A few months ago, I was thinking that medical marijuana would become legal in the United States by 2023, with recreational use to follow a few years later. I now expect it to be much sooner than that. And everyone who owns cannabis stocks stands to benefit— perhaps by the 2020 election.
One Republican who’s close to President Trump, Dana Rohrabacher, is expecting it even SOONER: “as early as spring of 2019.”
Well, that’s about where we are now. So it’s time to get positioned in high-quality cannabis stocks with U.S. operations, if you haven’t already.
Nearly every Democratic presidential candidate has called for legalization. According to the insiders I’ve spoken with at cannabis conferences, President Trump is moving closer to introducing such a policy as well. The tax revenues alone would be more than any politician could pass up.
Already, the dominos are starting to fall — which brings me to the first pot stock to own BEFORE legalization hits:
Canopy Growth (CGC)
One of the most important developments in the history of the U.S. marijuana industry hit the headlines just before the Easter holiday. Canadian cannabis giant Canopy Growth (NYSE:CGC) announced that once legalization is passed, it will buy a U.S.-based marijuana company called Acreage Holdings (OTCMKTS:ACRGF).
Acreage already operates in 20 U.S. states, and was one of the first to tackle the East Coast market. Founder and CEO Kevin Murphy is a Wall Street transplant — and incredibly well connected. Acreage’s board includes three of the most important people on the planet: former U.S. Speaker of the House John Boehner, former Massachusetts governor and current presidential candidate William Weld, and former Prime Minister of Canada Brian Mulroney.
Acreage has another advantage: the ability to manufacture and distribute on a national scale. That’s thanks to its late-2018 acquisition of Form Factory.
Canopy has already created billions in wealth for its shareholders, as you can see in the chart below. Imagine what it can do as the biggest player in the much-larger U.S. market.
With marijuana illegal in the United States, pot stocks based here are still in the earlier part of that chart. The legal limitations result in the stocks trading at a major discount to their Canadian peers (for the moment). So, let’s take a look at some of our highest-quality options.
Innovative Industrial Properties (IIPR)
Innovative Industrial Properties (NYSE:IIPR) is the only publicly traded marijuana real estate investment trust (REIT) – a vehicle that owns assets and must pay out 90% of its profits to shareholders.
I’ve always loved the company’s business model. It buys grow facilities from the growers, often providing them with much needed money for their businesses, and then leases the land back to them. Innovative Industrial Properties receives an initial base rent of 10%-16% of the total investment, and rent grows approximately 3%-4.5% a year. A typical lease is 10-20 years, with the targeted size of the initial deal from $5 million to more than $30 million.
It’s a win for the growers and a win for the company, which has grown to a market value of $780 million by repeating that acquisition and leaseback model over and over. As marijuana moves toward legalization in the United States, Innovative Industrial Properties is undoubtedly the best positioned real estate business.
Not only is Innovative Industrial Properties the only marijuana stock to pay a dividend, it was the first to list on a major U.S. exchange. It began trading on the NYSE on December 1, 2016. Today, Innovative Industrial Properties is indeed the clear leader in marijuana real estate. Early investors have made a lot of money along the way…and many more will rush in the moment marijuana is legalized federally.
iAnthus Capital (ITHUF)
In October, iAnthus Capital (OTCMKTS:ITHUF) was part of the biggest marijuana merger of the time. By buying MPX Bioceuticals, iAnthus now has operations in 11 states, more than 60 retail locations, and over 500,000 square feet of cultivation and processing space.
Most importantly for us as investors in marijuana stocks — iAnthus is expected to be one of the first to turn a meaningful profit.
iAnthus released its fourth-quarter numbers on April 2, with quarterly revenue coming in at $2.2 million on full-year sales of $4.5 million. Specifically, iAnthus generates revenue in nine of the 11 states it is currently approved to do business in. California should join that list as No. 10 in the next couple of months. The company has 21 dispensaries open with the ability to open 40+ more. It has a total of 200,000 square feet in cultivation and processing facilities in nine states and the potential to increase that to as much as 580,000 square feet.
And it’s about to expand even further. On March 29, iAnthus also announced that it would purchase CBD for Life, a national cannabidiol (CBD) brand in the United States. Its products are currently available in more than 750 retail outlets throughout the country. That number will likely skyrocket once marijuana is legal in every state.
Charlotte’s Web (CWBHF)
Charlotte’s Web is the world’s leading brand by market share in the production and distribution of CBD wellness products. It gets its name from a five-year-old girl named Charlotte Figi whose grand mal seizures were drastically reduced — from 300 per week to just two or three a month — thanks to this company’s high-quality CBD oil. It’s an amazing story, and just one example of why this industry is set to grow 40X in the coming years.
For these reasons, Charlotte’s Web’s jump to a major stock exchange in either the U.S. or Canada is inevitable, and I suspect the announcement is right around the corner. I see the company garnering more and more market share as CBD oil hits the shelves in CVS Health (NYSE:CVS) and Walgreens (NASDAQ:WBA) stores… just for starters.
I Also Like Penny Pot Stocks. Here’s Why
Canopy, Innovative Industrial Properties, iAnthus, and Charlotte’s Web are the heavyweights in their markets. All of them started out as penny stocks.
For that matter, so did Coca-Cola (NYSE:KO), Apple (NASDAQ:AAPL), Netflix (NASDAQ:NFLX), and Microsoft (NASDAQ:MSFT). But people who invested with Steve Jobs and Bill Gates when they were operating out of garages are now, of course, incredibly wealthy. And these companies went from just a couple of employees — to employing millions worldwide.
You might own AAPL stock yourself. But many of the gains have already been made. For example, in the last two years, it’s up 24%. In the same time, IIPR is up 387%, and CGC is up 480%.
Think about it: It’s easier to go from $0.50 to $3 per share, than it is to go from $200 to $1,200 per share.
And while these stocks are so tiny, the “big money” on Wall Street is locked out. But not us. Click here to learn more.
I’ve got a whole presentation for you on all the reasons I like penny pot stocks with U.S. legalization around the corner. But it boils down to their ability to innovate.
It’s about buying the equivalent of Apple before the iPhone… not Apple once it’s cranking out more expensive versions of the same product.
Now, when it comes to penny stocks, you’ve got to weed through a lot of trash. Let me show you my five-step method for picking the RIGHT penny stocks.
After my presentation, you’ll have the chance to learn about the four penny pot stocks my research is highlighting now. Actually, I’ll throw in a fifth penny pot stock just for fun.
With legalization about to hit possibly in the next few weeks – it’s now or never.
Matthew McCall is the founder and president of Penn Financial Group, an investment advisory firm, as well as the editor of Investment Opportunities and Early Stage Investor. He has dedicated his career to getting investors into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA), +1,044% in Tesla (TSLA), +611% in Liquefied Natural Gas Limited (LNGLY), +324% in Bitcoin Services (BTSC), just to name a few. If you’re interested in making triple-digit gains from the world’s biggest investment trends BEFORE anyone else, click here to learn more about Matt McCall and his investments strategy today.