The top three performers on the S&P/TSX Composite index on Monday, Feb. 4, were all pot stocks. And each one posted impressive gains: Aphria Inc (TO:APHA) surged 12.87 percent, Cronos Group Inc (TO:CRON) jumped 11.94 percent and Aurora Cannabis Inc (TO:ACB) added 8.76 percent.
So why did they do so well? What was the reason?
A search for a causal effect turns up little. The only news yesterday involved Aurora, whose partner, Radient Technologies Inc (V:RTI), received a processing license from Health Canada. Was that news enough for the stock to jump more than 8.5 percent?
If it was or wasn’t is a topic of speculation, especially when considered beside the fact that the other two top performers’ gains came without any news being announced.
The conversation surrounding the country’s pot stocks is shifting. It’s no longer simply about one stock or the other, but is broadening to include a much larger landscape. Investors are looking at where the cannabis industry as a whole in this country is headed. And when you take that view, there are plenty of headlines that document the expansion – Canada’s now legal recreational markets are just getting legs and still have not hit their stride, medicinal markets are expanding on a global scale, and legalization south of the border is growing on a state-by-state basis providing a larger market right at Canada’s doorstep.
But perhaps the largest cause for confidence in this burgeoning industry are partnerships.
For example, in December, the giant U.S.-based tobacco company, Altria (NYSE:MO), announced it was investing $1.8 billion in Cronos Group. That is a lot of cash and marketing know-how. It has also given Cronos a strong stock boost when comparing performance over the last year.
Beverage companies – like soft drink manufacturers and beer makers – are looking to sign deals. Also in December, Tilray Inc (NASDAQ:TLRY) partnered with Anheuser-Busch InBev, maker of Budweiser, Corona and Stella Artois beers, to research the making and marketing of beverages infused with cannabis ingredients.
But if you’re still looking for specific news, several cannabis companies will be reporting quarterly earnings in the next few weeks, including Aurora, Cronos and Tilray. Beside the numbers, the comments and plans for the coming months that will be included should provide interesting reading.