"Not unless hell freezes over."
That's what I would have told you 35 years ago had you asked me to recommend a "pot" stock... even if they were legal back then.
Hell has just frozen over and that's exactly what I'm going to do today...
...recommend a "pot" stock.
Let me explain.
News broke earlier this week that Constellation Brands Inc. (NYSE: STZ) made a $191 million investment for 9.9% of Canadian marijuana company, Canopy Growth Corp. (OTCMKTS: TWMJF).
First, this deal single-handedly legitimizes a $53 billion industry and in turn creates profit potential that's at least double that when the smoke clears - pun absolutely intended.
Second, the acquisition changes "pot" stocks from purely speculative undertakings suitable only for your riskiest capital on par with the Iraqi dinar, Zimbabwean dollar, and Bitcoin, to quality investments that can produce windfall profits year after year on par with choices like Altria, Diageo, and yes, Constellation itself.
Third, Constellation has just broken the taboo associated with marijuana, which means that other top-tier competitors aren't far behind; they'll have to get in the game or risk getting left behind - something no self-respecting CEO can risk in today's hotly competitive markets. In fact, I'll be very surprised if we don't see similar moves from Pernod Ricard SA (OCTMKTS: PDRDY), Diageo (NYSE: DEO), and Anheuser-Busch InBev NV (NYSE: BUD) in short order - all of which I'm watching very, very closely at the moment for signs of similar deals.
One of the Most Volatile Sectors in the Markets... Until Now
Pot stocks, canna-vesting, the "Green Rush" - whatever you want to call it - marijuana investing has been all over the headlines recently as states across the country have begun to legalize the green stuff for recreational or medical use.
Not surprisingly, millions of investors jumped on board thinking this was their ticket to financial freedom, only to get badly burned via questionable stock offerings touted by even more questionable individuals.
It was less than three years ago that investors lost a whopping $23 billion buying marijuana penny stocks like Growlife Inc. (OTCMKTS: PHOT), Advanced Cannabis Solutions Inc. (OTCMKTS: CANN), and MediJane Holdings Inc. (OTCMKTS: MJMD). More will follow when the SEC concludes a number of "pump-and-dump" investigations rumored to be in the works.
If only the problems stopped there. Earlier this month, the Toronto Stock Exchange announced it would be delisting stocks for marijuana companies that weren't in compliance with U.S. federal laws. Examples include Aphria Inc. (OTCMKTS: APHQF) and Maple Leaf Green World Inc. (OCTMKTS: MGWFF), both of which are pursuing growth and distribution efforts stateside.
If You Can't Beat 'em, Join 'em... and Profit
Before today, some of the largest opponents to marijuana usage and legalization have been alcohol companies, but Constellation's move changes the game. Where before the alcohol producers saw competition in cannabis, they now see dollar signs.
The way I see things, Constellation's acquisition is the ultimate "sin" stock move. Only, the end game is NOT smoking-related products nor traditional alcoholic beverages as the standalone product lines they've historically represented.
It's cannabis-infused drinks, which means there's a crossover effect.
Alcoholic beverages are a $223.2 billion a year industry in the United States alone, and it makes sense that a major beverage company like Constellation would move in as a narcotic like marijuana goes mainstream, because that means it can potentially reclassify an entire product line when it crosses from one genre to another.
Pot brownies won't hold a candle to what's next!
About the Author
Keith is a seasoned market analyst and professional trader with more than 37 years of global experience. He is one of very few experts to correctly see both the dot.bomb crisis and the ongoing financial crisis coming ahead of time - and one of even fewer to help millions of investors around the world successfully navigate them both. Forbes hailed him as a "Market Visionary." He is a regular on FOX Business News and Yahoo! Finance, and his observations have been featured in Bloomberg, The Wall Street Journal, WIRED, and MarketWatch. Keith previously led The Money Map Report, Money Map's flagship newsletter, as Chief Investment Strategist, from 20007 to 2020. Keith holds a BS in management and finance from Skidmore College and an MS in international finance (with a focus on Japanese business science) from Chaminade University. He regularly travels the world in search of investment opportunities others don't yet see or understand.
Or to contact Money Morning Customer Service, click here.