Marijuana: What Do Buffett and the Richest Americans Think?


Aug. 22 2019, Updated 10:48 a.m. ET

Marijuana is a hot topic right now! From presidential candidates to the wealthiest Americans, everyone is talking about the sector. According to the expectations, the US marijuana market alone could reach $22 billion by as early as 2022.

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Buffett and richest Americans discussed marijuana

Some of the views that we’re going to discuss were expressed a while ago. However, since marijuana is heating up right now, we decided to analyze the views again.

Warren Buffett’s Berkshire Hathway has a mark on many industries. Will Buffett invest in marijuana stocks? The marijuana industry is booming. A Nasdaq article said that global marijuana sales could rise from $9.7 billion in 2017 to $31.3 billion by 2022, according to data from Arcview Market Research and BDS Analytics.

Recession fears have erupted. Therefore, we think that the current scenario presents a huge opportunity to invest in the marijuana sector. The recession can’t touch the marijuana industry because it isn’t cyclical. Read Is the Cannabis Industry Recession-Proof? to learn more.

However, the cannabis industry is still in the development stage. Legal restrictions and regulations are a major headwind. Currently, marijuana isn’t legal at the federal level. Also, regulation scandals impact companies’ stock price. Usually, Buffett only invests in businesses that he understands. So, will he be interested in marijuana?

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Buffett’s view on Coca-Cola and cannabis

A Markets Insider report said that Buffett isn’t very keen about the idea of Coca-Cola (KO) getting into the cannabis business. He said, “It would be a mistake for Coca-Cola to get into the marijuana – cannabis business. They have a wholesome image, and that would be detrimental to it.”

Earlier this year, there were talks that Coca-Cola planned to team up with Aurora Cannabis (ACB) to make CBD-infused beverages. Aurora Cannabis has gained 17.7% year-to-date.

Cowen analyst Vivien Azer thinks that Coca-Cola could miss out on a massive opportunity. Currently, the CBD market is growing. The market could reach $16 billion by 2025. A CCN article said that Buffett’s advice to Coca-Cola might be wrong.

We agree! Presidential candidates want to legalize marijuana on a federal level. Constellation Brands (STZ) already partnered with Canopy Growth. With the increasing acceptance of marijuana and marijuana-based products, Coca-Cola partnering with cannabis might not be a bad idea.

Bill Gates’ thoughts on marijuana

In the past, Microsoft founder Bill Gates said that the marijuana industry would pan out. He supported marijuana legalization in his home state of Washington back in 2014. He approved of marijuana being tried at a state-level initially before making it a national policy. Microsoft partnered with Kind Financial, which supports the cannabis industry. According to CNBC, the partnership started in 2016.

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Celebrities spur the cannabis industry

In addition to presidential candidates and the wealthiest Americans, many celebrities are stimulating the cannabis industry. The support is helping cannabis become mainstream.

Snoop Dogg partnered with Canopy Growth (CGC) (WEED) in 2016. Boxing heavyweight champion Mike Tyson also launched his own cannabis company in 2018. California legalized recreational cannabis in 2018. Other celebrities like Dan Bilzerian, Gene Simmons, and Seth Rogen have also endorsed marijuana.

In April, a GreenFund article said that celebrities’ support could benefit the industry and de-stigmatize cannabis use. Celebrities could also incentivize more research into the plant’s medicinal and recreational applications.

Sector picks up steam

The cannabis sector suffered after scandals in July. CannTrust (CTST) took a massive hit after it violated Health Canada’s regulations. The company’s recent trouble with Ontario Cannabis Store impacted the stock price.

CannTrust has fallen 61.4% year-to-date. The stock has fallen 20.8% in August. Curaleaf (CURLF) also violated FDA regulations. As a result, the stock has fallen 16% in August. HEXO (HEXO) got caught up in scandal rumors. So far, the stock has fallen 3% in August.

The recent FBI investigation and challenges from FDA regulations impacted the sector in August. Cannabis still isn’t legal at the federal level. The 2020 presidential elections are getting close. We think that cannabis will be hot again due to many Democratic candidates supporting marijuana legalization and helping with regulations. To learn more, read about Andrew Yang and Bernie Sanders’ take on cannabis.

President Trump hasn’t been vocal about his views on marijuana yet. We think that he might use marijuana legalization as a key weapon for his reelection campaign. Read President Trump: Is Marijuana Legalization a Key Weapon? to learn more.

Jim Cramer, CNBC’s Mad Money host, thinks that cannabis is hot right now. Notably, he supported Canopy Growth and Cronos Group last week. This week, Cramer said that he prefers Aphria and Cronos Group over Canopy Growth.

Canopy Growth and Cronos Group have fallen 18.5% and 13.1% in August. Aurora Cannabis (ACB) has fallen 6.5%, while Aphria (APHA) has risen 22.3%.

The cannabis industry is growing. However, cannabis is a high-risk industry. Regulations still pose a challenge. We suggest that investors do plenty of research before considering any investment.

Stay tuned with us to learn more on 2020 election candidates’ take on cannabis.


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