I’ve been bullish on the AdvisorShares Pure US Hashish ETF (NYSE: MSOS) for nicely over a yr.
This exchange-traded fund (ETF) consists primarily of multistate American hashish companies that develop, distribute and promote the product.
Thus far, my bullishness on this ETF hasn’t paid off.
Like the remainder of the market, the AdvisorShares Pure US Hashish ETF has taken a beating over the previous 12 months.
However I haven’t seen any change within the fundamentals of the hashish sector that make me change my tune on the fund.
As a substitute, I imagine that my bullishness was merely a yr too early.
Latest information from the White Home has solely reaffirmed my conviction.
Final week, President Biden introduced steps towards a large overhaul of U.S. hashish coverage.
In the course of the announcement, Biden referred to as for a assessment of how hashish is at the moment scheduled below federal regulation.
Hashish continues to be labeled as a Schedule 1 drug. That classification consists of medicine that don’t have any accepted medical use and have the best danger for substance abuse.
This lumps hashish in with heroin and tub salts.
It additionally places hashish in a extra restricted class than fentanyl and cocaine.
That’s fairly loopy contemplating that 70% of American voters suppose that hashish ought to be absolutely authorized (not scheduled in any respect). And hashish is already absolutely authorized in 19 states and authorized for medical causes in 38 states.
The timing of Biden’s announcement was a shock. The truth that hashish was going to be rescheduled or absolutely legalized ultimately was not.
I imagine that is the official turning level for the AdvisorShares Pure US Hashish ETF.
Getting hashish out of Schedule 1 purgatory will likely be an enormous catalyst for the inventory costs of hashish corporations.
It can unleash a large quantity of shopping for curiosity.
At present, as a result of hashish continues to be a Schedule 1 drug, nearly no institutional or retail traders can personal shares in multistate operators (MSOs).
Brokers gained’t commerce them. Mutual and hedge funds aren’t allowed to personal them.
Heck, the MSOs can’t even checklist on an American inventory trade. As a substitute, all of them must checklist in Canada.
I’m not exaggerating once I say that lower than 5% of funding {dollars} out there are at the moment in a position to personal hashish corporations.
Provided that no one should buy these shares, it’s no shock to be taught that they’re typically misvalued.
Proper now, the MSO trade is maybe probably the most inexpensively valued high-growth sectors the market has ever seen.
Biden’s information is the turning level.
When hashish is rescheduled or absolutely legalized, billions (if not trillions) of funding {dollars} that beforehand couldn’t personal these MSO shares will all of a sudden be capable of.
When that occurs, the present mismatch of development and valuation will likely be remedied.
The upside right here isn’t a pleasant little return. It’s a large one.
The Worth Meter ranks the AdvisorShares Pure US Hashish ETF as “Extraordinarily Undervalued.”
This commerce understanding large has all the time been a matter of “when,” not “if.”
And President Biden’s announcement has made the “when” a way more a near-term occasion than ever earlier than.
Valuation Score: Extraordinarily Undervalued
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Good investing,
Jody