Every day I hear from you folks.
Many of you write in to tell me about the big wins you’ve made on this or that stock pick.
But just as many of you write into me about your worries – what in the market is keeping you up at night.
I get it. The media is filled with stories of doom and gloom.
Here’s a few headlines you all have sent me: “1 Figure That Shows Why Marijuana Stocks May Be Immensely Overpriced…” “Getting Too High? Canadian Marijuana Stocks Skyrocket, Raising Bubble Fears…” “Avoid These 5 Outrageously Overvalued Cannabis Stocks…”
No wonder pot stocks have been on such a roller coaster this year, with all this “noise” out there.
Now, some marijuana stocks are, indeed, overpriced. But there so many catalysts lining up behind them – not least of which is full legalization in Canada – that earnings will rise enough to prove those valuations sound.
But beyond legalization in Canada and elsewhere, there’s another catalyst out there that my team’s recent trip to the Lift & Co. Cannabis Expo and Business Conference in Toronto late last week helped solidify in my mind. (We’ve got a full report on our Toronto trip up at Nova-X Report. To find out how join us there, click here.)
You’ve seen some pretty big numbers bandied about legal weed’s eventual market size, some reaching the hundreds of billions.
But that’s nothing.
This latest catalyst, some folks believe, could launch legal marijuana into the $1 trillion zone.
Take a look…
Countdown to June 8
Canada’s journey to fully legalizing cannabis nationwide is so close that marijuana companies – and pot stock investors – can almost taste the profits coming their way.
A week from today, June 8, the Senate of Canada is slated to put its final stamp on the recreational-use bill. And if all goes according to plan, dispensaries nationwide will start opening their doors later this summer.
While Canada already has a thriving medical marijuana market, recreational sales are not just going to bump up the number of customers, but those products sell at higher margins as well.
They’ll be selling into a Canadian market where sales could reach $6.5 billion (CAD) by 2020, according to the Canadian Imperial Bank of Commerce.
And a Deloitte study notes that Canada’s total legal weed market – when you add in the growers, the value-added product makers, the testing labs, security, tourism, exports, and all the rest – soon could reach $22.6 billion.
But those numbers are small once you consider the catalyst we’re talking about here today…
From Billions to a Trillion
Aaron Salz, the founder and CEO of Toronto-based Stoic Advisory Inc. who we spoke with at the Lift & Co. Expo, says there’s a reason for those high valuations – and the rocky market for marijuana stocks they’ve created over the past six months or so.
Cannabis is, Salz says, a unique product – one set to take over portions of several markets, including alcohol and nutraceuticals (pharmaceutical-grade health products). However, even though there seems to be hundreds of “penny pot stocks” out there, the industry is still relatively scarce in terms of quality stock investment opportunities.
Thus, the high valuations.
Martin Landry, managing director of Equity Research at GMP Securities LP, told us at Lift & Co. that the high valuations among many Canadian companies are justified due to their potential to go international.
And the way he sees it, if you’re investing in Canadian pot companies, you’re really investing in a global opportunity that spans the 33 nations where some form of marijuana is now legal.
Grand View Research, Inc. sees legal global pot sales reaching $146.4 billion by the end of 2025.
And Aaron Salz, the founder and CEO of Toronto-based Stoic Advisory Inc. who we talked with at the Lift & Co. Expo, believes the global pot market could reach $1 trillion in a decade or less.
And forward-thinking pot companies have been investing fortunes into building up their businesses to dominate this global landscape – or make themselves attractive acquisition targets for bigger players like global alcohol or tobacco companies – going forward.
In Toronto, John Kagia, executive vice president of Industry Analytics at New Frontier Data, told us the firm has gone from looking at North America as the only region where legal cannabis markets were active a few years ago, to tracking the pot industry in 23 countries with a population of 2 billion engaged in some sort of legal cannabis regime.
“One can understand when you see markets like Brazil, Argentina, Germany… the long-term trajectory is truly substantial,” Kagia says.
Andres Fajardo, cofounder and chairman of Clever Leaves, a vertically integrated licensed cannabis producer in Colombia, told my team that producers operating in his nation have a geographic advantage in terms of ideal growing conditions. Labor and land are also relatively low cost.
Plus, the country – which has one of the most developed medical marijuana markets in Latin America – also has a thriving, international flower business full of people who know how to cultivate their products to markets and ship them around the world.
As of April 9, Colombia has granted 35 pot manufacture licenses, 33 of which included the option to export cannabis, according to Marijuana Business Daily.
Now, I share individual pot stock picks with my members at Nova-X Report. And many of those are Canadian cannabis companies with a lot of international exposure.
But these are also very small-cap stocks that are often too volatile for beginning investors (that’s why I save them for my Nova-X members – to find out how to join them and get those companies’ names, click here).
However, there is a way you folks can play these stocks – and the rapidly growing international legal cannabis scene…
The Way to Play It
One way to get in on the type of big pot firms that have operations abroad is to look at the bellwether Horizons Medical Marijuana Life Sciences ETF (TSX: HMMJ).
In just the past month, HMMJ has climbed 10% – nearly triple the returns of the S&P 500 over the same stretch. And if things go as well as they’re expected to in Canada, it should soar in the coming months.
This ETF is loaded with some of major Canadian pot companies that expanding their reach into far-flung markets like Germany and Australia.
So it’ll give you a good taste of what’s possible in these international markets.
Now, we’re not done with our travels around the nation to legal marijuana events. This week, we’re in New York for the Cannabis World Congress & Business Exposition.
I’ll have a report on the most profitable ideas we pick up there real soon – hopefully tomorrow, in fact.
See you then.