boost investor interest in the space because it would allow banks to work with cannabis companies. This would help cannabis companies in several ways.
A big move may be coming for cannabis stocks, which could be an opportunity for short-term profit on the path to long-term sector growth.
Cannabis stocks are about to make a big move over the next several weeks. This is a good trading opportunity.

What is going to send the group higher?

The Senate should take significant steps to advance key bank sector reform that would help cannabis companies, say lobbyists.
With election primaries heating up it’s worth considering the candidates’ positions on cannabis reform and the impact that could have on cannabis stocks.
Now that Florida Gov. Ron DeSantis (R) is officially in the race for the Republican presidential nomination, it’s worth knowing more about his views on cannabis policy.

After all, DeSantis will now play an even bigger part in the election debates, even if polls say DeSantis has a slim chance against frontrunner Donald Trump. His voice matters – since cannabis is such a politically driven sector.

The bottom line: DeSantis offers a mixed picture, but it’s not all bad for cannabis investors.
After a brief run-up prior to the latest SAFE Banking hearing, marijuana stocks “sold the news” on the day of the event.
Cannabis stocks rose sharply in early May on news that Congress is getting serious again about allowing banks to serve cannabis companies. The Senate banking committee will hold hearings on the favorable bank reform May 11.

The reform bill, called the Secure and Fair Enforcement (SAFE) Banking Act, was recently refiled by a bipartisan group of lawmakers in both branches of Congress. The co-sponsors were: Sens. Jeff Merkley (D-OR) and Steve Daines (R-MT), and Reps. David Joyce (R-OH) and Earl Blumenauer (D-OR).
Although federal efforts to push through cannabis reforms have failed, recent Florida polls show powerful support for legalization.
After another month of dramatic declines in March, cannabis stocks showed a little more stability in April.

This is encouraging, even though it is never really possible to “call the bottom” in out-of-favor groups.

How out of favor is cannabis? I’ve invested through three bear markets, and I don’t think I have ever seen a group as unloved as cannabis is now. Remember, this is a good thing if you are a contrarian investor looking for bargains, as long as the group in question is not a value trap. (Like the declining newspaper industry years ago, a value trap that Warren Buffett got caught in.)
On a marijuana-friendly April 20, cannabis stocks celebrated with product launches and a minor sell-off in the face of more federal disappointment.
While cannabis companies have yet to see meaningful federal progress in the U.S., the dominoes are beginning to fall in Europe now that Germany has announced its proposed reforms.
The cannabis sector remains under pressure. But the stock price weakness makes the group a good buy for contrarians because there are plausible catalysts on the horizon.

Let’s be clear. It won’t be easy to buy. It never is, when sentiment is so dark.

Buying right never feels good, as the saying goes. When the right time to buy comes along, you won’t want to, is how technical analyst Walter Deemer puts it.
Marijuana stocks have been some of the worst performing stocks for the last few years. Couple the abysmal sentiment with some positive state-level trends and it might be time to buy.
Although cannabis stocks remain weak, recent polling from Florida, “The Sunshine State,” is improving industry sentiment and pointing to better conditions ahead.