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Here’s What Legal Cannabis Looks Like After the Marlboro-Cronos Deal

5 | By Michael A. Robinson

Big news this morning – and I hope you’re hearing it from me first.

As I’ve been predicting since I first started covering the field in late 2016, Big Tobacco is diving head first into legal cannabis.

Altria Group Inc. (NYSE:MO), maker of Marlboro cigarettes and other major brands, said early today that it’s taking a $1.8 billion, 45% equity stake in Canadian cannabis leader Cronos Group Inc. (Nasdaq:CRON). Plus, Altria has the option to take over Cronos through 55% ownership over the next four years.

The “bigness” of this news is evident in the price Altria paid: $12.14 per share – an 18% premium over Cronos’ stock price as of Thursday, and approaching the stock’s all-time high of $15.30.

And it’s evident in how Cronos absolutely skyrocketed on the news. As I write this, the Toronto-based firm’s stock is already up more than 25% for the day.

Altria’s dive into pot makes sense, of course. Its long-running global experience in the highly regulated tobacco industry is going to come in handy for an internationally oriented cannabis firm like Cronos, which has operations not just in Canada, but also in Colombia, Germany, Poland, Israel and Australia.

And Cronos should supply a nice shot-in-the-arm for Altria, which, like all tobacco firms, has been hit hard by public health laws and anti-tobacco campaigns. It no doubt hopes the Cronos deal will help turn the tide.

As for what happens from here – to Cronos and the rest of the legal cannabis industry we follow so closely here – no one can say for sure.

But we’ve seen this story play out before – and can make some pretty good guesses.

Recall August 15, one of legal cannabis’ biggest days ever.

That’s when Corona beer parent Constellation Brands Inc. (NYSE:STZ) announced that it was taking a major stake in Canadian marijuana leader Canopy Growth Corp. (NYSE:CGC) in a headline-grabbing $3.8 billion deal.

Canopy went on to surge 19% in one day, and then explode another 51% in the week following.

But here’s the even more important point – Canopy’s rise brought up just about every other pot stock along with it.

Just take a look at what happened to the Horizons Marijuana Life Sciences ETF (TSX:HMMJ.TO).

The cannabis-stock ETF soared nearly 80% through mid-October – in just two months. Meanwhile, the SPDR S&P 500 ETF Trust (NYSE:SPY) tumbled more than 3%.

That’s where we are right now – on the precipice of another huge leg up for pot stocks. (I don’t have time to get into it now, but already this morning, other cannabis companies are seeing their share prices on the move.) And this Altria-Cronos deal is the catalyst, just as the Constellation-Canopy blockbuster was the trigger for legal marijuana’s last big move up.

The Constellation and Altria deals are just the start of the biggest cannabis money migration we’ll probably ever see – from global “sin stock” giants to tiny Canadian startups. And you can take part – if you know the right moves to make.

That’s why I recently sat down for an in-depth interview on just that subject. In that conversation, we let you in on exactly what’s happening here – and why – and which stocks will be the biggest beneficiaries.

I hope you check it out – before this latest rally really takes off… and it’s too late to join in.

Click here to see it.

I’ll see you back here soon.

5 Responses to Here’s What Legal Cannabis Looks Like After the Marlboro-Cronos Deal

  1. Doug says:

    Michael,. I have invested in many of the pot stock positions based on your recommendations prior to October 17 and since then they have gone down nearly 50 percent. I am confident they will come back , however it concerns me that you speak with such optimism in massive growth yet you don’t touch on the fact that these are also high risk on major swings down too. I am holding on strong with hope and confidence that the next year or two will put some of my holdings to hopefully very high levels of return.

    Doug

  2. Ivan says:

    As you well know these numbers mean absolutely nothing unless you publish the profit percentage for each day. The way it’s presented looks suspicious/deceptive. Had one invested $100,000 on monday the profit would have been only $3,160 or 3.16%. That’s how transparency works.

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