Call it the "Cannabis Gold Rush," or the "Green Rush," but however you slice it, it's one of the most exciting, lucrative investing stories of our time.
And it's far from over.
There's a lot to look forward to: Canada already legalized medical marijuana at the federal level and should make recreational puffing legal sometime later this year.
But here in the United States, we Yanks have stubbornly kept "reefer madness" away from society by keeping it illegal at the federal level, while states – lots of them – are bucking the feds to take advantage of the pot bonanza.
Nine states have already legalized recreational weed, and 29 have permitted medical use. Not to mention, 13 states have decriminalized marijuana, making getting caught with a little dope no more problematic than being late with a library book.
Growers, landowners, lab companies, farm supply companies, farm equipment manufacturers, and even packaging firms have rushed to the market to make money on "green gold."
Billions are being made, and taxes are being paid even with the dubious legality of the product.
And the flow of dollars will increase dramatically when we finally get marijuana off the federal controlled substances schedule at some point in the (hopefully near) future.
More than 70% of Americans favor marijuana legalization, and many states badly need the tax revenue that legalization would provide.
Still… the "linchpin" to all of this – the financial sector – is still waiting on the sidelines.
But that's about to change in a very big, massively profitable way – and you can ride these companies to – pun intended – absolutely dizzying heights.
Lucrative "Cracks" Are Starting to Appear in the Wall Between Weed and Finance
I'm talking about financial services companies, like investment banks and commercial banks, which have mostly avoided the cannabis business in spite of the dollars at stake.
For the most part, I don't blame them.
Banks have enough regulatory issues to deal with at any given time, and inviting a whole new host of regulatory bodies – including the FBI and other federal agencies – has not been in their best interest.
O, Canada! An earth-shattering weed announcement in Ottawa could help turn everyday Americans into pot stock millionaires. Watch this for details…
Until now, only small, privately owned investment banks like Chardan Capital Markets and Viridian Capital Advisors have assisted the handful of public companies in the weed business.
So these private firms have been making a killing helping weed companies raise money, but so far, there hasn't been a way for us regular folks to capitalize on the weed financial services boom taking shape before our eyes.
But that's changing very quickly, and this change is being led by major firms – like these two right here…
These Banks Are the Marijuana Banking Revolution
The first of the winners I want to show you is Canaccord Genuity Group Inc. (OTCMKTS: CCORF), a Vancouver-based investment bank and wealth management firm doing a lot of business in Canada's booming cannabis sector right now.
While most of its cannabis investment banking has been up in the Great White North, Canaccord recently announced it was opening a cannabis banking operation in the United States. The new weed bankers will be based in San Francisco (undoubtedly wearing flowers in their hair) and provide services for marijuana firms.
These include the whole gamut of services being conducted for any other type of company. Managing public offerings, raising debt financing, private placements of equity and debt, and providing consulting and advisory services are just a sampling.
Now, investing in Canaccord doesn't just give you exposure to the cannabis sector. It also exposes you to the firm's other high-growth areas like healthcare, technology, sustainable energy, and even blockchain. All of this has made it one of the largest wealth managers in Canada – and among the top 10 wealth management firms in the United Kingdom and Europe.
So although Canaccord will see explosive growth from the cannabis industry, there are other outstanding parts of the business that should also drive future earnings growth and provide a bulwark if cannabis hits regulatory bumps along the path to big profits.
As an investor, I maintain a "rich-guy" mindset and approach that relies heavily on valuation. This has kept me away from all but a few cannabis stocks, as their valuations seem to have been developed after liberal consumption of the core product line.
Like so many early-stage growth industries, plenty (but not all) marijuana stocks are valued on hopes, dreams, and complete puffery (pun intended – again). Picking the winners from the losers is a losing proposition, and your odds would improve by making a single-number bet on a roulette wheel.
But again, Canaccord isn't just a cannabis company.
It instead offers exposure to other high-growth industries at a price that's a bargain for a real business able to grow at double digits not just from hopes, dreams, and heavy product intake.
As a bonus, the folks keeping the wheels moving at the firm have tons of skin in the game. Employees won 40% of the company, and they provide share matching in the employee stock-purchase plan.
I absolutely love these programs for one very simple reason: For them to get wealthier, they have to make us wealthier as well.
The stock boasts strong fundamentals. Shares trade at just 1.1 times book value and 16 times trailing earnings. If the company comes anywhere close to meeting analyst expectations, then the P/E is an unbelievable 10.
All of this adds up to a winning long-term hold for Canaccord.
Time-Sensitive Briefing: Thanks to just announced, historic legislation, a new pot stock boom is about to blow the doors off anything we've seen up to this point. Click here…
But that's not the only wealth manager I'm watching break into the marijuana industry.
Another I've been eyeing up is Cowen Inc. (Nasdaq: COWN), which you should consider making a long-term investment in.
Cowen jumped headfirst into the cannabis industry, holding its first "Cannabis Colloquium" for institutional investors in January. The firm worked with Canada's leading marijuana provider, Canopy Growth Corp. (OTCMKTS: TWMJF) as an advisor for its equity offering last year.
You know I love an unreasonably good deal, and this fits to a "T."
Cowen shares trade for less than 70% of book value and under six times earnings expectations for 2018. That is an unreasonably attractive price for a company that could see explosive earnings growth with the eventual legalization of marijuana on the U.S. federal level.
Like Canaccord, Cowen employees also have a lot of skin in the game.
Officers and directors must own stock equal to multiples of their salary, and they are not allowed to hedge their shares in any way. Their fortune is dependent on company performance.
Once again, for them to get rich, they have to work to make us rich.
Until now, financial services companies have been reluctant to tackle the potential regulatory and legal hurdles of the cannabis industry.
But Canaccord and Cowen are proof that's changing quickly, and those companies who get an early foot in the door have a good chance of dominating the cannabis financial services industry for years to come.
Nothing Jeff Sessions Can Do Will Stop These $5 Pot Stocks from Exploding
Canada is expected to take marijuana fully legal this July, and there's not a damn thing the notoriously anti-weed attorney general can do about it. It might make him furious, but investors who park a few hundred bucks in these tiny "north of the border" companies could potentially turn a small stake into $100,000 fast. We've got the details for you – click here…
About the Author
Tim Melvin is an unlikely investment expert by any measure. Raised in the "projects" of Baltimore by a single mother, he never attended college and started out as a door-to-door vacuum salesman. But he knew the real money was in the stock market, so he set sights on investing - and by sheer force of determination, he eventually became a financial advisor to millionaires. Today, after 30 years of managing money for some of the wealthiest people in the world, he draws on his experience to help investors find "unreasonably good" bargain stocks, multiply profits, and build their nest eggs. Tim tirelessly works to find overlooked "hidden gems" in the stock market, drawing on the research of legendary investors like Benjamin Graham, Walter Schloss, and Marty Whitman. He has written and lectured extensively on the markets, with work appearing on Benzinga, Real Money, Daily Speculations, and more. He has published several books in the "Little Book of" Investment Series and a "Junior Chamber Course" geared towards young adults that teaches Graham's principles and techniques to a new generation of investors. Today, he serves as the Special Situations Strategist at Money Morning and the editor of "Max Wealth" and Heatseekers.