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Tilray (NASDAQ:TLRY), a Canada-based cannabis company, is trending, and TLRY stock is up about 5% in early trading after jumping nearly 11% yesterday.
The rally was sparked by a report that the U.S. Department of Health and Human Services () has recommended that the federal government fundamentally change its official view of cannabis.
Washington Could Become Much More Cannabis Friendly
The Department of Health and Human Services recommended that the Drug Enforcement Agency () change cannabis to a Schedule 3 drug from a Schedule 1 substance, Bloomberg reported yesterday.
Schedule 1 drugs have “no currently accepted medical use and a high potential for abuse,” while Schedule 3 substances possess “moderate to low potential for physical and psychological dependence.”
Importantly for TLRY and its peers, selling Schedule 1 drugs from one state to another is prohibited, while there are no such barriers for Schedule 3 drugs. As a result, the change that HHS is seeking would likely make it much easier and more profitable for cannabis companies to operate in the U.S.
Additionally, the move would trigger favorable tax changes for cannabis companies in the U.S., Investor’s Business Daily reported.
TLRY Stock: An Improved Outlook in Congress and Good Moves by Tilray
In an Aug. 28 column, I noted that Senate Majority Leader Chuck Schumer, a Democrat, was earnestly trying to pass a bill that would give the cannabis sector “access to the American financial system” for the first time. Moreover, seven Senate Republicans, only two fewer than the number likely needed to pass the bill, were backing the legislation.
I added that “[s]ince conservatives are focused on many other issues, and Republicans are looking for ways to attract young voters, I believe there’s a very good chance that the legislation will pass the House. ” Consequently, I believe that cannabis companies could soon obtain this important milestone which would enable them to spend much more on various new projects and marketing initiatives.
I also applauded Tilray’s decision to acquire a cannabis-infused beverage maker and eight beer brands while also merging with one of its Canada-based competitors, HEXO. That’s because the moves are likely to meaningfully increase the company’s brand power over the longer term.
Additionally, I think selling cannabis-infused beverages to consumers will be easier than convincing them to imbibe it in other forms because “consumers — including those who are older and conservative — are used to socializing while drinking alcoholic beverages.”
On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.