Marijuana and the Presidential Election

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The presidential race will thrust marijuana into the national spotlight, which likely means more gains to come

In our February 5th Digest, we highlighted Sen. Cory Booker, a New Jersey Democrat and presidential hopeful who is making federal marijuana legalization a part of his campaign platform.

From that Digest:

Booker discussed criminal justice reform and the need for “changing our drug laws,” including “ending [the] prohibition against marijuana” on the radio-syndicated “Tom Joyner Morning Show” on Friday.

Last year, Booker introduced the Marijuana Justice Act, which would eliminate marijuana’s status as a Schedule 1 drug under the Controlled Substances Act.

The move would also require federal courts to expunge the records of Americans who have prior marijuana convictions related to use or possession.

It turns out, Booker isn’t the only presidential hopeful endorsing marijuana legalization …

***Last Monday, Sen. Kamala Harris called for the legalization of marijuana at a federal level

Making an appearance on “The Breakfast Club,” a New York City-based radio show, Harris became the latest 2020 presidential hopeful to support marijuana legalization.

From Politico:

“Half my family’s from Jamaica,” the California Democrat said, laughing when asked to respond to those who think she’s opposed to legalizing recreational use of the drug. “Are you kidding me?”

When asked whether she would smoke again if the federal government were to legalize the recreational use of the drug, Harris laughed and replied: “Listen, I think it gives a lot of people joy. And we need more joy.”

The former San Francisco district attorney and California attorney general said legalization would have to come with some caveats, emphasizing a need for research on the effects of marijuana on the developing brain and a means for regulating use of the drug while driving.

Regardless of your political leanings, Booker’s and Harris’s endorsement of federal legalization has ensured one thing — all presidential contenders are going to have to take a public stance on marijuana legalization, and that will thrust cannabis even further into the spotlight.

We anticipate this will lead to a new wave of marijuana investment as we near the 2020 election.

***But this isn’t the only tailwind we expect to push marijuana investments to new highs over the coming quarters

For any newer Digest readers, we believe legal marijuana is one of the biggest investment opportunities of this generation. A new wave of legalization has already — and will continue to — create massive stock winners. Matt McCall is our resident marijuana expert and the editor of the newsletter Investment Opportunities.

In his February issue, he pointed toward six catalysts that he expects will drive marijuana stocks to new highs over the next few years. One of these catalysts is something we haven’t discussed in our marijuana-themed Digests — branding.

From Matt:

Think about any consumer good and you immediately think of the most popular brands. Soft drinks — Coca-Cola. Fast food — McDonald’s. Athletic wear — Nike. Beer — Budweiser. Coffee — Starbucks. And so on.

So far, there has yet to be a cannabis brand that stands out from the pack. In late 2018, LeafLink, a wholesale cannabis ordering platform that sells over 700 brands, put out a list of its top sellers. There is one distinct takeaway: not one brand was dominant.

The goal of every company that produces consumer marijuana products is to become that first major brand. As more products hit the shelves and the marijuana industry starts to mature, there is no doubt that a few brands will rise to the top. Some of the largest names right now have the best chances of becoming household names based on their size and cash available to market products and scale up production.

That being said, do not count out some of the smaller companies that simply produce superior products.

A recent Bloomberg article echoes this idea that it’s still early and anyone’s game.

“We believe successful brands can emerge in the U.S., likely built on product differentiation, but in early stages of a new industry, it can be hard to identify long-term winners,” analyst Michael Lavery wrote in a note to clients.

Even as some emerging U.S. brands such as MedMen Enterprises Inc., Lowell Herb Co., and Pax Labs Inc. appear to have early traction, the market is still highly fragmented.

One proxy for how cannabis companies may grow is the e-cigarette market, says Lavery. In 2013, the top five players held a combined 40 percent of total market share. Today, that number is 97 percent, led by JUUL Labs with over 70 percent. In the cannabis sector, Lavery estimates that the seven largest publicly traded U.S. cannabis operators captured six percent of market share at most in 2018 …

***Given this fragmentation, Matt has been suggesting subscribers adopt a “basket” strategy, since it’s anyone’s guess which company will end up being the “McDonald’s” of marijuana

From Matt:

When it comes to the marijuana mega-trend, our best strategy is to build a basket of stocks. You can look at this as if you are building your own ETF, but you don’t have to pay the fees and you aren’t stuck with a bunch of other stocks you don’t want to own.

This basket approach increases the chances that one of your marijuana holdings becomes a market share leader of tomorrow (imagine buying, for instance, Nike, when it held practically zero market share).

Yet market share “leader” isn’t even required for significant investment gains — if, as Bloomberg notes, the seven largest publicly traded U.S. cannabis operators captured just 6% of market share in 2018, then practically any measurable market share could mean major profits and returns.

So, what’s the best way to identify the strongest marijuana investments for investing?

Matt suggests a 5-factor analytical model that includes:

– Strong revenue growth
– Solid cash position
– Path to profitability
– Great management
– Buying at the right point in the J-curve

If you’re interested in Matt’s marijuana research, he’s revealing his latest Cannabis Cash Calendar recommendation tomorrow. Click here to learn more.

In the meantime, continue to expect more spotlight on marijuana as we near the presidential election.

***Finally, a new milestone for marijuana on Wall Street, as well as great news for Matt’s subscribers

Last Thursday came news that the cannabis REIT, Innovative Industrial Properties (NYSE:IIPR) is going to be added to the S&P 600 SmallCap Index. This is the first cannabis-related company to join the index.

IIPR is a REIT that leases property to marijuana companies. It’s a great, ancillary way to play this trend. If the name sounds familiar, it’s probably because you read about it from my colleague, Luis — he highlighted IIPR in his Digest on 2/5.

When a stock is added to an index, it often pushes that stock’s price higher. This is because every fund that tracks the index needs to buy this new stock since it’s now a part of the index. That buying pushes up the price. And indeed, that’s what happening with IIPR — which is great news for Matt’s subscribers, since Matt recommended IIPR back in August.

When the news broke, IIPR rallied 4% in after-hours trading. As I write, IIPR is up 5% on the day, and Matt’s subscribers are up over 90% since this summer.

Again, Matt is releasing his new recommendation tomorrow. If you’d like to learn more, click here.

Have a good evening,

Jeff Remsburg


Article printed from InvestorPlace Media, https://investorplace.com/2019/02/marijuana-and-the-presidential-election/.

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