While Investors Chase Monday's Tilray, Canopy And Aurora Rally, A Potential Federal Shift Could Redefine Cannabis Growth Fundamentals

Shares of major cannabis companies, including Tilray Brands Inc TLRY, Canopy Growth Corp CGC, and Aurora Cannabis Inc ACB, are trading sharply higher Monday morning.

The stocks are soaring following a WSJ report that President Trump is potentially considering reclassifying marijuana as a less dangerous drug, a move that would have profound financial implications for the industry.

What To Know: According to the WSJ article, this potential policy shift comes after cannabis companies have contributed millions of dollars to the president’s political groups.

The rally in cannabis stocks is a direct reaction to the economic benefits that reclassification would unlock. The WSJ reports the specific change under consideration is moving marijuana to a Schedule III drug classification.

Such a change would ease federal restrictions, but more importantly for investors, it would likely make the multibillion-dollar cannabis industry more profitable. The primary reason for this is that reclassification would allow cannabis companies to take normal business tax deductions, a benefit they are currently denied under the existing tax code, which would substantially improve their bottom line.

This prospect of increased profitability and easier market conditions is fueling Monday’s surge in the sector. The report also notes that the Biden administration had started a similar process but did not complete it before leaving office.

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How To Buy TLRY Stock

Besides going to a brokerage platform to purchase a share – or fractional share – of stock, you can also gain access to shares either by buying an exchange traded fund (ETF) that holds the stock itself, or by allocating yourself to a strategy in your 401(k) that would seek to acquire shares in a mutual fund or other instrument.

For example, in Tilray Brands’ case, it is in the Health Care sector. An ETF will likely hold shares in many liquid and large companies that help track that sector, allowing an investor to gain exposure to the trends within that segment.

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