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The rise of mobile app-based investing has been nothing short of revolutionary - in more ways than one. Easy, inexpensive access to markets has dramatically changed peoples' lives as it's added billions to bottom lines coast to coast.
The New York Times estimates the average age of Robinhood's 20 million users is just 31 years. That tells us the millennial crowd, whose collective financial prospects were once dimmed by the two economic collapses bookending the 2010s, is flexing its wealth-building muscle in a big way.
These apps have essentially democratized the markets. And of course, there's GameStop: However you feel about it, watching small retail investors coordinate a massive, all-out attack and knock Wall Street's biggest hedge funds out of the ring was unforgettable.
That's all to the good.
But for all that mobile apps like Robinhood can do for investors, there's one really big thing they can't do...
It's a major problem; a market tragedy, really. Users are effectively frozen out of the "Wealth Play of 2021," sidelined from the extreme profit potential in the United States' $15-billion-and-counting legal cannabis sector that's growing by as much as 21% a year...
Why Investors Are Forced to Miss Out
The problem is Robinhood and many other mobile investing app users are completely unable to purchase stocks over-the-counter (OTC) - equities bought and sold off the major exchanges like the New York Stock Exchange (NYSE) or NASDAQ.
It's complicated, but at this point, OTC transactions just don't align profitably with their payment-for-order-flow business model. These brokerages can offer folks commission-free trades and low account minimums because customer orders are essentially "sold" to big market-makers who then execute the trades. Robinhood made around 50% of its 2020 revenue from this business model.
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Now, I'm not here to debate the wisdom, or ethics, or effectiveness of that business model; it seems to work okay for Robinhood.
But the problem is, as of 2021, aside from a few great exchange-traded funds (ETFs), the best cannabis stocks you can buy - the kinds that better than doubled our money since late December, 2020 - all trade over the counter.
I'll tell you why - it's got everything to do with prohibition. Cannabis is, at minimum, decriminalized in 48 U.S. states and territories, illegal in just six states and American Samoa. It's fully legal in 17 jurisdictions and counting.
But, of course, it's still illegal at the federal level.
That is a significant obstacle for companies who, otherwise fully licensed, tax-paying, and law-abiding, "touch" the plant in their business activities. Banks are usually unwilling to extend their services to these firms, or do so at a substantially higher cost, for fear of incurring Uncle Sam's wrath.
This keeps Wall Street's big underwriters at bay, too. Thus do outstanding cannabis companies like Trulieve Cannabis Corp. (OTC: TCNNF) find themselves cut off from the $45 trillion pools of major-exchange liquidity.
There are real signs this may be changing. Full federal legalization has never been closer at hand than it is in today's Democratic Congress - and in one of the last bastions of bipartisanship, dozens of Republican lawmakers are in favor of real cannabis reform, too. I'm watching legislative affairs like a hawk and reporting sometimes multiple times a week for National Institute for Cannabis Investors members; that's how close legalization is.
I'm really excited for what could happen to some of these stocks once they hit the "Big Board" - many of them have turned in triple-digit performance off the exchanges. But the fact remains that, today, the only place to trade serious cannabis sector players is over the counter.
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But of course, by the time full federal legalization hits and we see a mass migration of these stocks to places like the NYSE and Nasdaq, it'll be too late.
My colleague, Danny Brody, recently hosted a "roundtable" with predictions on which might be the first cannabis major to jump from OTC to a major exchange. You can learn how to get content like that here.
There are billions of reasons to make the change and start investing in legal cannabis shares.
Mobile App Users Are Already Missing Impressive Gains
I'm not often able to "open up" the NICI Model Portfolio for non-members, but once in a while, I'm able to talk to everyone about some cannabis stocks. And this past December, I did just that when I recommended both Jushi Holdings Inc. (OTC: JUSHF) and Curaleaf Holdings Inc. (OTC: CURLF).
In the three months since, people who were able to buy these shares through their brokerage and hold them have enjoyed more than 124% in peak gains; at last count, that was around 20 times better than the broad markets.
NICI Members, on the other hand, have had a crack at 434.2% and 139.5% gains from just these two stocks - there are 10 other double- and triple-digit winners open right now, and just one of those triple-digit winners, a Canadian cultivator of vegetables and cannabis, trades on the Nasdaq.
So, in a way, folks who aren't able to buy OTC are getting barely 7% of the profit potential. JUSHF shares are trading for $7.56 right now, but I'm projecting $41 a share by the end of this year - that's 436% higher from here. But you're effectively cut off if you're unable to buy in.
Fortunately, there's an easy fix - it might take you 20 minutes, tops. And if you're happy with your investing performance otherwise, there's certainly no reason to leave Robinhood altogether - not when you can have the "best of both worlds," as it were.
After all, where's it written that you're limited to just one brokerage account?
I can't recommend a specific brokerage, but here are links, names, and customer service numbers of online brokerages NICI Members have found easy to use. It might help to ask them if they offer low- or no-commission trades themselves.
- TD Ameritrade Customer Service - 1 (800) 669-3900
- Fidelity Customer Service - 1 (800) 343-3548
- E*TRADE Customer Service - 1 (800) 387-2331
- Charles Schwab - 1 (800) 435-4000
Because the right brokerage is so important for trading cannabis stocks, our research team has put together a step-by-step guide on opening a brokerage account; the examples are specific to E*TRADE, but I expect you'll find the experience and process pretty similar for all the brokerages I named a minute ago.
That way, you should have no trouble whatsoever picking up the three companies I just named before they hit a major U.S. exchange - the better to maximize your profit potential.
And, of course, you can always go here to learn more about our forecasting, our proprietary cannabis-stock database, our Model Portfolio, and all the trade and stock research recommendation alerts you can get from the National Institute for Cannabis Investors. Take a look...
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.