A Conversation with Matt McCall
Matt McCall is the founder and president of Penn Financial Group – an investment advisory firm designed to guide its clients toward financial freedom. He is also the editor of Matt McCall’s Investment Opportunities and Early Stage Investor.
Matt has made more than 1,500 television appearances in the last 10 years. He served as the chief technical analyst and co-host of national radio show Winning on Wall Street, co-hosted daily investment show Making Money with Charles Payne on Fox Business Network, and contributed to the Fox News Channel.
He has also traveled to multiple countries around the world sharing his next-generation approach to investing – namely, the idea that there are better stocks to invest in than the ones the rest of Wall Street focuses on. That includes marijuana stocks…
Starting in 2010, Matt was one of the first analysts in America to cover over-the-counter marijuana stocks. Matt is on a first-name basis with the CEOs of the world’s top publicly traded marijuana companies and has a knack for identifying the most promising opportunities before 99% of the market knows about them.
In the following excerpt from The Marijuana Industry Insider’s Playbook – a new book from financial publisher Stansberry Research – Matt discusses the future of the legal marijuana industry…
Q: What first interested you in looking at the marijuana market? When did you start educating yourself on this industry?
Matt McCALL: Seven or eight years ago, I asked myself, “What industry out there has the potential to grow to a multibillion-dollar industry outside of just technology?” Marijuana is the one that kept coming into my mind.
At the time, cannabis was just starting to catch on medically. I started seeing some of these penny stocks creep up. And I started getting a lot of inquiries from different people about these stocks. Everyone who followed my work knew I always like to be on the cutting edge of what the next big industry is going to be.
So I started seeing that happening and, just out of curiosity, started doing a little bit of a deeper dive into the companies. What I realized, at that point, was there was a complete lack of credible research and information available on these opportunities. I’d say 99% of the “research” that was out there was somebody pumping up a stock through marketing and then getting out of it.
It’s similar to what we’re seeing with bitcoin now. You were a biotech company last week. But when you change your name to “Blockchain,” your stock goes up 1,000%. The same happened with cannabis companies over the last decade during certain periods. I realized the majority of the companies out there were junk. That was obviously disappointing to me. But in the years since, things have gone from the Wild West to not-so-wild West. And some of the bad actors have been thrown out of the industry.
From the standpoint of stock analysis, you’re seeing a huge demographic shift. The older demographic is dying off.
And lot of people I know – in all walks of life, all ages of life, whether they make millions and millions of dollars, or if they are living on minimum wage – smoke marijuana. They may not talk about it, but even that’s starting to change.
Honestly, at first, I was just doing a lot of writing on the area and began publishing stuff and throwing it on the Internet. Then about six years ago, I started getting requests to sit on panels and emcee marijuana investing panels. I’ve probably sat on 50 different panels with CEOs of all the major companies. From Canopy Growth in Canada – now a C$5 billion company – to the little guys that are now probably back in their parents’ basement.
I was lucky to be in a position to see this entire industry morph from what it was to what it is now.
From a personal standpoint, I was in the hospital with a friend maybe four years ago – emergency room. There was a little girl next to me, maybe 10 years old, crying and crying. And the father was crying.
It was so disheartening, it was almost making me cry. I talked to the father for a minute and I said, “If you don’t mind, what’s going on?” He said, “She has terrible seizures and the only thing that helps her is cannabis.” And I saw that firsthand. I thought, “Wow, this girl’s life will be horrible forever unless she has that.”
It’s not about people getting high. It’s the fact that cannabis is a true medical breakthrough that this country is so backwards on and still considers more dangerous than cocaine.
Q: Yeah, it’s a Class 1 narcotic.
McCALL: I’ll be honest with you, it’s ridiculous. I mean, that is just insane to me. Alcohol is more dangerous than marijuana, in my opinion. But back to your question…
I saw how things are going to change, how these older people who have one point of view are disappearing. And then you have millennials and Gen Xers like myself who have largely more progressive views on cannabis. Even the Baby Boomers like my parents, who experimented with it 40 years ago and may still indulge, can see the upside potential. There’s just so much money.
At the end of day, I like money. And we can make so much money in this industry from so many different angles.
At the end of day, I like money. And we can make so much money in this industry from so many different angles.
I went to graduate school in Colorado, had my first job, and started my first company there. When I moved there, they had just started to open up gambling in Central City in that area. And I remember getting money back from the government.
I was like, “What the hell’s this?” They made so much money in taxing that we got money back. So Colorado was at the forefront of gambling. The same is true with cannabis. You now see gambling in every state basically. I think the same thing is going to happen with cannabis.
As of late 2017, 29 states and D.C. have legalized medical cannabis. Seeing how much money’s going to be made will then encourage [the other] states and local municipalities to push for legalization.
I think within five years, it will be legal federally. And all these companies that are sitting at a couple-hundred-million-dollar market cap will be several-billion-dollar companies, just like in Canada.
Q: You said that over the last seven years, you watched the industry go from the Wild West to a little less wild. Do you see over-the-counter equities as being legitimate considerations for investors right now? Or is that still too wild? And if so, how do you separate which are the good ones and which aren’t?
McCALL: So to go back to your original question, is there opportunity? I think there’s huge opportunity here in two parts.
One huge opportunity… is finding the unicorns that are really going to flourish once this becomes a federally legal business. The second huge opportunity is to trade them because you can plan ahead.
One huge opportunity, for lack of better words, is finding the unicorns that are really going to flourish once this becomes a federally legal business.
The second huge opportunity is to trade them because you can plan ahead.
California’s recreational-use law just went into effect in January 2018. A lot of people bought ahead of the news. But once we see how much money is actually generated in California, it’s going to be a boom for a lot of these companies. The companies that own dispensaries there. The ones that own the grow facilities there.
That’s going to be a huge boom you can trade around. You can really play that by starting to buy in advance. Once the numbers start rolling out, these stocks will soar.
Then there’s that longer-term play I mentioned. That’s all about looking for the stocks that will stay around. And Canada is a great example. The government stepped in to allow Canadians to buy their medical marijuana online. They’re looking at July 2018 to be able to buy recreational marijuana online and have it delivered to your home. That’s another event you can trade around.
It’s all regulated by the government, which is a great thing. Even though I hate governments, it’s a good thing for this industry. And we’ve seen that in the results of those stocks and the increased perception of the legitimacy of this business. When alcoholic-beverage company Constellation Brands (STZ) came in and invested $190 million in Canopy Growth (CGC), that sent a big message to the world. Canopy now has a $6 billion valuation. This is a serious, legitimate business we’re talking about.
Constellation owns Corona. This is not just some fly-by-night company. This is a real company that’s getting into the marijuana business. And that just shows that big multinationals are starting to position themselves for the moment the U.S. becomes legal so they can jump right in.
Now jumping to your current question about separating the good companies from the bad…
When I analyze these stocks, a lot of them get cut right away. First, I look at management and try to see where the people come from. Was this company a biotech two years ago that changed its name and said it was a cannabis company overnight?
The second thing I do is look and see if they’re actually making money. Some of these companies have no money. They may have so many shares outstanding that it’s basically just like this scheme of people trying to pump and dump with press releases.
Q: Yeah, of course. Remember the marijuana vending machine company Medbox? Remember how much it was trading for a few years ago? It completely tanked and the CEO was sued.
McCALL: Yeah. I know, it’s ridiculous. I know these guys. I know the bad players personally. I’m not friendly with them, but I know them and I know what they do. They make millions of dollars knowingly preying on the poor American public. And they’re great at it.
In short, you are going to end up analyzing these companies the same way you would analyze any company and any industry. You just to have a different mindset because news is very important in this industry.
Around election time, you’re going to probably get a spike. Usually coming into a new year you’ll see a spike, like we saw in 2018 when California opened up. I expect you’ll see a spike around when Canada opens up in July 2018.
If you’re a trader, try to trade around it. And then buy into the dips.
I have a long watch list that I go through every day. But I’m very careful because I don’t want anyone to get burned. This can be a volatile industry. I don’t want to be that guy who’s pushing these stocks in a bad way.
But at the same time, there’s opportunity. And I don’t want folks to miss out, either. I also worry if they don’t come to me, they’re going to go to somebody else who’s almost certainly trying to fleece them.
So that’s why I’m honest about it. There are two ways to play it… Either you let it go and live through the ups and downs, or you trade it. There’s risks in both.
Q: You’ve been watching this market now for seven years. Do you think that we’re still in the early stages? What inning are we in right now?
Q: You think we’re in the second inning.
McCALL: I put Canada in the fifth inning and put us in the second inning. I’m a numbers geek. And at the end of the day, it all comes down to how much money you have in revenue and earnings.
Just look at some of the numbers… Canada, for example, is expected to generate between C$2.5 billion and C$4.5 billion by 2021. That’s great for Canada.
However, recreational in California alone is projected to be greater than Canada by that point.
And it’s not limited to just California…
The opportunity for Midwest farms to mass grow marijuana is a huge opportunity.
The opportunity for Midwest farms to mass grow marijuana is a huge opportunity if the country ever gets its act together and legalizes marijuana on the federal level.
Not only could it become an alternative to current crops that are distributed in the U.S., the international markets could lead to the U.S. being a major marijuana exporter. It is important for the U.S to become a leader in the industry soon. Again, though, that goes back to legalizing it on the federal level. Canada will have a jump on the U.S. with exporting and they are already working with several other countries.
Matt McCall is a staunch advocate of not just telling people what to invest in… but educating people so they understand exactly how these investments work for them.
He’s the editor of Matt McCall’s Investment Opportunities, Early Stage Investor, and 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 (a top-selling investment book for more than two years).