By Matt McCallApr 17, 2019
Every marijuana company out there wants to be the next Canopy Growth (CGC) or Aurora Cannabis (ACB).
Today, they’re some of the biggest names in the business. But not so long ago, these stocks were virtually unknown outside the industry.
They’d been available for years — on the Toronto Stock Exchange, as well as the U.S. over-the-counter (OTC) markets. Yet, even if the average investor had heard of them mentioned in passing, they had no real knowledge of the stocks. And more importantly, they did not own shares.
Then they made the “jump” to the NYSE, and the rest is history.
There are a few specific reasons that Jumper Stocks are such a phenomenon. Let’s take a look at those now.
When a Jumper Stock begins trading on the same exchange as the biggest companies in the world, it obtains a certain clout. It has now joined the likes of Amazon (AMZN) and Apple (AAPL) — the big boys.
This benefit is difficult to put into words. But the effect is clear.
After uplisting from the OTC markets to the major exchanges, the Jumper Stock is now behind the red velvet rope… rubbing elbows with the who’s who in business — and signaling its credibility to investors.
That includes institutional investors. This brings me to…
No matter how attractive a company is, until its stock is listed on the NYSE or NASDAQ, nearly every mutual fund, exchange-traded fund (ETF), and big institutional investment advisor will be prohibited from buying it.
Therefore, by making the move to a major exchange, the Jumper Stock can now be purchased by the largest funds in the world. To give you an idea of how important this is, consider these numbers:
U.S. mutual funds have about $19 trillion in assets under management… and ETFs have another $3.6 trillion.
That’s huge. If cannabis companies were to attract even 0.1% of that money, that’s $22.6 billion flooding into marijuana stocks.
As legalization spreads — and demand skyrockets — we’re also going to see pension funds and other large institutional funds buying into newly-listed Jumper Stocks on the NYSE and NASDAQ.
Some of this happens by default — when these stocks get added to an index.
Just last week, there was a great example. Canopy Growth announced that it would be added to the leading index of Canadian large-cap stocks: the S&P/TSX 60 Index.
To get on these kinds of indexes, companies must be a certain size (by market cap) and also show decent liquidity (something that many up-and-comers are still working toward).
This is a big deal. Canopy Growth is the first marijuana stock to be included in this prestigious index with the likes of Toronto-Dominion Bank (TD), Enbridge (ENB), and TransCanada (TRP). Not only that — all the funds that track the index have to buy it. As a result, the shares gained 5.5% just on the index announcement alone.
And with the inflow of money from large financial institutions comes:
One of the reasons I like investing in smaller, early-stage companies is that they are typically flying under Wall Street’s radar. So, good news doesn’t result in potential investors getting “locked out” right away by pricey moves.
This is the case with nearly all OTC stocks. At this point, the number of analysts covering them is very low. Oftentimes there is not one firm that publishes research on the stock.
With the cannabis industry, there are a couple of firms in the business of covering smaller marijuana stocks, like Cowen and Piper Jaffray… but that’s nothing. When you look at the S&P 1500 (which covers 90% of U.S. stocks), those companies get 12 analyst ratings, on average.
When a stock gets more analyst coverage, it also gets more press. The investment firm puts out a press release that it initiated coverage of the stock, which gets media attention. It also inspires competing firms to launch their own coverage. Each headline brings fresh buyers.
That was certainly the case for Charlotte’s Web (CWBHF), my pick for the InvestorPlace Best Stocks for 2019 contest. While it hasn’t yet made the jump to the NYSE or NASDAQ, it does have a couple of analysts covering it. And when Cormark Securities initiated coverage in February, the stock got another 4% boost, on top of an already great run.
While I fully expect great companies like Charlotte’s Web to make the jump… not every pot stock is going to.
First, there’s a unique hurdle to clear:
Both the NYSE and the NASDAQ specifically exclude companies that sell marijuana in the United States. You can thank the Drug Enforcement Administration (DEA) for that: Marijuana still carries a Schedule 1 label, alongside ecstasy, bath salts, and heroin.
But more importantly…not every pot stock has what it takes to make the jump. We’ll take a closer look at that in tomorrow’s MoneyWire.
P.S. With such huge gains in marijuana stocks — I want to make one thing clear:
Profiting from them is NOT a matter of luck.
It’s about knowing what the “trigger” is.
Now you know what to look for: the jump to the NYSE or NASDAQ. But, in my experience, you can’t wait to hear about it on TV. If you wait, you’ll miss out on most of the gains.
So, I research these stocks well before they’re covered in the mainstream news.
And I’ve identified three secret factors that are present in all stocks that successfully make the jump
At Early Stage Investor, I’ve used this system to add five likely Jumper Stocks.
And I’m willing to give you one of my picks for free. Check out my presentation on Jumper Stocks to get the full details.
At the end of the presentation, you’ll have the chance to receive all my Early Stage Investor research for a discounted price — and after midnight, that discount will expire. Click here to watch now.
Note: This is Part 3 of a series on the opportunity in pot Jumper Stocks. Click here to read Part 4 now.
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