It certainly has been a great day for pot stocks on the ASX. Although the majority of them have rallied strongly, the Auscann Group Holdings Ltd (ASX: AC8) share price has definitely been the standout with a 29% gain to 26.5 cents.
Not far behind was the Zelda Therapeutics Ltd (ASX: ZLD) share price with a 17% gain to 3.6 cents, followed by MMJ Phytotech Ltd (ASX: MMJ) with a 12.9% gain to 35.5 cents.
Why have they rallied?
At present medical marijuana is sourced from overseas on a case-by-case basis, but all this could soon change following an announcement from the Federal Government.
This morning Federal Health Minister Greg Hunt announced that the government would allow medical marijuana companies to distribute cannabis oils and medications in Australia within the next couple of months.
Furthermore, the government has advised that until sufficient supply is available in Australia, companies will be able to fast-track imports from overseas sources.
Should you invest?
Whilst this is undoubtedly great news, it is still early days and picking out a winner from an increasingly competitive industry will be both difficult and full of risk.
The one share which I think has arguably the best chance of success is the recently listed Auscann. As well as its experienced management team, the company has significant ties with the largest North American producer – Canopy Growth Corp.
The CAD$2 billion medical marijuana giant is not only a major shareholder in the company, but it also provides Auscann with royalty-free access to its expertise and intellectual property in the cultivation, manufacture, and supply of high-quality medicinal cannabis products.
I believe this gives the company a huge advantage given today's announcement and can't say I'm surprised to see its shares rally. But at the end of the day it is still a high risk investment and certainly not suitable for all investors.
