Investment advisor, author, and newsletter writer
Pot Stocks and Gene Editing
Matt McCall is the founder and president of Penn Financial Group, an investment advisory firm serving individual and institutional clients. Matt is also the author of two books on investing, The Swing Trader’s Bible: Strategies to Profit From Market Volatility and The Next Great Bull Market: How to Pick Winning Stocks and Sectors in the New Global Economy.
Matt is known around Wall Street for his extensive technical analysis expertise and his insightful chart analysis that leads to precise buy and sell points in the best stocks and exchange-traded funds that pass extensive top-down screenings. His track record speaks for itself – across his multiple newsletters, more than 80% of his recommendations since 2015 have been profitable for his subscribers.
Matt is the editor of two newsletters, Matt McCall’s Investment Opportunities and Matt McCall’s Early Stage Investor, where he uses his next-generation approach to investing with trends that have the potential to produce grand slam returns.
Here, Matt talks with Investor Hour hosts Buck Sexton and Porter Stansberry about…
Porter Stansberry: Matt, what are you looking for when you recommend stocks to your readers? What’s your classic setup?
MATT McCALL: Basically, I’m looking for big-picture themes, getting in early before it’s on the cover of TIME magazine or the Wall Street Journal is talking about it. And there are themes that are going to change the way that an industry is done right now.
One example is transportation. Transportation is a $7-trillion-plus industry that really hasn’t been changed much since the combustion engine was put into a vehicle. I believe, in the next 10 to 20 years, we’re all going to be sitting in electric cars, we’re all going to be sitting in self-driving cars, and we need to look at that theme and how that’s going to change the world. And along that way, we make money – whether it be all the sensors that need to go on the cars, whether it be the electricity in there, whether it be 5G and we need to connect all these cars.
Gene editing is another one. It will transform the way that we do health care in the future. It’s going to be preventative and it’s going to treat diseases in ways that have never been treated before.
So I try to find the big themes and then the companies you’ve never heard of before they become mainstream… looking for those big 20-, 30-, 50-baggers.
Porter Stansberry: Let me ask you about a couple of specific, emerging new industries. Marijuana is on the minds of a lot of folks today. I was scanning the markets last week, and I noticed this little stock – Tilray. The stock was just blowing up. But it’s valued at $10 billion currently, and it had sales last year of $20 million. And you’ll notice, there’s a whole lot of zeroes missing there on one side or the other.
So, the question I have for you, Matt, is: If you get into these things early, how do you know you’re not a part of some crazy mania that is going to get you wiped out?
MATT McCALL: That’s a great question, because there are, obviously, a lot of manias that have wiped out a lot of people. You have to take a step back and think about it just logically, Porter – is this something that you believe will be around in 5, 10, 50 years from now? There’s a difference in my mind between a fad and a trend.
Back in the day, I used to look at a lot of retail, a lot of clothing, because my ex-wife was in fashion. Remember Heelys, those little sneakers that had wheels in them? Every kid was wheeling around – that stock went up hundreds and hundreds of percent. And at the same time, I was looking at a company called True Religion that was making jeans.
I said, “OK, well, that little wheel thing is not going to be around. Any shoe company can make that.” I stayed away from it. The company is now bankrupt, I believe. True Religion ended up getting bought out at 50 times whatever it IPO’d at back in the day, and people are still wearing those ugly jeans. That’s a viable trend that stayed.
Today, when you look at marijuana, the valuations are astronomical. They’re not going to make sense. And if you do any type of value investing or fundamental investing, you’re going to say no to all of them. If you said no to Tilray a month and a half ago, you missed out on almost 600% profit.
But marijuana is going to change the way that we do “entertainment” when we go out… This is a real industry.
But marijuana is going to change the way that we do “entertainment” when we go out. For example, I love a good glass of wine. I was just in Italy for three weeks, where they drink wine all day, every day. As soon as the sun came up, I was drinking wine until I couldn’t drink any more. And the way I felt in the morning wasn’t very good. Take a hit of marijuana? I feel great in the morning.
And you look at how big those industries are… Cigarette sales in the United States – $77 billion. Beer – $110 billion. Annual wine sales in the U.S. – $60 billion. They’re predicting that by 2030, you’ll have marijuana sales of $75 billion. This is a real industry. If for some reason it becomes illegal everywhere – which is not going to happen, the exact opposite is happening – then we stay away. This is not a fad, this is a trend…
Porter Stansberry: Matt, do you think that people who buy Tilray at $10 billion are going to have a successful investment?
MATT McCALL: In the next year? No. But I do think there’s a lot of great opportunities out there, smaller companies that are overlooked. So, no, I wouldn’t buy Tilray here today. I would not do it. But I think there are opportunities in marijuana.
If you want to learn more about the giant emerging market in cannabis, gene editing, and the transportation stocks that Matt McCall mentioned, go to www.IPMpodcastoffer.com.
You can receive a special discount to his newsletter – Matt McCall’s Investment Opportunities.
Porter Stansberry: Are there more conservative, more established businesses that you would put into that marijuana sphere? Big existing businesses that could see a big increase in sales?
MATT McCALL: There are bigger names that I like… let’s call them ancillary plays that aren’t pure plays where they’re growing the plant or selling the plant.
Constellation Brands is a great example. You know, it owns 38% of Canopy Growth, which is the largest publicly traded marijuana company in the world. So, that’s a great way to play. Constellation owns 38% – I’d say you’re going to get a lot of exposure to it, plus, you’ll have the brands like Corona, Modelo, and Mondavi wines. That’s a great play if you want to have exposure to marijuana with a less aggressive play.
You can look at companies such as Scotts Miracle-Gro, which helps with the growing of marijuana as more marijuana is grown around the world. You could look at some pharmaceuticals that will be using the CBD aspect of the plant – the non-psychedelic aspect of the plant – that helps with seizures, anxiety, and different issues like that.
You can look at Coca-Cola. There’s rumors that it’s going to come out and buy part of Aurora and it’s going to make CBD drinks, and that type of deal is going to be done in the next couple days, in my opinion.
So, yeah, there are a lot of big-name plays where you can buy into and have exposure – secondary exposure to this market without going directly to Tilray or Canopy or any of the direct players.
Porter Stansberry: When you look down the path into the future, marijuana has become legal in a lot of places in the U.S. It’s legal in Canada, and it’s legal around the world. As marijuana gets integrated into society and eventually becomes legal in the banking system and a lot of the other things that are holding it back right now – do you think it’s likely that a company like Philip Morris or one of the big tobacco players ends up rolling up all these little guys and becoming a dominant, branded provider?
MATT McCALL: Oh, absolutely. I mean, it’s going to be just like anything else. Look at the soft drinks, how that’s really rolled up. And any time a new soft drink hit the market, you had one of the big names come in and buy it up. You know, Kobe Bryant’s new sports drink just got bought up for a ton of money. You know, any time a little guy comes up, they get bought up.
So, you will see this. I mean, in my marijuana watch list I have here in my trading system, I have more than 200 stocks. One hundred of them will not be around, I will guarantee that, maybe 150 will not be around in three or four years. You know, they’re little. They’re jokes, they’re little players. A lot of them will be bought up by the big names.
But a company like Canopy, which Constellation owns 38% of, it’s been buying up smaller companies and it will continue. And the key that’s often overlooked in marijuana is, you talked about Canada, which you can buy recreationally for the first time, and you look at the U.S. – this is a global play. When I was in Italy last week, in Rome, they had these new cannabis shops that went up earlier this year. They’re very low-grade cannabis, so you can walk right in and buy it.
So, if you see the EU legalizes marijuana – which it will, in my opinion, in the next four or five years – that’s a huge boom. Australia is supposed to be a huge market for it. So, there’s going to be a lot of international plays, and the only way for companies to take advantage of that is to be a big-name player, like you said.
I don’t think Philip Morris is getting into it. I think that company’s in trouble. But I think you’re going to see some of the soft drink and some of the food companies really make big moves into the space.
Porter Stansberry: Very interesting. Beyond marijuana, I wanted to ask you for your next best growth sector. What’s another huge growth sector that you’re focused on?
MATT McCALL: I’m going to say health care, and within there more particularly, gene editing…
There are three publicly traded companies that really use what’s called CRISPR-Cas9 – it’s a way to edit genes in the future. That, to me, is going to be a game changer, along with genetic-testing companies. There are a lot of companies that are small right now, but they are kind of the “picks and shovels” of the health care industry, and they will be needed for anything going forward…
And what’s going to happen is, instead of looking at family history, look at my genes, what I’m made up of. Look at my genomes, the ones that are sequenced and tell me what I’m susceptible to. And that’s going to change the way – we’re going to be such preventative patients going forward, it’s amazing. I’m a hypochondriac. I go to the doctor all the damn time. This is going to save me so much time because I know what to look for. I mean, this is going to be up in a trillion-dollar industry.
There are things called monogenic diseases. There are more than 10,000 of them that they know about, and this is when there’s one gene of all the genes in our body that’s screwed up. And if we can go in and just fix that, it cures the disease – sickle cell disease, cystic fibrosis – I can go on and on. And if you can go in there and repair that one gene, you are cured. And the addressable market right now for a new diagnosis every year is $75 billion. If we go back to the people that have the diseases now, it’s a $2 trillion addressable market. This is a game changer…
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