Let me begin this first MoneyWire of 2018 by wishing you a Happy New Year! It has all the makings of being a very profitable year, and we’ll be talking more about some of the great opportunities I see coming our way.
In fact, I want to start that today with one of the mega-trends I’m most excited about for 2018. I wrote my subscribers about it last week, and we already locked in 50% gains in less than two days! You can see why I’m so high on it.
Okay, so that’s a bit of a pun there because I’m talking about marijuana. It’s not some newfangled tech breakthrough like self-driving cars or blockchain technology. It actually goes back nearly 3,000 years, but the world around it is now changing and that’s what makes it a NexGen mega-trend.
I’ve made money on quick trades in marijuana stocks, but in the big picture, there was simply a lack of news in this space, and the group tends to stagnate when there are no headlines. That all changed in 2017, especially for Canadian stocks because that country is moving closer to full legalization that’s currently pegged for the summer.
Several other major headlines helped boost the sector recently, including alcoholic beverage giant Constellation Brands’ (STZ) $190 million investment in 10% of Canada’s largest cannabis company, Canopy Growth Corporation (TWMJF). STZ is actually a U.S.-based company, and it was the first of its kind to make a sizable purchase in the hot sector, and the move immediately legitimizes the Canadian marijuana group. It could also be a sneak peek into what will happen here in the United States in the years ahead. I suspect cannabis will be legal medically in the next five years and recreationally a few years after that.
In fact, the 2016 election was a big moment for marijuana. Initiatives to either create or expand legal cannabis programs were on the ballot in nine states, and all but one was passed. The adult usage of marijuana was legalized in California, Nevada, Massachusetts and Maine, and medical marijuana programs were either created or expanded in Florida, North Dakota, Montana and Arkansas.
Here in 2018, recreational sales begin this month in California and the numbers are already staggering. Sales in that state alone are expected to outpace all of Canada over time. It is estimated that recreational sales of marijuana in the United States will be in the $7 billion–$10 billion range by 2021, with California accounting for more than half.
It’s not just the U.S. and Canada either. Estimates are for medical marijuana sales to reach nearly $56 billion by 2025 as more countries and states expand into the group. In fact, medical marijuana sales are expected to grow faster than what we saw in the broadband internet sector in the 2000s!
There is a sea of change taking place right now, and the growth potential is eye-popping. This is not some fleeting rally. There are much bigger factors at work now, and each day we’re getting closer to legalization.
How to Play the Trend
Before you go out and buy any stock that is associated with marijuana, you need to know that the theme does come with above-average risk. There are a lot of poorly-run companies within the sector, so it’s important to do our homework and focus only on the leaders that are poised to benefit in the next wave of growth. And because of the changing landscape, you can now incorporate longer-term investments into your thinking. There will be trading opportunities along the way, but those with a longer holding period will allow us to weather day-to-day price swings on our path to strong returns. As always, our NexGen criteria and risk-management strategies will be crucial to our success.
One nice and diversified investment is a brand new marijuana exchange-traded fund called ETFMG Alternative Harvest ETF (MJX), which began trading in the United States last week as the first marijuana ETF. It is made up of 31 stocks primarily from the United States and Canada, with 25% coming from outside North America. The companies focus on the healthcare, consumer and materials sectors within the cannabis industry, which means the top holdings are direct plays on the primary trend. Early trading volume was impressive (278,000 shares on the first day), and I do expect it to move higher over time. If you’re looking for a more precise entry point, we would need to wait for it trade a little bit longer for the chart to give us a better reading.
The stock my NexGen Profit Multiplier and Investor subscribers made a killing on in just two days was the Cronos Group (PRMCF). It’s not an ETF but it does give broad exposure to the theme because it is a holding company with interests in five licensed producers in Canada, and it has also expanded by signing deals with Israeli and German companies to distribute in those two countries. While it was initially added as a longer-term play, the quick two-day 50% profits were just too juicy to pass up, and this company will definitely remain on my radar.
I expect more payoffs like that in the coming months and even years, which is why I’ve also recommended another company to my readers. This one focuses on plant biotechnology, and we’re up 13% in just a week. There will be plenty more ground-floor opportunities for us to get in ahead of Wall Street and make big money.