Market watchers say pot stocks will recover

Pot has been hot.

And despite a potential crackdown by Washington on the industry, some market watchers are optimistic on stocks related to the marijuana business.

Names like Weed, Aurora Cannabis and Canopy Growth, all viewed as plays if investors are bullish on the weed business, fell a respective 45 percent, 6 percent and 3 percent since Thursday's open.

Meanwhile, one exchange-traded fund related to the business, the ETFMG Alternative Harvest ETF, fell 6 percent on Thursday, but saw a bit of a bounce back and rose nearly 3 percent on Friday. This ETF is a particular favorite of David Seaburg, head of sales and trading at Cowen. This weakness should be bought here, he said Thursday on CNBC's "Trading Nation."

"I look at it and say, 'It's a tax revenue sort of catalyst.' There's no way that local governments and attorney generals are not going to support it for that reason alone. You buy it here; MJX in particular," Seaburg said, referring to the ticker symbol for the ETF.

This most recent dip is likely a good buying opportunity for investors who can bear the high risk associated with the industry, said Mark Tepper, president and CEO of Strategic Wealth Partners.

"This is a really high-growth, but high-risk industry," Tepper said Thursday on "Trading Nation."

"In 2017, these stocks were up 250 percent, and in light of the news [Thursday], these same stocks are down 10 to 40 percent. I think what's important for consumers to investors to realize, is sales in Colorado topped $1.3 billion and grew 32 percent year over year. California has nine times the population, and estimates $5.1 billion in 2019, which sounds really, really low. There's just a lot of tax revenue that states would be missing out on, and it just seems really unlikely that Sessions wins here," Tepper said, referring to U.S. Attorney General Jeff Sessions.

Some of the biggest players in the space are listed on Canadian stock exchanges, Tepper pointed out, and noted that even if these plans were to pan out, there's still a rich market out of the country.

"It's a high-risk, high-reward play. For our clients, probably a little too high risk, but if you are interested in having some high-risk opportunities in your portfolio, this is probably a good buying opportunity," he said.

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's Closing Bell (M-F, 3PM-5PM ET). In addition, he contributes to CNBC and CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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