3 Top Pot Stocks to Watch in October
September was a rare up month for cannabis stocks. The sector received a boost when the U.S. Department of Health and Human Services, on Aug. 29, recommended that the Drug Enforcement Agency (DEA) should reclassify the drug to a Schedule III substance, putting it in with certain steroids or Tylenol with codeine, instead of where it is grouped now, a Schedule I drug, similar to fentanyl and heroin.
The reclassification would be one step toward allowing federal decriminalization of the drug. As it stands, it is legal in 37 states for medical use and fully legal in 23 states, but not having it legal nationally causes complications that have weighed down cannabis stocks. It's still illegal to transport cannabis across state lines, so the crop must be sold in the same state it is grown in. So, no matter how good a crop a company in Florida may have, it still has to rely on its own greenhouses in other states when selling in those places.
Being banned federally also means that financing is complicated because banks generally won't lend money to cannabis companies. There are also tax problems associated with being illegal at the federal level, as companies cannot make the same type of federal deductions other industries can. The only deduction a marijuana-related business can take is the direct cost of goods sold. For many companies, that difference is enough to make them unprofitable.
Source Fool.com
