May 11, 2021
There’s no denying marijuana has moved out of the shadows and into the mainstream…
Cannabis shops have cropped up everywhere in the 36 states that have legalized medical use. My editor tells me the cannabis “wellness” store by her not only sells the expected CBD products but also has yoga classes and local jewelry for sale.
Now, I have some professional experience with the topic of cannabis. I hosted a documentary for CNBC called “Marijuana USA” that explored the emerging billion-dollar industry. (And that was in 2010… cannabis has exploded since then.) I also wrote Joint Ventures: Inside America’s Almost Legal Marijuana Industry, a 2011 behind-the-scenes deep dive into cannabis culture and how the plant affects this nation’s economy.
Today, we’ve got Stansberry Research’s health care and cannabis expert Tom Carroll writing for you.
Tom was ranked by Fortune magazine as the No. 1 U.S. health care analyst. He has also consistently ranked in industry stock-picking awards, including top-five finishes for stock picking from Starmine, the Wall Street Journal, and Forbes.
Tom explains why, yes, cannabis still isn’t legal yet at the federal level… but, no, it really doesn’t matter in terms of investing and making money off of it.
Legalization Doesn’t Matter for Big Gains in Cannabis
by Thomas Carroll
Hey, Tom, do you think I could smoke it?
My world completely turned upside down when I heard my dear Mum utter this simple question…
In mid-2020, my mother turned to me for some advice. She was seeking a remedy for her decades-long problem with insomnia.
“Do you think this medical marijuana might help?”
My answer was a resounding yes. In fact, one of our state’s largest cannabis growers has formulated a pill that is specifically designed for sedation.
Of course, I was also floored… This was coming from the conservative woman who raised me and my sister in the age of crack cocaine, University of Maryland basketball star Len Bias’ overdose, and the constant barrage of “Just Say No” messaging. I didn’t even puff a cigarette until my mid-20s.
We began the registration process in Maryland’s medical-cannabis program. In short order, she was approved, and we made an appointment with a cannabis pharm-D, the PhD equivalent of a pharmacist.
Mum was evaluated and prescribed a bottle of “Good Night,” a cannabis sleep-aid pill that resembles any over-the-counter (“OTC”) pain medication. It certainly wasn’t the cannabis my mom had encountered growing up in the 1960s.
Guess what? It worked like magic… Even taking only half a pill an hour before bedtime put her to sleep and kept her asleep all night. She now wakes up refreshed and ready to tackle the day.
Given this experience, Mum is interested in exploring other cannabis options now available to 250 million other Americans across the country. Will wonders never cease…
While cannabis is a personal choice, just like consuming alcohol, smoking cigarettes, or taking a baby aspirin daily, the U.S. is entering the best time in history to explore the benefits of cannabis. Regulated, tested, high-quality cannabis is safe and effective when used correctly for your health and wellness.
The industry is just getting started… Millions of people, just like my Mum, are dipping their toes in the water.
I write the monthly Cannabis Capitalist investment research newsletter for Stansberry Research. But as I like to say, “I’m a stock analyst, not a consumer.” (This is mostly true, as I’m a troubled sleeper as well.) And I believe right now is a fantastic time to be investing in cannabis companies.
Now, you might be thinking, how can we invest in something that remains federally illegal? Shouldn’t investors wait until cannabis is fully legalized by the federal government?
In my view, the answer is a resounding NO.
If you wait, you will have missed the boat for big gains. It’s time that you put aside any perceived stigma that you have about this plant… The decadeslong failed War on Drugs policy did far more damage than good. And if you just can’t get past your long-held beliefs… well, get out of the way. You are in the minority.
The early boom-and-bust volatility of the emerging cannabis sector may be softening. I believe material investment returns will be made in the decade ahead, without the wild market swings seen over the last several years.
Let me explain…
Meaningful cannabis milestones have been achieved. In 2020, the cannabis sector evolved from having sketchy beginnings to becoming a real industry. From growth in legal state medical programs… to emerging adult-use markets… to federally legal hemp… to an FDA-approved cannabis drug… to the first company achieving $1 billion in sales… these accomplishments cannot be taken away. They have laid the foundation for a solid market.
Professional companies. There are now many cannabis companies with real management teams, independent boards, hundreds of millions in revenue, and strong balance sheets. Milestones have created the playing field on which to build real businesses. These cannabis companies are no longer “lotto ticket” stocks… They are investable today.
Supportive lawmakers. Perhaps most important, the current White House and Congress are much more cannabis-friendly than any other lawmaking administration in history. The meaningful cannabis milestones achieved and yet to be achieved are now backstopped by lawmakers with new-world thinking… As Pennsylvania Lt. Gov. John Fetterman said recently in an interview, “Cannabis is not a drug. It’s a plant.”
Cannabis is truly at a tipping point…
The man who made twenty-three 1,000% recommendations just unveiled his #1 stock live on camera right here.
This Moment Didn’t Happen Overnight
There have been four distinct eras of cannabis investment and growth. This is how legal cannabis evolved throughout the past 25 years… and will continue to grow in the coming decade. These landmarks support our current bullish view of cannabis…
1. Grassroots Business Development, 1996 to 2010
It all started (legally, that is) in 1996, when California created the first medical-cannabis program in the country. Two years later, Alaska, Oregon, and Washington joined this new market. Early investors and entrepreneurs took big risks both financially and legally to get started. They faced challenges ranging from fear of federal raids to operating a cash-only business to a “not in my neighborhood” mentality that limited locations.
2. From “Toehold” to “Foothold,” 2010 to 2018
As legal cannabis programs expanded across the U.S., professional investors and sophisticated entrepreneurs took note of the massive opportunity emerging. Investment bankers quit their high-paying jobs to form startups. Former pharma executives came out of retirement. Cannabis-focused private-equity companies were formed. And I know of at least one former health care analyst who made an early, hefty investment in a medical-cannabis startup. This is when the current big U.S. cannabis companies got their start.
3. A New, Investable Market Takes Shape, 2018 to 2020
With national legalization of cannabis in Canada, U.S. cannabis companies went public through “reverse takeovers” of already publicly traded Canadian companies. This gave them a new currency to fund future growth.
Soon, individual investors went from merely dabbling to outright trading in cannabis stocks. Cannabis-focused hedge funds were formed. Foreign subsidiaries of investment banks hired equity research analysts and bankers to cover the explosion in the number of cannabis stocks. Exchange-traded funds (“ETFs”) were launched that focused on cannabis. Billion-dollar cannabis companies Canopy Growth (CGC) and Tilray (TLRY) became household names on CNBC.
4. The Full Monty, 2021+
The industry has kicked into high gear, and it’s about to see real risk-adjusted returns. In November 2020, President Joe Biden and Vice President Kamala Harris won the election. Like them or not, they are cannabis-friendly…
And just days into 2021, the Georgia Senate runoff election pushed the Senate blue, giving Democrats 51 potential votes. These elections gave the U.S. a best-case policy outcome for cannabis. Everything that has been built and established up to this point will now begin to see real, supportive, and rational federal regulatory support for this inevitable new market. It will not be easy, but the balance of power has shifted.
Today, there are several publicly traded U.S. cannabis companies that are completely investable. This year, we will see the first cannabis company meet and exceed $1 billion in total sales. It’s amazing that these stocks are still trading over the counter.
As of this writing, 21 states have robust medical-cannabis programs, 19 have approved adult-use markets, and 10 continue to forbid cannabis with psychoactive properties.
Said differently, 77% of the U.S. population has access to a legal-cannabis program. This includes both adult-use and medical-only markets.
Where is the federal government in all of this? Aren’t our leaders in Congress supposed to represent us? Why does cannabis remain illegal at the federal level?
It doesn’t really matter, from an investment perspective…
Now, federal legalization will eventually happen in some form. Over the years, a number of bills have been introduced in Congress that seek to legalize cannabis. And as we’ve said, right now, there is more support than ever from lawmakers.
Legalization Is a Moot Point
In the last decade, there has been something I refer to as “policy conflict” in cannabis. This means things are happening that should not happen, given federal law.
Forty states have pushed forward and created sophisticated legal-cannabis programs. This flies in the face of federal law.
The FDA approved Epidiolex – a prescription anti-seizure drug whose active ingredient comes from cannabis. News flash… the FDA is a federal agency.
The Securities and Exchange Commission (“SEC”) recently registered shares of Green Thumb Industries (GTBIF), a U.S.-focused cannabis company. Wait… what? Those federally registered shares were then sold to a U.S. institutional investor the very next day. And many more are following Green Thumb’s lead.
Isn’t all of this illegal? Don’t these federal agencies know that? The behavior of these agencies is so interesting.
Another related catalyst for the stocks will be when they are listed on U.S. exchanges. Currently, the U.S. exchanges won’t list them. Why? Cannabis is illegal on a federal level. They must list in Canada and trade OTC for U.S. investors. Isn’t this crazy?
Now that the SEC has drawn a major line in the sand (a trench?), the exchanges have got to be asking themselves, “Why aren’t we listing these names now if the shares are registered in the U.S.?” We believe this question is currently in discussion… And there is precedent. In every state with a legal cannabis program, local banks have made the move to work with cannabis businesses. The exchanges are next.
As U.S. cannabis companies get listed, their stock prices will rise significantly. This will open them up to investors an order of magnitude higher. This day is coming soon.
All of this questions the notion that federal legalization must happen first before any real legitimacy can emerge. If federal agencies are allowing things like this to happen, then perhaps congressional action is a moot point…
Right now is truly a unique time to be an investor in the biggest new market of our generation. Waiting for the federal government to catch up to cannabis is the wrong move… Legalization is already happening all around us.
If you need more proof, just remember, my 75-year-old Mum wants to smoke it.
P.S. Tom is offering a special discount right now for his cannabis research service… You can lock in 50% off his monthly newsletter, which is full of actionable stock recommendations that have already produced huge gains. Click here to find out more information about Cannabis Capitalist.
Love us? Hate us? Let us know how we’re doing at [email protected].
Contributor, American Consequences
With Editorial Staff
May 11, 2021