Cannabis stocks could see a massive boost from news that President Trump told federal agencies to prepare for the imminent loosening of federal restrictions on cannabis. “The Drug Enforcement Agency is expected to announce the first steps towards reclassifying the drug as soon as this week,” says the Independent.
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That kind of policy shift could be a game-changer for the entire industry.
For years, cannabis stocks have struggled under the weight of regulatory uncertainty, limited banking access, high tax burdens, and restrictions that have prevented many companies from reaching their full potential. A meaningful easing of federal restrictions could help remove some of those long-standing barriers, opening the door to improved profitability, stronger institutional interest, and renewed momentum across the space. If that happens, cannabis stocks could see significantly higher highs from current levels.
One name that could benefit is Tilray Brands (NASDAQ: TLRY). Analysts at Roth Capital believe the stock could rally by more than 40% over the next 12 months. Part of that optimism is tied to Tilray’s Canadian cannabis business, which remains one of the more established operations in the industry. The company is also seeing a rebound in its international business, which has become an increasingly important growth driver.
Earn Yield From Cannabis Stocks
One example is Innovative Industrial Properties (NYSE: IIPR), a real estate investment trust focused on owning, managing, and leasing cultivation and processing facilities used by licensed cannabis operators. Because it operates as a REIT, IIPR offers investors a different way to benefit from growth in the cannabis industry. Instead of depending directly on cannabis sales, it generates revenue from long-term property leases. The stock also offers a sizable dividend yield of about 13.21%, making it attractive to investors seeking both income and sector exposure.
Another REIT worth watching is NewLake Capital Partners (OTCMKTS: NLCP). Like IIPR, NewLake provides capital and real estate solutions to state-licensed cannabis operators. It gives investors exposure to the growth of the cannabis market through the property and financing side of the industry, which can sometimes provide a more stable business model than plant-touching operations. NewLake yields 11.5%.
For Further Diversification, Consider ETFs
For investors who don’t want to bet on just one or two names, cannabis-focused exchange-traded funds may offer the best route.
ETFs can provide broader diversification across the sector, helping reduce the company-specific risk that comes with owning individual cannabis stocks. Here are three to consider.
Advisor Shares Pure US Cannabis ETF (NYSEARCA: MSOS)
With an expense ratio of 0.6%, the ETF was the first actively managed U.S.-listed ETF with dedicated cannabis exposure, focusing exclusively on U.S. companies, including multi-state operators, as noted by AdvisorShares. Some of its top holdings include Green Thumb Industries (OTCMKTS: GTBIF), Trulieve Cannabis (OTCMKTS: TCNNF), Curaleaf Holdings (OTCMKTS: CURLF), and Jushi Holdings (OTCMKTS: JUSHF).
Amplify Alternative Harvest (NYSEARCA: MJ)
Or, take a look at the ETFMG Alternative Harvest ETF. With an expense ratio of 0.75%, the ETF tracks the performance of companies within the cannabis ecosystem that benefit from global medicinal and recreational cannabis legalization initiatives, as noted by ETFMG.com. Some of its top holdings include Tilray Brands, SNDL (NASDAQ: SNDL), Cronos Group (NASDAQ: CRON), and Canopy Growth (NASDAQ: CGC).
Roundhill Cannabis ETF (BATS: WEED)
With an expense ratio of 0.41%, the Roundhill Cannabis ETF offers exposure to leading U.S. multi-state operators (MSO). Its top holdings include Green Thumb Industries, Curaleaf Holdings, Trulieve Cannabis, Cresco Labs (OTCMKTS: CRLBF), and Verano Holdings (OTCMKTS: VRNOF).
Cannabis Stocks Could Rally as Federal Policy Shift Nears
If federal restrictions on cannabis begin to ease, the entire sector could enter a new phase of growth. Improved access to banking, lower tax burdens, and broader institutional participation would address many of the challenges that have held cannabis stocks back for years. That creates a more supportive backdrop for both operators like Tilray and ancillary plays such as Innovative Industrial Properties and NewLake Capital Partners.
For investors seeking diversified exposure, ETFs like MSOS, MJ, and WEED offer a balanced approach. While volatility will likely remain, the potential for higher highs in cannabis stocks is becoming increasingly tied to real policy change rather than speculation.
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