Like most Americans, I’ve suddenly had a lot of time on my hands to think. And when that happens, I usually think about marijuana … stocks, that is. With the benchmark indices flashing red yet again despite the U.S. Federal Reserve’s best efforts, it’s no surprise that the green sector also suffered. Once a bright spot in the cannabis market, Aurora Cannabis (NYSE:ACB) is careening toward implosion. Year-to-date, Aurora stock is down an absurd 66%.
Even more absurd is this black swan event. Again, with the extra time, I’ve performed a deeper dive into the coronavirus from China. Frankly, compared to other outbreaks we’ve had, the hysteria that we’re witnessing doesn’t justify the actual threat. Yes, the disease known as Covid-19 is a serious one. And yes, it is an additive threat: just because you’re worried about other problems won’t mitigate your risk profile to the coronavirus.
At the same time, the Centers for Disease Control and Prevention stated that during the H1N1 crisis in 2009, about 57 million Americans were infected. Among them, 17,000 died. Those are staggering figures. Yet for the life of me, I don’t remember people hoarding supplies like doomsday Chicken Littles. Certainly, I don’t recall any racist backlash against specific communities, which caused a surge in firearms purchases recently.
To borrow one of President Donald Trump’s favorite phrases, in some ways, the coronavirus is “fake news.” Yet this fake news is causing real problems for Aurora stock. Why?
It comes down to the pandemonium, not the coronavirus being the culprit. In other words, an iteration of the flu might not kill you. But the resultant panic might.
ACB Stock Is Not for Anyone Except Speculators
Sadly, then, it’s time for cannabis investors to look elsewhere. Perhaps Canopy Growth (NYSE:CGC) and Cronos Group (NASDAQ:CRON) provide better platforms. Relatively speaking, they’re more stable than rival offerings. Further, they both have major financial backing.
As for Aurora stock, this was a somewhat believable contrarian story. However, with the outbreak – which I think deserves to be called the “econovirus” – ultra-speculative names like ACB just don’t belong.
However, as I just alluded to, this isn’t to say that Aurora is completely without merit. One of the most compelling concepts that erupted into the mainstream was our dependence on China. Specific to Aurora stock, the underlying company specializes in medical marijuana. Well, medicine is just one of those core products that’s suffering from a huge supply chain disruption.
As I explained a week ago, China veritably owns our medical supply chain, from over-the-counter vitamin supplements to prescription drugs. Well before this crisis, defense and security strategists agonized over the leverage that China holds against the U.S. This issue became prominent during the heightened period of the trade war. Obviously, it’s one of the top security challenges today.
Now, I’m not suggesting that cannabis can replace our cold and flu medicines. But then again, who knows? I can tell you for sure that having an additional medical supply channel for the health problems that cannabis may address is never a bad gig, especially during emergencies.
Of course, China doesn’t just dictate terms for U.S. and global medicinal distribution. It’s also the world’s biggest manufacturer for almost everything. Now, companies are exploring alternatives to Chinese manufacturing sources. But such initiatives will take considerable time.
In a situation like this, having a viable cannabis market within North America would undoubtedly mitigate some pressures.
Probably Too Little, Too Late
Because of the econovirus panic, I’m sure all bets are on the table. I’m fairly confident that the current administration is at least considering full legalization. If so, this could lead to a robust partnership with our loyal Canadian friends.
If we’re going to be dependent on any country, it might as well be Canada.
However, the positives will probably come too late to save Aurora stock. It might come in time to help Canopy or Cronos. If you’re looking to gamble in this sector, I think these two offer better bets. Even then, these are extremely risky ventures.
The one thing that might help Aurora stock, though, is the return of normalcy. If the masses come to their senses and realize that they are their own worst enemy, perhaps that will extend some time for ACB. But let me warn you that this is a gamble to beat all other gambles.