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I got in touch just before the holidays to let everyone know about the top wealth play of 2021 - cannabis - and to list some of my favorite long-term buy-and-hold stocks in the sector I think will clobber the market this year. We'll check in with those companies in a minute - I think you'll be pleased with how they've done in such a short time.
When I published the research, I had a feeling I'd be back with a performance update before long...
With what looks to be a new majority in the Senate, investor optimism about cannabis has never been higher; the AdvisorShares Pure U.S. Cannabis ETF (NYSEArca: MSOS), which, like the ticker suggests, tracks the U.S. cannabis sector, surged more than 8% yesterday as the Georgia runoff results came in.
I certainly hope you've had the chance to participate in some of the double-digit profits we've enjoyed over the past few weeks; they're just a taste of what's coming.
That's great news for everybody, frankly. If you got in when I first recommended these, congratulations. On the other hand, if you've been waiting to see which way the wind is blowing, there's still some time to move.
But not much...
The 2021 Cannabis Rally Was Practically Inevitable
If you're a member of the National Institute for Cannabis Investors, following along with our research, you've probably known this day was coming - and I don't mean because of the election.
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The truth is, for a long time now, cannabis legalization is one of the few areas of broad, bipartisan agreement in this day and age. The idea of ending federal marijuana prohibition is about as popular with small-government congressional conservatives who've come to view prohibition as a needlessly expensive infringement on liberty as it is with congressional liberals who feel... well, pretty much the same way.
Cannabis reforms are routinely sponsored by Democrats and Republicans alike - often co-sponsored, at that.
Put another way, this boom was coming no matter what happened in the election. That's because the catalysts powering it are completely unstoppable...
- There's a massive sales surge already underway. The U.S. cannabis market is worth roughly $100 billion today, but currently, a whopping 80% of that is claimed by the black market. The rapidly expanding legal markets in the states, though, are soaring by 40% a year, on pace to double in less than two years. The five states that legalized this past November could add another $9 billion in sales, too. Federal prohibition is baked into that figure, by the way. Should it end, we will likely blow way past those estimates.
- Cannabis firms, investors, and private equity have an estimated $10 billion cash hoard available right now. That's a lot of "firepower" in any sector; it's exactly what's needed to facilitate the deals that put dollars in shareholder pockets. There are untold tens of billions more among the big Wall Street firms watching this sector as closely as we are.
- Major-exchange liquidity is closer than it's ever been. U.S. multistate operators (MSOs) haven't been able to list on the NASDAQ or New York Stock Exchange, and tap the $47 trillion liquidity pool there. Without that liquidity, huge institutional investors - the kind that drive 2% and 3% daily changes in trillion-dollar companies like Amazon.com Inc. (NASDAQ: AMZN) - haven't bought in. The advent of special purpose acquisition companies (SPACs), however, puts the big exchanges well within reach of the best MSOs. Once Wall Street sees these companies listed on major exchanges... the whales will bite.
With all that said, anything that moves legalization at a faster pace and on a larger scale will certainly be a potent growth catalyst.
Short of that, full passage of the SAFE Banking Act, which allows plant-touching companies to access traditional banks at normal costs, and the MORE Act, which would give MSOs the ability to take the same write-offs as other businesses, is that much more likely now. That may not sound like much, but it's much more expensive for cannabis firms to execute routine business functions because they can't easily access banks. Simply putting cannabis companies on a level playing field with other companies is a critical component in boosting returns; every dollar MSOs don't have to spend just to do business is a dollar they can put in your pocket.
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And, if you've been following along, that's just what two of my favorite cannabis stocks have done recently...
We've Seen Fast, Big Profits from These Picks
When I recommended one of the world's top cannabis companies, Curaleaf Holdings Inc. (OTCMKTS: CURLF), I called it a "$12 ticket to wealth."
Well, I'm happy to report that today, it's fast becoming a $15 ticket to wealth.
The shares jumped an impressive but sustainable 10% in yesterday's trading but have packed on a market-beating 18% since my last recommendation and a whopping 112% and change since I told you about them in September. They've executed an aggressive, intensely targeted acquisition of Alternative Therapy Group's Massachusetts cultivating and processing operations in the meantime. Curaleaf is "cultivating" top-line growth at around 30% a quarter.
It's not too late to jump on this stock; I think even $14.60 will be a distant memory before long.
My other recent recommendation, Jushi Holdings Inc. (OTC MKTS: JUSHF), is an exciting MSO with a solid-gold management team.
Jushi executives have managed to build a cannabis business that's akin to a medieval fortress - invincible. Jushi's core market is in Pennsylvania, which, as NICI readers would tell you, I've predicted to go legal sometime in 2021. The Keystone State is one of the biggest markets in the country, and Jushi is all over it. The company enjoys a literal monopoly on cannabis dispensaries in the wealthy Northern Virginia suburbs, and it owns one of just three permitted dispensaries in Santa Barbara, Calif.
Like I said: a fortress. Jushi has an enviable, defensible position in some of the country's best, most promising cannabis markets.
The stock itself is attractive, too. Very attractive. I speak with Jushi insiders regularly - it's one of the reasons I'm able to adjust my growth models quickly. Insiders own about 70% of the shares, and as seasoned investors know, there's only one reason insiders load up on their own stock: They expect it to go up. I recommended JUSHF at around $4, and it's up as much as 43% since.
Again, don't feel like you've missed out if you haven't bought, but do buy soon: My proprietary financial model suggests we'll have a $40 stock on our hands by the end of 2021 - almost a 10x return on investment in a year. Other cannabis stocks I'm analyzing show the potential of 20x, 30x, or more. If you've been hanging back, well, this is a rare second chance.
You can go right here to learn more about my cannabis stock database, and how to get the trade alerts and stock research recommendations we release regularly at the National Institute for Cannabis Investors.
About the Author
Don Yocham is Executive Director for the National Institute of Cannabis Investors (The Institute) and Director of Cannabis Investing Research for Money Map Press. Before starting his role with the Institute, he was the Head of Private Deals for the publication Cannabis Venture Syndicate. From his first foray into the trading pits of Chicago to introducing institutional investors to entirely new markets in the early 2000s, Don has pretty much covered the entire field of investing in his 25-year career. In the depths of the financial crisis, when the typical investor had lost more than half of their money, his portfolios were up.