The Time is Now

Invest in Marijuana Before Canadian Legalization

Written by Jimmy Mengel
Posted May 10, 2018 at 3:51PM

If you’ve ever been hesitant about investing in marijuana stocks, now is the time to act.

If you missed out on the easy triple-digit gains that we saw when Canada first launched publicly traded weed companies in 2014, you aren’t too late.

If you missed the massive windfall after California legalized marijuana this January, you aren’t too late.

The next big marijuana event is firmly on the horizon, and as they say, “A rising tide lifts all boats.”

After much hemming and hawing, Canada’s prime minister, Justin Trudeau, has finally announced that our neighbor to the North will indeed be legalizing marijuana this summer.

"We have been working with our partners across the country to make this happen and we are going to be moving forward this summer on the legalization of cannabis," he said.

Once the official announcement finally hits, all marijuana stocks will see a massive boost.

But you cannot just toss a dart at a handful of cannabis companies and expect to do well. Here’s a few things you should know before investing in marijuana stocks…

Buying marijuana stocks can be extremely lucrative. In the four years I’ve been investing in the pot stock market, I’ve had more triple-baggers than the rest of my investing career combined.

But if you don’t know what you’re doing, it’s easy to get burned. I’ve seen dozens of stocks go down in flames. These were typically pump-and-dump schemes that never had a chance at a legitimate business, but the stock had marijuana somewhere in the name and went through the roof — despite not having any operations or experience to speak of.

When I started in the sector, I saw a lot of marijuana companies that evolved out of shell corporations that basically had no experience in the industry. One I point to sometimes was called Integrated Parking Solutions, and then overnight it became Integrated Cannabis Solutions, and the stock went up like crazy.

It soon crashed and is now worth exactly nothing.

That is to say, you need to be careful.

This is going to be a fluctuating market. What often happens is that there'll be good or bad news out one day and all of the marijuana stocks go crazy for a week or two.

It happened when Canada introduced legalization.

It happened when California went legal in January. Almost all of my stocks went up 50% just based on the teeming hordes finally throwing money at them.

It is going to happen once legal marijuana in Canada goes live this summer.

You need to get in now, and you need to find the right companies to place your bets on…

Size and Scope

As more and more areas open themselves up to both medical and recreational marijuana, there are more and more companies flooding the market with “flower” — the smokable part of the marijuana plant.

That is going to drive down prices and create very difficult margins for smaller producers.

Here’s what I look for... size and scope.

For some Canadian companies like Canopy Growth Corp. (TSE: WEED) (OTC: TWMJF), Aphria Inc. (TSE: APH) (OTC: APHQF), and Aurora Cannabis (TSE: ACB) (OTC: ACBFF) — their unique ability is the sheer reach and production capabilities.

Canopy was the first billion-dollar cannabis company and has a massive production facility, name recognition, and global outreach that could make it the biggest cannabis company in the world for years to come.

Aphria Inc. is positioning itself as a low-cost producer with international reach.

Aurora Cannabis is currently constructing an 800,000-square-foot production facility, known as “Aurora Sky”, at the Edmonton International Airport. It will be capable of producing in excess of 100,000 kg of cannabis per year. It’s also the world’s only cannabis facility located on the property of an international airport, which gives it access to international customs, as well as air and ground domestic and international courier services.

Companies like this are the ones that will control the production market. For producers, it’s go big or go home...

Unique Products

Some companies are well positioned because of the unique products they offer. While I wouldn’t recommend smaller growers that are bound to be wiped out, I do recommend companies with strong branding, a patented product, or a strong advantage in the area they are operating.

Much like alcohol, branding means everything. You'll need a brand identity for marijuana. It's the difference between selling elegant Grey Goose vodka for $50 a bottle and Black Watch rot-gut booze for $6.  

I cover a dozen of these companies in my Marijuana Manifesto newsletter.

Patents

Another major factor to look at in medical marijuana stocks is their patents. If a company has a proprietary idea or intellectual property, they can roll it out around the world without worrying much about competition.

I just spoke with a company this week that is developing patents for medical marijuana products.

The unique angle here is that it has put a patent application in for a time-release cannabinoid (CBD) pill that would allow patients to take their medicine like it should be taken.

This company could not only have a huge run-up based on that patent, but it also stands a chance at being an easy acquisition target for either a large pharmaceutical company, or even a larger marijuana company like Canopy or Aurora.

It is also currently exploring international agreements to export its medical product to huge markets like Germany and Australia — where competition is extremely limited.

I’ve prepared an entire presentation about this groundbreaking company, and you can learn everything you need right here.

I suggest getting in before the Canadian legalization hits.

Godspeed,
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Jimmy Mengel

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Jimmy is a managing editor for Outsider Club and the investment director of the personal finance advisory, The Crow's Nest, and cannabis stocks advisory, The Marijuana Manifesto. For more on Jimmy, check out his editor's page.

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Investing in Marijuana Without Getting Burned