Are Cannabis Stocks a Good Buy in November 2023?

Cannabis stocks have slumped a long way down in the last few years, so is November the time to get back into the industry or not?

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Pot stocks are a riskier investment

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Cannabis stocks continue to be pretty much in the toilet this year. Granted, we’re in a bear market and that will have an effect on the sector. Yet even still, cannabis stocks aren’t likely to suddenly climb back to where they were back in 2017 — at least, not yet.

As an industry still in its infancy, let’s look today at where cannabis stocks stand in November 2023. What’s more, what could influence the sector to make it a buy in the future?

What’s been happening?

The future of cannabis stocks will continue to remain uncertain in November 2023. There were some major events, however, that could potentially lead to an increase in share price, if not now then in the fairly near future.

For instance, last month, the United States House of Representatives passed the SAFE Banking Act. This would allow cannabis stocks and their businesses to access traditional banking services. It was a huge move, as these companies are now able to receive the much-needed financial relief that other businesses have access to.

Furthermore, a study released in the last month from the Cannabis Research Institute at the University of California, Merced, found in a study that those partaking in the use of cannabis may have a lower risk of developing Alzheimer’s disease. This could at least lead to more research to develop cannabis therapies for Alzheimer’s as well as other neurological disorders.

As for this month, there were some more United States and global developments. New York State released proposed cannabis regulations to allow for further growth of the industry. The Food and Drug Administration (FDA) approved the first cannabis-based treatment for epilepsy as well, derived from cannabidiol (CBD), the non-psychoactive component of cannabis. On the other side of the world, the German government announced cannabis legalization, aiming for 2025. This is huge, given it’s the European country with the largest economy.

Not there yet

While Germany is a great development, and growth in the United States is ongoing, there are current problems that will last. For instance, the industry continues to see disappointing earnings reports. Management turnover also remains prevalent. Plus, there remain concerns about how to compete in quite a crowded cannabis industry.

So, when can investors hop back into cannabis stocks? One major move would be the legalization in the United States. But who knows when that will be? It seems as if it won’t be an overnight legalization as it was in Canada, but a slow and steady increase in usage. Further, profitability will need to improve as well, growing in market share. Plus, consumer demand and product development will also need to improve around the world.

Stocks to watch

If you’re going to continue watching cannabis stocks, stick to Canopy Growth (TSX:WEED) and Tilray (TSX:TLRY). These two companies have a diverse set of revenue streams now that have helped them at least attempt at profits once more.

Canopy stock continues to struggle severely after growing too much, too soon. Further, the company believed United States legalization was imminent, and that doesn’t seem to be the case, especially with an election due in the next year. Still, it will happen eventually, and the company should certainly see growth when it does. For now, however, costs will need to remain down, and interest will need to rise.

Tilray stock has seen profit once more, with a focus now shifting to edibles and cannabis-infused beverages. This has meant partnerships with large institutions as well. Even still, shares are a fraction of what they once were. So, while these two cannabis stocks could be the winners in the long run, for now, I’d keep them on your watch list.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has positions in Canopy Growth. The Motley Fool recommends Tilray Brands. The Motley Fool has a disclosure policy.

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