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The ACT has legalised weed: These are the pot stocks to watch for high returns

What are the weed stocks to look out for? (Source: Getty)
What are the weed stocks to look out for? (Source: Getty)

The Australian Capital Territory has become the first jurisdiction in the nation to legalise the personal use of cannabis, after a bill in Canberra passed on Wednesday afternoon.

However, Aussies need to know that while the bill has been passed, it won’t come into effect until 31 January 2020 – and you can’t legally buy it, either.

So while you technically can’t roll up your joints just yet, you can still make the most of the new legislation: through the stock market.

Cannabis stocks have been bubbling up for the last few months now, but could this move by the ACT make now the time to invest in them?

Invest in a handful

According to financial commentator Peter Switzer, investors need to tread carefully as they could find themselves in a pickle from the clash between ACT law and Federal law, which still says it’s illegal to grow or use cannabis.

“One of the great turn-offs to investors and especially big-end-of-town institutions that can be big drivers of share prices, is uncertainty,” Switzer told Yahoo Finance.

“Clearly, if there was Federal government acceptance of the law change, the impact on ‘pot’ stocks would be significant.”

In fact, on the day that the news was announced, one of the top marijuana shares – Althea Group – actually fell.

However, that doesn’t mean it’s out of the ring, Switzer said.

“Anyone trying to get high earnings from pot stocks, maybe should get exposure to a few and hope that one becomes the out and out leader of the pack.

“You always have to be careful of stocks that can make it or be broken on the back of decisions made by politicians,” he warned.

In August, small cap company expert Tim Boreham earmarked Althea, MMJ Group, Ecofibre, Elixinol Global and ECS Botanics as ‘emerging winners in cannabis corner’.

Look to US stocks

But according to Stake founder and CEO Matthew Leibowitz, the Australian market for weed stocks is “too small to even register” and we should look stateside instead.

“The US has the largest, most progressive and dominant marijuana companies in the world,” Leibowitz told Yahoo Finance, citing Canopy Growth, Tilray and Aurora Cannabis.

All three have an international presence through distribution agreements into more than 30 countries altogether, with Tilray an “interesting one to watch” because of its pharmaceutical export distributions.

“As a trade, the major marijuana stocks are well off their highs earlier in the year, they've actually taken a real beating in the last few months.”

Leibowitz recommends watching Innovative Industrial Properties (IIPR), which provides land and services to the marijuana sector.

“It’s one of the only US weed stocks that is up for the year (around 100 per cent for the year) and if the sentiment for weed stocks change, it's the one worth keeping a close eye on,” he said.

“But remember that's not until we see the tide turning on the pot stocks as a whole.”

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