Why Cronos Stock Is Up 17% So Far in December -- After Jumping 23% in November

An open-mouthed big fish with a dollar sign on it swimming after three smaller fishes with dollar signs.

What happened

Cronos Group (NASDAQ: CRON) stock soared 23.3% in November, according to data from S&P Global Market Intelligence . And it's up 17.7% in the first two trading days of December.

This compares extremely favorably to the recent performances of the broader market and shares of the Canadian marijuana grower's peers. The S&P 500 returned 2% last month and is down 1.4% so far in December.

So what

December performance

Cronos stock popped on Monday and again on Tuesday for a two-day total rise of 17.7%, driven by news out on Monday that tobacco giant Altria (NYSE: MO) is in talks with Cronos about a possible investment in the marijuana company. Reuters, which broke the story, said the talks surrounded a possible buyout, though Cronos simply confirmed that the two companies are discussing a "potential investment."

It makes good sense that Altria, the U.S. cigarette leader that's probably best known for its Marlboro brand, is looking to diversify, as cigarette smoking rates among Americans have been declining for many years. Shares of Altria are down nearly 22% over the last year, suggesting there could be more urgency than in the past for the company to diversify. Whether Cronos (or other major marijuana companies) will want to risk being tainted by being associated with a tobacco company remains to be seen. If the price is right would be my guess.

November performance

We can largely attribute Cronos stock's strong performance last month to three catalysts related to the midterm elections in the United States. Taken together, they arguably brought this country a leap or two closer to legalizing cannabis at the federal level.

1. Voters in Michigan gave the green light to recreational cannabis for adults, making it the 10th state (along with Washington, D.C.) to do so, and folks in Missouri and Utah voted to legalize marijuana for medical use, bringing the total to 32 states where medical cannabis is (or soon will be) legal.

2. The Democrats took control of the House of Representatives from the Republicans, who remain in control of the Senate. As a broad generality, Democrats are more open than are their counterparts across the political aisle to legalizing marijuana across the land.

3. Former U.S. Attorney General Jeff Sessions resigned a day after the elections. Sessions, who quit under pressure from President Donald Trump, was an ardent marijuana foe. As I wrote last month, "some feared that he could crack down on the possession and/or use of the substance in U.S. jurisdictions where it's legal for medical and/or recreational use."

Now what

Cronos stock will almost surely get an additional boost if a deal is struck with Altria involving either a buyout or a significant investment. But buying shares of any stock based on such speculation can be very risky. If no deal occurs, shares will often fall back to the level at which they were trading before being bid up on speculation.

As with any stock, it's best to make your investment decisions on Cronos based on the company's business prospects.

10 stocks we like better than Cronos Group Inc.

When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor , has quadrupled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Cronos Group Inc. wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of November 14, 2018

Beth McKenna has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

More Related Articles

Sign up for Smart Investing to get the latest news, strategies and tips to help you invest smarter.