Tuesday was the World Wide Web’s 30th birthday.
Sir Tim Berners-Lee invented the service in 1989 as way for scientists to share data. The internet and hyperlinks already existed, but no one had thought of a way to use it to connect from one document to another.
Now, the web is one of those inventions we can’t imagine life without, like the light bulb.
It’s also mind-boggling to remember that there were plenty of naysayers about the internet.
Most famously, America’s two biggest news magazines of the day featured stories about why the internet wouldn’t amount to anything.
In 1994, Time said the internet “was not designed for doing commerce, and it does not gracefully accommodate new arrivals.”
A headline on a Newsweek article the next year read: The internet? BAH!
Many pundits thought it would never amount to much. They couldn’t envision a world like the one we have now, even though many experts saw it coming.
The marijuana trend is often treated the same way now. It’s almost as if the news doesn’t matter. And yet the news keeps coming….
- On Tuesday, New Jersey lawmakers reached a deal to legalize recreational marijuana and a vote on final approval will take place soon.
- Yesterday, Florida lawmakers agreed to end a ban on smoking medical marijuana.
- New Mexico lawmakers reached an agreement recently that would let the state open up its own marijuana stores. Think about that. Government run marijuana stores!
And regular Digest readers know that many presidential candidates continue to campaign for legalization.
And still pundits say you have to wait, or the industry is too unpredictable, or even that it’s all a bubble about to burst.
They will tell investors to stay away from these stocks as a fad. And any volatility in the stocks is used to bolster their case.
But the skeptics are wrong and Matt McCall can prove it.
Matt, the editor of Investment Opportunities, knew that there would be skeptics about marijuana stocks, just like there were skeptics about the internet 20 years ago. And, he knew that listening to those skeptics would push some investors to miss this trend that could turn small investments into profits seen once in a generation.
So, he wrote an essay explaining why the skeptics were wrong about the internet then and wrong about marijuana stocks today.
From Matt’s essay ….
Of all the internet-related businesses you could have invested in during the early 1990s, you’d be hard pressed to find three better ones than Cisco, Intel, and Microsoft. These three businesses played dominant roles in the buildout of the worldwide web and the devices people used to access it.
Here are the returns for each stock from January 1, 1990 to December 31, 1999:
- A $10,000 investment in Intel (INTC) would have turned into more than $461,000 … a 4,600%+ gain!
- A $10,000 investment in Microsoft (MSFT) would have grown into $935,555 … profiting more than 9,350%!
- And a $10,000 investment in Cisco (CSCO) when it went public in February 1990 would have turned into $6.9 million by the end of the century. That’s life-changing profits of 69,000%+!
As you can see, these businesses produced extraordinary returns for their shareholders during the internet’s formative years. If you want better returns on every $1 you put at risk, you’ll probably have to play the lottery.
However, the road to 5,000%+ gains was very bumpy. These super-performing stocks went through huge short-term ups and downs during their extraordinary runs.
For example, Cisco went public on February 16, 1990 at a split-adjusted price of $0.06 per share. The market cap that day was a modest $224 million. Revenue for the year surged 150% to $69 million from $27 million a year earlier. If you remove the name of the company and the year, those numbers are eerily similar to a handful of marijuana IPOs here in 2018.
By 1991, Cisco’s market cap hit $1 billion for the first time as revenue increased to $183 million. Again, the numbers are very similar to some marijuana stocks today.
Even so, early investors in CSCO did not turn into multi-millionaires overnight. In 1994, the stock fell over 50% in a few short months. It took more than a year for it to rebound. Investors who did not have the patience or the confidence in their research bailed out on the pullback under $1, missing out on a possible fortune.
The selling was triggered by an overall market plunge as the NASDAQ fell 14% from its March high. The selling in Cisco specifically was exacerbated when a spokeswoman warned that the next quarter’s earnings “were not in the bag.”
Think about that. A comment by one person, who is likely not even with the company anymore — and a comment that was focused on one three-month timeframe at that — likely sent most investors for the exits way too early.
Then there is Intel, which actually became a publicly traded stock back in October 1971. The company raised $8.23 million at a valuation of $58 million, a true microcap. Today Intel is worth $208 billion, more than 3,500 times its initial valuation.
Investors who had the fortitude to take the ride with Intel stock are extremely wealthy today. But as we know, it was not always a smooth ride. There were several sizable pullbacks in Intel years before the Internet Bubble in 2000. On a long-term chart they are barely noticeable (see below), but if you were an investor at the time they felt a lot worse than a mere blip.
After topping out in July 1995, INTC pulled back 40% the following few months. It took a year to recover the losses, and by July 1997, the stock rallied another 270% from the December 1995 low.
I would bet that the majority of retail investors were unable to stomach the pullback and dumped INTC when it was in the single digits.
One final example is Microsoft. In 1990, the stock pulled back 38% from a high before rallying. The next year, MSFT fell 21% before rallying to a new high. Then there was a 28% pullback in 1992 before more new highs. And in 1993, there was a repeat performance as the stock again fell 28% before being 60% higher a year later.
The lesson is that in the early 1990s it was not easy for investors to hold through the pullbacks. A 20% pullback is considered a bear market in the investment world. Investors in Microsoft, Intel, and Cisco had to endure their fair share of bear markets, but if they did stay, they were on their way to becoming multi-millionaires.
That’s a powerful lesson about investing during times of massive cultural changes and investment trends. Bailing out due to skepticism or market volatility (versus staying invested) makes the difference between a small gain, or even a loss, and making triple or quadruple digits in your investments.
Investors should focus on the long-term picture.
There is a tidal shift going on as marijuana’s mainstream acceptance spreads around the country, and around the world.
Don’t let short-term thinking rob you of a potential to get rich!
Matt has plenty of picks for his Investment Opportunities subscribers, but he has made some of his picks public:
Marijuana REIT Innovative Industrial Properties (IIPR) is up 133% since Matt advised his subscribers to buy it.
Canopy Growth (CGC) is up 51%.
And he has several other stocks in his portfolio with similar gains. You can see Matt’s presentation about the next marijuana stocks that could achieve similar gains clicking here.
If history teaches us anything, it’s that investing in major trends that change the way we live can be a bumpy ride at first. But there was no denying the power of the Internet then, and no denying the shift toward marijuana now.
To a richer life….
Luis Hernandez, Managing Editor
and the research team at InvestorPlace.com
