Tonight’s New Jersey vote … Tomorrow’s banking reform vote … and CVS joins the ranks of retailers selling CBD-infused products
Regular Digest readers know that 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.
Two important votes are happening within the next 24 hours that could be major catalysts for marijuana stocks … and by extension, investment gains for you and me.
On top of that, it appears Barron’s has been reading our very own Matt McCall. I’ll explain more momentarily.
There’s much to cover, so let’s jump straight in.
***Tonight, we’ll learn whether New Jersey fully legalizes marijuana
New Jersey residents will be deciding whether New Jersey becomes the 11th state to legalize recreational marijuana this evening.
Local news stations are indicating it will be a tight vote. If the vote isn’t passed, the issue might be pushed back to 2020 before it’s voted on again.
While we’re very interested to watch what happens, we don’t anticipate a “no” vote would be a material headwind to marijuana’s momentum. There’s simply too much mounting pressure for reform. Case in point, the second vote we’ll be watching this week …
***A congressional committee vote tomorrow puts marijuana banking reform in the spotlight
Despite major steps forward for the marijuana industry as a whole, there are still challenges. One of the most significant is how marijuana’s illegal status under federal law prevents the industry from being able to access the traditional banking system.
We first put this issue on your radar in our January 23rd Digest:
… there’s one major headwind facing legalized marijuana — the U.S. government. Marijuana is still illegal on the federal level. In fact, the feds treat marijuana as a controlled substance equal to heroin.
Now, you might read that and say, “Well, what does that matter? Marijuana stock-prices are climbing. States are legalizing. So what impact does the federal government have anyway?”
A huge impact.
You see, with marijuana still illegal under federal law, getting banks to accept deposits from marijuana-related companies is extremely difficult. That’s because any bank that does business with marijuana companies could be charged with “aiding and abetting” — which is a federal crime.
… in order for the marijuana industry to make its next quantum leap, banks need to be in on the game.
It looks like a Congressional committee may be ready to make that leap.
Tomorrow, a bipartisan bill designed to protect banks that service the marijuana industry will go before the House Financial Services Committee.
Reps. Ed Perlmutter (D-CO) Denny Heck (D-WA), Steve Stivers (R-OH) and Warren Davidson (R-OH) are the main politicians pushing the Secure and Fair Enforcement (SAFE) Banking Act.
Perlmutter provided the following statement:
For six years, Congress has failed to act on the issue of cannabis banking, putting thousands of employees, businesses and communities at risk. However, the issue is finally receiving the attention it deserves with the first-ever congressional hearing and now a scheduled committee vote.
If the committee embraces the legislation, it’s likely we’ll see it heading to the full House, and then to the Senate. If approved, the bill will be a watershed moment for the U.S. marijuana industry.
***As evidence of continued marijuana momentum, last week, we saw more pressure put on CBD legalization with CVS’s announcement that it has begun selling CBD-infused products
One of the hottest sub-markets of the marijuana industry is CBD.
To make sure we’re all on the same page about CBD, I’m going to turn to Matt McCall. He’s our resident marijuana expert, helping his Investment Opportunities subscribers navigate the complex marijuana investment industry.
From Matt’s October special report:
CBD is shorthand for cannabidiol, which is one of more than 400 chemical compounds found in a cannabis plant. Of those 400, over 60 are unique to the cannabis plant, and they are referred to as cannabinoids.
CBD is what’s called a non-psychoactive compound found in both the cannabis and hemp plants. That’s a fancy way of saying CBD will not get you “high.”
I could write an entire book on the benefits of CBD, but I’m going to keep it simple for you. It’s actually been used by wellness and medical professionals for years as an alternative to traditional pharmaceuticals to treat everything from anxiety and depression to chronic pain to the reduction of inflammation to childhood epilepsy. If it were a drug, we would call it a wonder drug. CBD is considered one of the most beneficial compounds available to humans, and it does not have the nasty side effects that many drugs do.
The problem is that while CBD made from hemp is now legal thanks to the 2018 Farm Bill, CBD made from marijuana is still illegal. That’s because marijuana remains a controlled substance. As we pointed out in our March 8th Digest, confusion around this topic as well as the lack of formal guidance from the FDA has led state and local officials around the nation to shut down the sale of certain CBD-infused products.
Despite this, a growing number of retailers are selling CBD products, even with the risk of government prosecution. And now, you can include CVS in that group. The drugstore chain is selling CBD topicals, such as cremes, sprays, roll-ons, lotions, and salves.
We expect this will put even more pressure on the FDA and congress to provide additional clarification on CBD guidelines.
***Finally, it looks like Barron’s is reading Matt McCall
Last week, Barron’s ran an article on one of Matt’s recommendations, Innovative Industrial Properties (IIPR).
From the article titled, “Why This Marijuana REIT Is Flying High“:
American cannabis producers have money problems, and that’s a lucky thing for Innovative Industrial Properties. Even after most states have legalized pot sales, the weed remains illegal under federal law. That federal ban closes big banks and stock exchanges to the business.
One way cannabis outfits can raise funds is to sell and lease back their cultivation properties with IIP — which had the good fortune to get real-estate investment trust status and an NYSE listing in 2016, before Donald Trump’s election slammed those doors shut on IIP’s real estate rivals. As the only U.S.-listed REIT serving the cash hungry cannabis industry, IIP has parleyed its cost-of-capital advantage into steady growth and a generously-valued stock (ticker: IIPR).
If this sounds familiar to you, perhaps it’s because you’ve read something similar from Matt. Here’s what he recently wrote subscribers:
For growers, it’s not easy to produce high-grade marijuana. Nor is it cheap — and getting that funding is tricky. Until the U.S. government removes marijuana from its list of Schedule 1 drugs — the ones considered most dangerous, like heroin — most banks want no part of it.
For investors, the options have been limited, as that Schedule 1 label prohibits most U.S. companies from listing on the NYSE or NASDAQ.
Notice I said “most.”
Innovative Industrial Properties is one of the few. Why can it list on those major stock exchanges? Because it never actually touches the plant. This is one of the smartest ways to invest in the exploding marijuana industry while it is still technically illegal federally.
Like all marijuana REITs, Innovative Industrial Properties simply plays landlord to the growers. Here’s how it works: Innovative Industrial Properties buys freestanding properties from medical marijuana growers licensed by their respective states. It then leases the properties back to the growers. This gives those growers an infusion of capital to expand their operations and increase production. In return, Innovative Industrial Properties receives regular rent payments under a long-term lease.
Matt recommended IIPR to his Investment Opportunities subscribers this past August. As I write, they’re sitting on gains of 171%, with IIPR setting new, all-time highs. Congrats to Matt and his subscribers for a great call.
If you missed the chance to add IIPR to your portfolio, Matt’s about to reveal his latest marijuana pick on April 4. He looks for the smaller, overlooked companies that are better positioned to deliver major gains – similar to IIPR. If you’d like to learn more about Matt’s approach, click here.
Looking forward, we’ll be watching the outcome of tonight’s and Tuesday’s vote with great interest. Meanwhile, we expect to be hearing more from the Fed and congress about CBD legalization in the coming months. Both will be big for additional marijuana investment gains.
Have a good evening,