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Forget a Marijuana “Bubble” – It’s Time to Make Money

By Matt McCallFeb 27, 2019


Welcome to the best start in 32 years.

In just the first two months of 2019, the S&P 500 is up 11.5%. Heck, we could close the market now and finish the year ahead of the historical average of just under 10% gains.

But why would we?

There is more to come. Much more.

I have two predictions for you:

First, I believe the S&P 500 will be up as much as 25% at some point during 2019. I said that before the year began, and I’m sticking with it.

Second, marijuana stocks will continue to blow away the market.

I was recently asked by CNN to talk about my expectations for the market. I made the same prediction to Richard Quest. He was a little surprised, so we made a friendly wager on whether the market hits a 25% gain. You can check out a clip here:

As spectacular as the S&P 500’s nearly 11.5% gain is, it’s actually puny in comparison to marijuana stocks. The most widely followed marijuana exchange-traded fund (ETF), the ETFMG Alternative Harvest ETF (MJ), is up 49% in just two months. That’s four times the market.

Dig down into individual stocks and the numbers are more eye-popping.

In my Investment Opportunities service, we started 2019 with eight stocks benefitting from the marijuana boom. Those eight stocks are up more than 60% on average in less than two months.

I can’t give them all away here. That wouldn’t be fair to my subscribers. But here’s a look at three that are flying in the first two months of 2019:

  • Khiron Life Sciences (KHRNF): + 132%
  • Innovative Industrial Properties (IIPR): +71% (and +131% since I recommended it last August)
  • Canopy Growth (CGC): +70%

That doesn’t just blow away the market. It also blows away the fabled FANG stocks that everybody focuses on:

  • Facebook (FB): +22%
  • Amazon (AMZN): +11%
  • Netflix (NFLX): +41%
  • Alphabet (GOOGL): +7%

With marijuana stocks outperforming just about everything in sight, we’re hearing talk of the “b” word. That’s right… “b” as in bubble.

You Can Still Make a Lot of Money

Let’s just dispense with the idea of a marijuana “bubble” right away. It’s nonsense.

Bubbles are formed when valuations get out of hand in a sector that is a fad.

Marijuana is not a fad.

Marijuana stocks have some of the biggest long-term potential we may ever see in our lifetimes. A wave of legalization is just now starting to sweep the world. Sales in the U.S. and Canada are already growing at more than 20% per year… and will do so for many years.

The legal marijuana industry is set to grow 10-fold over the coming decade.

In other words, we are in the early innings – maybe even still the top of the first – in a nine-inning game. This will create massive new markets and stock winners.

How can that possibly be a bubble when marijuana’s growth prospects are some of the best in the entire market?

If you want to know what a bubble looks like, go back to one of the most famous in history.

It happened in the Netherlands in 1636 and 1637. It’s referred to as Tulip Mania. The price of tulips are said to have risen from 1 to 200 in three months before crashing all the way back just three months later. At the peak, one tulip bulb cost 10 times the annual income of a skilled craftsman.

Now that’s a bubble.

There’s a big difference between tulips and marijuana. Tulips are… uh… pretty I guess. But their benefits end there.

Marijuana has real-life uses and benefits, and they are multiplying – from medical to recreational to the boom of cannabidiol (CBD). In fact, there is a clear path to marijuana at least competing with alcohol and perhaps even surpassing it in size over the next decade.

Some of this bubble talk comes as a result of a Barron’s cover story a couple of weekends ago. It looked at U.S. marijuana companies and what the magazine considered high valuations. “You’d have to be high to buy American marijuana stocks,” the article said. Clever.

I have always been a fan of Barron’s. The first thing I do on a Saturday morning is read the weekly issue. In this case, I thought the article presented a few good points of caution, but I was really disappointed in many of the other aspects.

I didn’t like how the author focused on a few bad actors in the industry and how they were linked to some U.S. marijuana companies. Every industry has bad actors. It’s the nature of business. My job as an investor is to weed those out, pun intended.

Not to toot my own horn, but I think I have an advantage here. I have been researching and covering marijuana stocks for nearly a decade, and I can tell you with confidence that the number of shady people in the industry has decreased dramatically in recent years. I would say by about 98%.

In terms of valuations, the author goes after U.S.-based companies with only a slight mention of their Canadian counterparts, which trade at much higher valuations. Absent from the piece is the fact that companies in early stage growth industries always have high valuations because investors are banking on above-average gains in the future.

Those future gains are worth banking on in the U.S. With legalization spreading, the industry is on track to become huge. Consider this: California’s marijuana market alone is already bigger than all of Canada. And yet, U.S. stocks trade at steep discounts to their Canadian peers.

That’s an opportunity, not a bubble. In fact, the legalization of marijuana is one of the great opportunities of the next decade.

P.S. With marijuana only now becoming legal in most parts of the world, saying those stocks are in a bubble is akin to saying internet stocks were in a bubble in the early 1990s because a few people were able to send emails. Investors who thought that missed out on stocks that multiplied 10 times over… and more.

The legal marijuana business is set to grow so much over the next 10 years, I believe it will turn out to be one of the three biggest investment opportunities of your entire life, no matter when you were born. The opportunity in legal weed is much like the opportunity internet stocks offered in 1994 … or that bitcoin offered in 2015.

That’s why I recommend multiple ways to make money in my Investment Opportunities service. And it’s why our marijuana stocks are up an average of 51% in just the last two months.

Even if you don’t know a thing about the marijuana market… even if you’ve never bought a stock before. If you have just a small stake, you could make a lot of money over the next 12 months. Click here to learn more about this incredible story.

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