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The Cannabis Sector’s Billion-Dollar Tax Cut

Written by Jeffrey Neal Johnson

On the heels of the executive order to fast-track research into psychedelic drugs, a second major federal policy shift on April 23, 2026, is sending waves through the cannabis sector. However, the real catalyst is being widely misunderstood by many on Wall Street. The recent decision by the current administration to move state-licensed medical marijuana from Schedule I to Schedule III of the Controlled Substances Act is not about federal legalization.

Instead, the true story is a surgical financial change buried in the U.S. tax code that could unlock billions in value for a select group of companies. For investors, this move rewrites the industry’s rulebook, shifting the entire sector from an era of speculative hope to one of tangible cash flow. This development creates a clear new playbook for identifying potential profitability in the cannabis market.

How the Death of 280E Changes Everything

For over a decade, U.S. cannabis companies have been uniquely punished by Internal Revenue Code Section 280E. This tax rule, originally designed in the 1980s to prevent illegal drug traffickers from claiming tax deductions, was applied to state-legal cannabis businesses.

In simple terms, this meant that licensed companies could not deduct ordinary and necessary business expenses from their taxable income. Imagine a normal retail sector business not being allowed to deduct rent for its stores, payroll for its staff, or marketing for its products. This policy forced cannabis operators to pay taxes on their gross profits instead of their net income, leading to crushing effective tax rates that often exceeded 70%.

The administrative move to Schedule III instantly nullifies this rule for licensed medical operators. This single change allows them to operate like any other business, reducing their effective tax rate to the standard corporate rate of around 21%.

For a stock’s valuation, the impact is direct and powerful. This policy change acts as a massive, non-dilutive infusion of cash directly onto company balance sheets. It appears poised to immediately improve net income, boost earnings per share (EPS), and provide management teams with hundreds of millions of dollars in newfound capital. This capital can now be used to fund growth, pay down debt, or return value to shareholders, rather than being sent to the IRS.

The New Kings of Cannabis Cash Flow

Despite the sector-wide excitement, this fiscal windfall is not a tide that lifts all boats equally. While the transition to Schedule III represents a broad administrative shift, the most profound financial advantage, a significant, non-dilutive infusion of liquidity, is being captured almost exclusively by the leading U.S. Multi-State Operators (MSOs) with dominant revenue streams and solid operational infrastructures.

The Profitability King

Green Thumb Industries (OTCMKTS: GTBIF) stands out as a potential gold standard in the space. It was the only major MSO to consistently generate positive net income even while operating under the full weight of the 280E tax burden, reporting trailing net income of $114.15 million.

With a reasonable price-to-earnings ratio (P/E) of 15X before the change, its profitability is now set to expand significantly. This newfound cash flow could allow the company to invest more heavily in marketing its popular consumer brands, such as Rythm and Dogwalkers, potentially accelerating its market share growth in key states.

The Scale and Shareholder Return Play

With over $1.27 billion in annual sales, Curaleaf (OTCMKTS: CURLF) has massive scale, which could make its tax savings among the largest in the industry. More importantly, the company provided definitive proof of this new financial reality by announcing an $83 million share buyback program.

A share repurchase is a classic move by a mature company with excess cash. The announcement’s timing, just days before the policy shift, could be seen by investors as management signaling its confidence, even before the official announcement of the end of the 280E cash drain. This demonstrates that Curaleaf’s focus is shifting from survival to returning capital to shareholders, which could attract a new class of value-oriented investors.

The High-Leverage and Strategic Plays: Trulieve, Verano, and Cresco Labs

Other MSOs appear positioned to use their newfound cash for aggressive growth. Trulieve Cannabis (OTCMKTS: TCNNF), with its dominant market share in Florida and strong political connections, may use its tax savings to fortify its position ahead of a potential adult-use legalization ballot measure in the state.

Meanwhile, companies like Cresco Labs (OTCMKTS: CRLBF), which recently secured a medical license in the massive Texas market, and Verano Holdings (OTCMKTS: VRNOF), which streamlined its corporate structure by redomiciling to Nevada, now have the capital to fund these expansion plans without taking on as much debt or diluting shareholders.

The Tilray Contrast: Know What You Own

When cannabis is in the news, many investors understandably flock to familiar, NASDAQ-listed names like Tilray Brands, Inc. (NASDAQ: TLRY), believing that the over-the-counter markets (OTCMKTS) are too risky. Tilray is one of the most liquid and widely held stocks in the sector, making it a go-to for traders looking for exposure to industry-wide sentiment.

However, its business model is fundamentally different from the U.S. MSOs. Tilray’s operations are primarily focused on the Canadian adult-use market, international medical markets in Europe, and a growing U.S. presence centered on craft beverage brands like SweetWater Brewing.

It is not a direct U.S. plant-touching operator. Because Tilray was never subject to the punitive U.S. 280E tax, it does not receive the direct, fundamental financial uplift from this specific catalyst. For investors considering the impact of this policy change, Tilray may be viewed as a sympathy trade rather than a primary beneficiary.

The Green Wave: A New Era for Cannabis Profits

The move to Schedule III is only a partial win, but it may be the most important financial victory the U.S. cannabis industry could have asked for. It does not legalize cannabis at the federal level, allow for interstate commerce, or clear the way for immediate uplisting to major U.S. stock exchanges like the NASDAQ. These remain significant hurdles that investors should continue to monitor.

However, by normalizing the industry’s tax structure, this move gives the strongest U.S. operators the ability to build financial fortresses. The urgent need for federal banking reform, while still important, is less critical now that these companies can generate internal cash flow to fund operations and expansion.

The investment playbook for cannabis has now clearly shifted. The focus moves away from speculating on broad policy reform and toward analyzing the fundamentals of U.S. MSOs that can effectively convert these massive tax savings into sustainable earnings.

While the industry has not yet received a full legal all-clear, it has received an official financial one. Investors interested in the space might consider adding the top U.S. MSOs to their watchlist and paying close attention to their upcoming quarterly earnings reports for management’s first official guidance in this new, post-280E environment. READ THIS STORY ONLINE

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USA Rare Earth’s $2.8B Power Play to Secure the Supply Chain

Written by Jeffrey Neal Johnson

In the modern global economy, a small group of 17 metals underpins all advanced technology. These are the rare earth elements (REEs), and four in particular, neodymium, praseodymium, terbium, and dysprosium, are the indispensable ingredients for the high-performance permanent magnets that power everything from electric vehicle (EV) motors and wind turbines to the sophisticated guidance systems in F-35 fighter jets.

For decades, the complex process of mining and separating these elements has been geographically concentrated, creating a significant strategic vulnerability for Western economies dependent on a single-source supply chain.

This market structure has ignited an urgent, global race to develop secure, resilient, and scalable sources for these critical materials. As governments and industries, from defense to clean energy, seek to de-risk their supply chains, a new class of resource companies is emerging. USA Rare Earth Inc. (NASDAQ: USAR) is positioning itself at the forefront of this movement, executing a clear, multi-billion-dollar strategy to build a new industrial ecosystem independent of traditional channels.

The $2.8B Bet on Brazil That’s Already De-Risked

A company’s trajectory can often be defined by a single, transformative move. For USA Rare Earth, that moment arrived with the definitive agreement to acquire Serra Verde Group for approximately $2.8 billion. This transaction, which gives USA Rare Earth 100% ownership of the Pela Ema mine in Brazil, fundamentally reshapes USA Rare Earth’s financial and strategic profile by immediately transitioning it from a development-stage entity to a global producer.

Unlike exploration projects that carry years of uncertainty, the Pela Ema mine is an operational, revenue-generating asset built on an advantageous ionic clay deposit, which can enable more environmentally sustainable extraction.

The financial impact is immediate and substantial, with Serra Verde projected to deliver annualized EBITDA of $550 million to $650 million by the end of 2027.

The combined company is targeting an impressive $1.8 billion in EBITDA by 2030. 

To further bolster its credibility, the deal brings seasoned mining executives Sir Mick Davis and Thras Moraitis to USA Rare Earth’s board.

The acquisition was funded with $300 million in cash and around 126.8 million new shares. This equity component is the strategic price for acquiring a de-risked asset. The investment is further insulated by a 15-year, 100% offtake agreement capitalized by U.S. government entities and private sources. This contract not only guarantees a buyer for the mine’s output for over a decade but also includes minimum price floors for the four key magnetic REEs, securing revenue streams and protecting against market volatility.

More Than a Mine: The French Connection

While the Serra Verde mine establishes a powerful production base in the Americas, USA Rare Earth’s strategy extends across the Atlantic. USA Rare Earth has solidified its global ambitions with an approximate 12.5% equity stake in Carester SAS, a French leader in REE processing, separation, and, crucially, recycling. This partnership is the second pillar of a broader vision to build a comprehensive, transatlantic supply chain.

This investment seeds a larger initiative to create an integrated industrial hub for rare earths in Lacq, France. The platform will feature a 3,750 metric tons per annum (mtpa) metal and alloy production facility from USA Rare Earth, located alongside Carester’s separation and recycling plant. This co-location creates a circular economy model, providing USA Rare Earth with access to cutting-edge European processing technology while giving Carester a long-term feedstock from both recycled materials and USA Rare Earth’s Round Top deposit in Texas.

This forward-thinking expansion is strongly supported by the French government, which has identified the project as a strategic priority for its industrial sovereignty. This support is tangible, with the government expressing interest in providing significant financial backing, including state guarantees such as the Garantie des Projets Stratégiques to secure debt financing, underscoring the venture’s geopolitical importance.

How USA Rare Earth Is Proving Its Thesis

Strategic maneuvers are ultimately judged by market reaction and operational execution. On both fronts, USA Rare Earth is showing positive momentum. USA Rare Earth’s stock price has risen over 50% over the past 30 days and around 110% year-to-date. This rally is supported by heavy trading volume, recently hitting 27.82 million shares, up from an average of 18.62 million, suggesting strong and growing investor interest.

Wall Street analysts are taking a constructive view, with the stock holding a Moderate Buy consensus and an average 12-month price target of $31.50. This outlook was recently reinforced by Wedbush’s new Outperform rating. USA Rare Earth’s financial position may be further bolstered by a proposed collaboration with the U.S. government, which could provide access to $1.6 billion in funding via the CHIPS Program to accelerate domestic capabilities.

Operationally, USA Rare Earth is hitting key milestones. It recently completed its first commercial pour of high-purity yttrium metal, a critical input for high-temperature aerospace components like turbine blades. This achievement, combined with the recent commissioning of Phase 1a of its commercial magnet production facility in Stillwater, Oklahoma, demonstrates that USA Rare Earth is successfully executing its complex mine-to-magnet strategy.

USA Rare Earth’s Place in the New Supply Chain

USA Rare Earth has executed a series of calculated strategic moves, transforming itself from a domestic prospect into a de-risked, vertically integrated global producer. The powerful combination of a cash-flowing Brazilian mine, a government-backed European processing hub, and a burgeoning U.S. manufacturing base creates a resilient, end-to-end supply chain that few companies can match.

This fully integrated platform is directly aligned with the multi-decade growth trends in electrification and the urgent geopolitical priority of resource independence. For investors seeking strategic exposure to these critical sectors, USA Rare Earth has moved beyond ambition and is now building the foundation of a new, independent supply chain for the Western world. READ THIS STORY ONLINE

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More Than Just Dirt: Caterpillar Is the AI Stock Nobody Saw Coming

Written by Jeffrey Neal Johnson

While the market’s growth stories often center on software and digital platforms, a powerful and perhaps more durable trend is unfolding in heavy industry. The companies responsible for building the physical world are reaching unprecedented valuations as a significant market rotation into tangible assets gains momentum.

This shift has moved beyond a simple recovery narrative; it’s now driven by accelerating global spending on an expanded definition of infrastructure that includes both traditional projects and the digital backbone of the modern economy.

Caterpillar (NYSE: CAT) is a prime example of this industrial sector’sresurgence. With Caterpillar’s stock price climbing about 40% year-to-date and hitting all-time highs, it has significantly outpaced the broader market averages. This performance signals that investors are increasingly rewarding businesses with strong, reliable cash flow and a direct role in constructing and powering global commerce.

For those watching the market, the long-term outlook for heavy machinery appears to be building on a new and remarkably solid foundation.

Performance in a World Under Construction

Sustained demand for Caterpillar’s iconic yellow equipment is currently driven by two powerful, parallel economic forces. The first is a global push for infrastructure modernization. This includes not just the high-profile rebuilding of roads, bridges, and airports, but also the critical, less-visible work of upgrading electrical grids and water systems.

The second force is the strategic trend of industrial reshoring. As companies move manufacturing and supply chains back to North America and Europe to increase resilience, the demand for new factories, warehouses, and logistics hubs has created a long-term construction boom. These powerful macro-drivers translate directly into Caterpillar’s exceptional financial metrics, creating a clear link between real-world activity and stock performance.

This cause-and-effect relationship is clearly visible in Caterpillar’s recent results, painting a picture of operational strength:

• Dominant market performance:Shares of CAT are currently trading just below their 52-week high of $820.20, reflecting over a 170% gain over the past 12 months. This momentum indicates investor confidence in Caterpillar’s strategic direction and its ability to execute.
• Explosive earnings power: In its most recent quarterly report on Jan. 29, Caterpillar surpassed analyst expectations, reporting earnings per share of $5.16. This result was driven by a 17.9% year-over-year increase in revenue to $19.13 billion—a level of growth not always seen in a mature industrial giant.
• Exceptional profitability:Caterpillar operates with remarkable efficiency, evidenced by a best-in-class return on equity of 45.76%. This key metric shows how effectively management is using shareholder capital to generate profits, which is a crucial indicator of a well-run company.

CAT’s High-Tech Growth Engine

Caterpillar’s modern growth story extends beyond its traditional identity as a construction equipment manufacturer. Several forward-looking catalysts are positioning Caterpillar to capitalize on high-growth industries, directly linking its future success to the evolution of the digital and automated economy.

The most significant of these new drivers is Caterpillar’s Energy and Transportation segment. This division has become a critical supplier of essential backup power generation systems for artificial intelligence (AI) data centers. These massive facilities consume enormous amounts of electricity and require uninterrupted power to function, making industrial-scale generators a mission-critical component. As global AI computing power demand explodes, so too does the need for reliable energy, placing Caterpillar at the very center of the digital infrastructure build-out.

Simultaneously, Caterpillar is making a strategic pivot toward automation and technology-integrated solutions. The recent acquisition of a self-driving tractor startup is a clear signal of this shift. This move is not just about futuristic technology; it’s a calculated entry into the higher-margin world of recurring software revenue. By equipping its machines with autonomous capabilities, Caterpillar can transition from one-time equipment sales to long-term service and software subscriptions, boosting customer efficiency and creating a more predictable revenue stream.

This forward-looking growth story is complemented by a deeply rooted commitment to direct capital returns to shareholders, reinforcing its appeal to long-term investors.

• A member of the Dividend Aristocrats, Caterpillar’s ironclad 30-year track record of consecutive dividend increases underscores its status as a reliable dividend compounder that rewards investors across economic cycles.
• The company’s current annual dividend of $6.04 per share is well-supported by a conservative payout ratio of 32.09%, indicating that the dividend is not only safe but has ample room for future growth.
• An active $20 billion share buyback program approved in mid-2024 continues to reduce the number of shares outstanding, which mechanically increases the value of the remaining shares over time.

Weighing the Opportunity in a Market Leader

The evidence suggests that Caterpillar has successfully evolved from a purely cyclical industrial company into a diversified infrastructure and energy technology leader. Its impressive performance validates the underlying strength of the physical economy and showcases its strategic ability to adapt to new, high-growth sources of demand.

This transformation is increasingly recognized by market experts. While the consensus rating from 24 analysts is a Moderate Buy, recent price target upgrades from major firms such as Truist ($920) and Jeffries ($900) suggest that significant upside could still remain. These targets reflect growing confidence in the durability of the data center and reshoring trends as long-term revenue drivers.

For investors who are considering shares of CAT for their portfolios, it’s important to weigh the complete picture. The stock’s beta of 1.52 indicates it has historically been more volatile than the overall market, and its business is still tied to the health of the global economy. However, this risk appears balanced by Caterpillar’s powerful operational cash flow and its strategic positioning in sectors with secular tailwinds.

Those looking to add exposure to the industrial economy should recognize Caterpillar’s blend of growth catalysts and shareholder returns, which together present a compelling case. Cautious investors may prefer to monitor the stock for a potential pullback before initiating a position, while those with higher risk tolerances might see the current momentum as a signal of ongoing strength. READ THIS STORY ONLINE

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