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Big Investment Could Solve Cannabis Banking Issue

0 | By Michael A. Robinson

Wall Street is waking up to the fact that legal cannabis is quickly going mainstream.

Finally.

After all, a $3.8 billion investment is the kind of move that makes big waves.

Of course, this is something we’ve been talking about for close to two years. And by being way ahead of the curve, you folks and my Nova-X Report members have had the chance to score some pretty sizzling gains.

Now then, there’s no question the Aug. 15 news that Constellation Brands Inc. (NYSE: STZ) is spending close to $4 billion to take a 38% stake in the Canadian cannabis firm Canopy Growth Corp. (Nasdaq: CGC) was a game changer.

Many cannabis stocks have rallied on the news – and I hope you were in on some of that.

But there’s an element to the deal that almost no one else is taking about.

You see, I think this mega investment marks the beginning of whole new financial trend.

One that will mean big bucks for cannabis investors.

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Despite massive growth in the space and a majority of states making medical marijuana legal, cannabis stocks had been under pressure for several months.

That’s largely because in early January U.S. Attorney General Jeff Sessions sparked a sell-off in the sector. A longtime cannabis critic, Sessions said he retained the right to crack down on states that had made marijuana legal.

Sessions cast doubt on the sector because marijuana remains illegal under federal law – despite the fact that 30 states and the District of Columbia have legalized some form of cannabis use.


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Of course, we now know the odds of a federal crackdown are highly unlikely. Even Sessions’ boss, President Donald Trump, supports a bipartisan compromise under which states could make marijuana use legal without interference from the federal government.

Known as the STATES Act, the legislation would allow each state to determine for itself the best approach to marijuana within its borders – without fear of a U.S. Department of Justice crackdown.

Because it draws on states’ rights under the 10th Amendment to the U.S. Constitution, the bill has gained approval from conservatives – and the the bill has wide support in both the House and Senate.

While that’s a great backdrop for the emerging cannabis sector, there’s nothing quite like a multibillion-dollar deal to get investors excited about huge gains ahead.

That’s why Constellation’s new pact with Canopy Growth is so vital. See, Constellation is the global beverage giant behind Corona beer, Robert Mondavi wines, Svedka vodka, and many other well-known brands.

And it marks the start of the great marijuana sector buyout trend – in which big consumer products companies will spend the next few years acquiring cannabis companies.

But here’s why this deal is even more important than it sounds…

Wall Street + Big Banks = Major Profits Ahead

Simply stated, it marks the emergence of mainstream cannabis banking.

This is huge because commercial banks have avoided cannabis like the plague, lest they run afoul of federal restrictions designed to curb illicit drug trafficking and money laundering.

Wall Street and big banks actually joined forces to make this the Constellation-Canopy deal happen.

The storied investment banking firm Goldman Sachs Group Inc. (NYSE: GS) served as an advisor on the deal. And Bank of America Merrill Lynch – the corporate and investment banking division of U.S. giant Bank of America Corp. (NYSE: BAC) – financed it.


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I predict this will be go down as a turning point in the drive to get commercial banks involved in the sector. In other words, U.S. banks now see a way to profit from legal marijuana, despite the fact that most still don’t accept accounts from cannabis firms.

So, while big U.S. banks will still avoid taking on cannabis accounts, they will continue to pour billions into the industry

That may be far more important in the long run. For the cannabis sector to grow into its full global potential, it needs the type of investment liquidity that only Wall Street and the big banks can provide.

Consider that industry experts at Arcview Research forecast $8 billion in U.S. legal cannabis sales by the end of this year. That figure will hit $22.6 billion by 2021, for a 27.5% yearly growth rate.

And let’s not forget that while the Constellation-Canopy deal was the largest deal of its kind, it didn’t happen in a vacuum.


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It came just weeks after Canada said it would make recreational use of cannabis fully legal on Oct. 17. With more than 30 million residents, Canada ranks as the world’s 10th-largest economy.

On July 19, Canadian medical-pot producer Tilray (Nasdaq: TLRY) became the first cannabis stock to make its initial public offering (IPO) on a major U.S. stock exchange.

Tilray is now in a rally because the firm’s Canadian unit just received an initial purchase order from Nova Scotia Liquor. That state-owned business has a monopoly on distribution and retail sales of alcoholic beverages in the province.

And it’s a deal in line with beverage makers looking to infuse nonalcoholic drinks with cannabis. On Aug. 1, The Hydropothecary Corp. (OTC: HYYDF) said it is working with Molson Coors Canada, a unit of Molson Coors Brewing Co. (NYSE: TAP), to develop cannabis-infused drinks for the Canadian market.

With these kind of moves happening in rapid order, you can see that cannabis stocks are poised for big gains ahead. In fact, readers of my Nova-X Report premium service just booked a very impressive profit.

On Monday, we sold half our holdings in a cannabis stock we had held for just 7.5 months for 70% gains. By contrast, during the period, the S&P 500 gained just 5.4%.

That means our cannabis stock beat the “mainstream” market by 1,196%.

Of course, that’s not the only big Nova-X winner. Last week alone, I showed my readers the opportunity to pocket back-to-back double- and triple-digit windfalls…

My next trade recommendation could drop at any minute, and you’re not going to want to miss out on the next major windfall.

I’ve also put together a list of the hottest cannabis stocks I’m following, and I am confident I can bring you wealth beyond your wildest dreams.

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