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Oil and Wheat? The Big Money Is Actually in Gold (and Cannabis!)


Oil and Wheat? The Big Money Is Actually in Gold (and Cannabis!)

Source: Shutterstock

This article is excerpted from Tom Yeung’s Moonshot Investor newsletter. To make sure you don’t miss any of Tom’s potential 100x picks, subscribe to his mailing list here.

In the past week, palladium has become the new darling of social media. The metal’s price has risen another 10%, sending thousands of investors to Wikipedia to research what palladium is even used for.

The price rise isn’t particularly surprising. Nor is the sudden interest in metallurgy. Russia was the world’s largest exporter of palladium, supplying a quarter of the world’s consumption. Sanctions are now putting the entire auto supply chain on high alert.

A chart showing palladium prices versus oil prices in the last decade.

Palladium prices (orange) are outrunning oil (purple) | Source: Thomson Reuters

But the attention over palladium, oil and wheat overshadow some stunning second-order bets. So, if you missed out on the oil-and-metal boom, many other bets are beckoning now.

An illustration of an astronaut reaching for a star.

Source: Catalyst Labs / Shutterstock.com

Gold? Cannabis? Really?

I was on the earlier end of the energy boom. I made my choice of Peabody Energy (NYSE:BTU) for our Christmas contest in December 2020 when prices hovered at $2. And my November call on Enservco (NYSEAMERICAN:ENSV) happened when the company was still a penny stock.

But many of these top picks have now run their course. An investor buying BTU at $26 today cannot expect the same 1,200% returns. Such a feat would make Peabody worth 3.5x more than the rest of the U.S. coal industry combined.

And Enservco’s meme-stock run to $8.76 is unlikely to be repeated. (Those still holding onto ENSV should ditch their shares). Natural gas prices tend to have an upper limit since export capacity is limited.

In other words, like the latecomers to a poorly-stocked buffet, many investors today are left with slim pickings. All the top commodity-based stocks have been bid to the moon.

Or have they?

The Second-Order Winners of Rising Inflation

Last month, I introduced the concept of second-order winners — firms that indirectly gain from rising commodity prices. If oil producers are drilling more wells, these lesser-known companies supply the fracking sand, pipelines and technical expertise.

And second-order companies are showing better value than ever before.

Top Moonshot pick Summit Midstream Partners (NYSE:SMLP) barely trades at 2x cash flow, a stunningly low valuation given the severe oil shortage. Other recommended stocks PBF Energy (NYSE:PBF) and Martin Midstream Partners (NASDAQ:MMLP) have similar valuations.

For investors looking for the next big thing, these second-order companies have the chance to go 2x…5x…10x.

Allegiant Gold (AUXXF)

When I first mentioned Allegiant Gold (OTCMKTS:AUXXF) in February, its CEO had just bought another 15,650 CAD of shares.

“Allegiant Gold already has a heavy insider presence. Seeing its CEO double down on his bet suggests that there’s even more gold in them hills,” I wrote.

The following month, the firm announced a 4 million CAD investment by Kinross Gold (NYSE:KGC). AUXXF shares are now up 45% since its first mention in the Moonshot Investor.

Rising inflation rates are now giving investors a second chance to jump in. According to a study by Reuters, gold prices are second only to 10-year inflation-protected bonds when it comes to outrunning inflation. And gold exploration firms like Allegiant Gold essentially become cheap options on commodity prices.

During periods of rising commodity prices, shares in these smaller exploration firms tend to outperform their more stable brethren.

Insiders have already taken note. In the past two weeks, the firm’s CFO and a director have joined CEO Peter Gianulis in adding to their stakes.

And if history is a guide, they’re signaling there’s still more gold yet in them hills.

CryoMass Technologies (CRYM)

Meanwhile, rising prices of agricultural commodities have created another unexpected winner:

Cannabis processors.

In particular, CryoMass Technologies (OTCMKTS:CRYM) is emerging as a big winner.

The company in question has a straightforward business. By using a patented freeze-drying system, CryoMass helps farmers extract more THC out of their cannabis crop. And with the cost of labor and equipment rising, these growers are reaching for every tool to improve yields.

Share prices for CryoMass are already up 50% since getting recommended in the Moonshot Investor in February. And much like other agricultural processing companies, CRYM will likely continue rising as input prices stay stubbornly high.

There are, however, some short-term concerns. Two weeks ago, shareholders converted warrants into over 50 million shares. While it’s a long-term bullish sign, such a significant move creates short-term selling pressure.

Cannabis stocks are also a magnet for speculators. In March, cannabis ETF AdvisorShares Pure Cannabis (NYSEARCA:YOLO) prices rose 20% after the U.S. House indicated it would pass the Marijuana Opportunity Reinvestment and Expungement (MORE) Act. Shares fell back after investors realized the bill had zero chance in the Senate.

But longer-term investors shouldn’t care. As inflation takes its toll on agricultural firms, efficient processing companies like CryoMass are the ones that stand to gain.

Bonus Pick from Louis Navellier

If you’re looking at these speculative penny stocks and saying, “there’s no way I’m going to take these risks,” let me tell you this.

I get it.

While Moonshot stocks can add a kick to a well-diversified portfolio, they’re inherently risky if bought alone.

It’s like sky-diving with only one parachute…

…And you’re not sure if you packed an anvil in there by accident.

But I also have some good news. InvestorPlace’s Louis Navellier recently revealed his No. 1 stock to buy now. It’s a stock that could tempt Warren Buffett himself.

And the best part? Louis is giving it away for free in an exclusive presentation.

To watch it and get his no. 1 stock pick, click here.

Apparently, Rug-Pulls Are Illegal Now

Last week, crypto investors sued developer Tyler Gaye for spending the $1 million he raised on a personal NFT collection rather than on building the “0peNFT” NFT exchange as he promised.

The legal action follows precedent from last month when the U.S. Justice Department arrested the 20-year-old creators of the rug-pulled Frosties NFT project. The young team had bilked investors of $1.1 million after promising “tokens, rewards, giveaways, mint passes, and early access to a future game.”

A Frostie NFT is displayed on OpenSea.

Exhibit 115a? | Source: OpenSea.io

The law community has finally decided that stealing from crypto investors should be illegal.

The precedent for these suits are about as old as some of my jokes. Modern class action started in the mid-1950s, and investor-shareholder lawsuits quickly followed. It was only a matter of time before crypto scammers got targeted.

Of course, there are plenty of other crypto con artists, and even more slighted buyers looking for justice. Heather Morgan (AKA the Crocodile of Wall Street) can’t possibly be the only scammer who left an extensive (and embarrassing) paper trail online.

But then again, considering some of the unforced errors we investors make, perhaps it’s the lawyers who will get the last laugh.

P.S. Do you want to hear more about cryptocurrencies? Penny stocks? Options? Leave me a note at moonshots@investorplace.com or connect with me on LinkedIn and let me know what you’d like to see.

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On the date of publication, Tom Yeung did not have (either directly or indirectly) any positions in the securities mentioned in this article.

Tom Yeung, CFA, is a registered investment advisor on a mission to bring simplicity to the world of investing.

Tom Yeung is a market analyst and portfolio manager of the Omnia Portfolio, the highest-tier subscription at InvestorPlace. He is the former editor of Tom Yeung’s Profit & Protection, a free e-letter about investing to profit in good times and protecting gains during the bad.

Article printed from InvestorPlace Media, https://investorplace.com/2022/04/oil-and-wheat-the-big-money-is-actually-in-gold-and-cannabis/.

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