The Cannabis Streaming Model

Written by Nick Hodge
Posted May 10, 2017 at 5:55PM

A new way to invest in the booming cannabis space has emerged.

The pot industry is maturing as most industries do — both on the regulatory and financial fronts.

For starters, we now know Canada will go “full legal” next year. That means marijuana will be legal for everyone for both medicinal and recreational purposes.

And California goes full legal next year as well. As the largest state in economic terms by far, the recreational pot market in California alone is expected to generate annual retail sales of $4.5-5 billion, according to Marijuana Business Daily.

The implications are huge.

California is expecting to generate no less than $1 billion in annual tax revenue from weed.

There is nothing governments like more than additional tax revenue.

So while right now only eight states plus D.C. have gone full legal… many more will follow suit. Because governments are so desperate for more taxes, they will rush to legalize cannabis. It’s a phenomenon Wired magazine called “Weed ‘Em and Reap”.

It’ll be a domino effect.

And it’ll also be one of the most lucrative investment trends we see for years — a long and sustained bull market driven by increasing legality, increasing adoption, increasing acceptance, increased investment options, and increased investor interest.

If the point of investing is to buy low and sell high — to be ahead of the herd — the time to plant seeds in the marijuana industry is now.

While multi hundreds of billions will be generated in revenue by the sector, and no doubt trillions over time, only a few companies have so far attained billion-dollar market caps.

And what’s more, we haven’t seen the industry go through innovation cycles.

But we’re starting to see more creative businesses being developed. And we’re also starting to see consolidation.

As this natural business cycle plays out, there will be myriad new ways to invest in the sector.

From advertisers and consultants to edible products and smoking apparatus, the market has only scratched the surface of what will come to pass regarding cannabis.

We’ll see new financial models as well.

And right now that’s where some of the biggest opportunities exist.

One example is the development of the so-called “streaming model” that has been used successfully in the mining industry for years by companies like Silver Wheaton and Royal Gold.

In a nutshell, a streaming company will lend other companies money as well as own stock in other businesses.

In this case, a well-financed marijuana streaming company would lend several other growers money as well as buy their stocks.

But in exchange for the loan it doesn’t want cash back… it wants cannabis instead.

So it becomes a 'grower of growers' and a cannabis ETF as well.

A streaming company not only profits when the stocks it owns move higher… but also from the sale of the cannabis it will get in exchange for the loan.

In this way, it diversifies its risk and becomes a grower without any operational expense. Those who own its stock will benefit in the same way.

The strategy is proven to be successful.

Companies that pioneered it in the metals space — where they’d lend producers cash in exchange for silver and gold — have seen their shares valued ever higher by the market.

In just one example, Royal Gold was able to deliver shareholders gains of 4,265% in the decade after it began executing.

Royal Gold StreamingIf that’s the template, that’s the kind of cannabis investment I’d like to make.

Just this week the first pure play cannabis streaming company began trading.

As one of the first financial publishing companies to cover this space in earnest, we have a full report ready for you on it here.

Call it like you see it,

Nick Hodge Signature

Nick Hodge

follow basic@nickchodge on Twitter

Nick is the founder and president of the Outsider Club, and the investment director of the thousands-strong stock advisories, Early Advantage and Wall Street's Underground Profits. He also heads Nick’s Notebook, a private placement and alert service that has raised tens of millions of dollars of investment capital for resource, energy, cannabis, and medical technology companies. Co-author of two best-selling investment books, including Energy Investing for Dummies, his insights have been shared on news programs and in magazines and newspapers around the world. For more on Nick, take a look at his editor's page.

*Follow Outsider Club on Facebook and Twitter.

Comments

Investing in Marijuana Without Getting Burned

JMM_copper_superplay_banner_ad