From mid-2015 to late-2018, many cannabis stocks experienced massive gains. For example, Aurora Cannabis (ACB  ) and Canopy Growth (CGC  ) gained 6,150% and 5,500%. These gains were due to increasing investor interest in the sector as the cannabis market is expected to grow by significant amounts in the coming years.

However, over the last couple of years, these stocks have given back 80% to 90% of these gains. The major factor is that they are not profitable and don't have an immediate path to profitability. It's turned out that growing marijuana is not that difficult or expensive which means there are persistent oversupplies and a lack of pricing power.

Coming Legalization

Additionally, states keep legalizing it, and public opinion has decisively turned on the issue with most Americans saying it should be decriminalized or legalized. There's also the factor that marijuana laws are more stringently applied towards minorities which ties into increasing support for police reform.

Given these factors, it's only a matter of time before it becomes legal on the national level.

Bear Market

There's little doubt that the cannabis market will grow in the coming years. In 2019, it was estimated to be $13.9 billion in the U.S. and it's expected to hit over $50 billion over the next decade. Currently, 33 states have legalized it for medical use and 11 states have legalized it for recreational use.

Another looming catalyst is that Democrats could win the Presidency and Senate. Unlike other Democrats, former Vice President and Presidential Candidate Joe Biden is not too enthusiastic about legalizing marijuana at the federal level, but it's likely that there will be less enforcement on the issue. Currently, banks aren't allowed to do business with cannabis companies which have been an impediment to the industry's growth. This could possibly change under a Democratic administration.

Recent Positive Price Action

So, marijuana stocks have been in a bear market over the last two years. Yet, in recent weeks, there has been some positive price action. One factor is that there are more, higher-quality companies available that are less leveraged to the price of the plant and more to the industry as a whole.

For example, GrowGeneration (GRWG  ) is a rollup of different stores that sell equipment that can be used to grow marijuana. Innovative Industrial (IIPR  ) is a REIT that owns warehouses that it sells to growers. It then also sells higher-value services to its growers as well.

Basically, it's a better business to sell farm equipment or fertilizer than be the farmer.

Another interesting area that should thrive with changing attitudes are companies working on marijuana-derived treatments like GW Pharmaceuticals (GWPH  ). Another option for investors is to own an ETF like the Alternative Harvest Fund (MJ  ) or Horizons Marijuana Life Sciences ETF (HMMJ  ).