Two big wins for Legacy Research subscribers… Pot’s legal grey area is sending this stock higher… How to be a wise speculator… In the mailbag: “You will never stop people taking drugs”…
As we showed you yesterday, for now at least, the U.S. stock market is in an upswing.
After its nearly 20% peak-to-trough fall – which marks official bear market territory – over the 2018 holiday season, the S&P 500 is up 4% year to date.
But one group of stocks has done a lot better than that.
It’s a group of stocks we put on your radar last September, right after we launched The Daily Cut – legal pot stocks.
The North American Marijuana Index tracks shares in the leading companies involved in the cannabis industry in the U.S. and Canada.
It’s up 31% this year. That’s almost eight times the returns of the S&P 500 (a good proxy for “the U.S. stock market”).
But even that is nothing compared to the gains in some of the individual legal pot stocks we’ve been recommending here at Legacy Research.
It’s the biggest pot grower in the world. It’s headquartered in Ontario, Canada. But it trades under the ticker symbol CGC in the U.S., making it easy for U.S. investors to buy.
Canopy shot up 35%… last week alone.
And it’s up 61% since the start of the year. That’s a higher return in three weeks than the S&P 500 has delivered over the past six years.
Regular readers will recognize Canopy. We first told you about it back in October as a way to get exposure to the pot legalization trend.
Colleague Nick Giambruno heads up this advisory. He and Legacy Research cofounder Doug Casey fly around the world looking for big market distortions… and the profit opportunities these distortions create.
And thanks to the ongoing war on cannabis we’ve been telling you about, the pot industry is one of the most distorted in the world.
This theme has been a winning one for Nick’s readers.
Since his recommendation, Canopy is up 513% in the Crisis Investing model portfolio – enough to turn every $10,000 into $61,300.
But despite this recent runup, it’s not too late to get in…
At writing, Canopy trades for $42. That’s 16% below Nick’s recommended buy-up-to price of $50.
A month before Nick recommended Canopy, he recommended pot “REIT” Innovative Industrial Properties (IIPR).
A REIT – or real estate investment trust – allows you to buy shares in commercial real estate ventures. In IIPR’s case, those commercial real estate ventures are giant indoor pot growing facilities.
It’s another big winner in the Crisis Investing model portfolio.
Yesterday, Nick sent an alert to subscribers to take a “Casey Free Ride” on IIPR, after it soared 242%.
If you’re not familiar with the Casey Free Ride concept… don’t worry. It means selling as much of the stock as you need to recoup your original stake… and letting the rest “ride for free.”
This has two benefits. First, you get to add to your cash reserves to deploy into new ideas when they come along. More important, you get to take some risk off the table and stay invested for free.
In short, you get to profit as your speculation continues to run higher without worrying about losses. And as Nick has been showing his readers, IIPR shares still have room to run.
Cannabis is a Schedule I substance at the federal level – along with heroin, “acid” (LSD), and “ecstasy” (MDMA). But it’s now legal, in some form or another, in 33 states (plus Washington, D.C.).
That’s where IIPR comes in. It has the perfect business model to take advantage of the legal grey area surrounding the U.S. marijuana industry.
One problem with existing in a legal grey area is that federally regulated banks don’t want to touch cannabis companies… for fear of breaking the law.
And fields of high-grade cannabis require a lot of financing.
You need expensive automated fertilizer systems… along with advanced greenhouse tech and lighting systems. You also need large-scale agricultural facilities and enormous amounts of power for the lamps.
And, to get the state licensing approved, you have to pay high lobbying costs.
Without access to the banking system… funding all this just isn’t viable.
It’s a leading source of financing for U.S. cannabis companies looking to get their business off the ground. Here’s Nick on how it works…
IIPR buys real estate from state-licensed cannabis companies and then leases it back to them under long-term net lease agreements. This gives marijuana companies access to much-needed capital…
Marijuana companies have the opportunity to redeploy the proceeds from selling their properties to IIPR into their company’s core operation and yield a higher return than they would otherwise get from owning their own real estate.
It’s a win-win, in other words. And it will continue to be… as long as pot remains illegal at the federal level… and U.S. pot growers are starved for bank funding.
That’s why IIPR is another stock Nick believes still has room to run. It trades at $54 at writing – 10% below Nick’s recommended buy-up-to price of $60.
The legal pot market has huge potential, but it’s still new. That makes it highly speculative. Which means that while pot stocks can be highly profitable, they can also be rollercoaster rides.
So speculate wisely.
Never invest money you can’t afford to lose. And keep your position sizes small. That way, you’re never exposed to what Legacy Research cofounder Bill Bonner calls a “ruinous loss” – one you can’t recover from.
The mailbag debate over pot legalization has been heating up since Doug Casey argued that ALL drugs should be legal. Then, last Thursday, reader Frank S. said:
It is apparent that drug legalization will… be the most efficient (and effective) path towards a human species that is that much more responsible with the substances it consumes.
And some of your fellow readers are backing both of them…
I’m with Doug and Frank S. on this for several reasons…
Why would we assume there is a huge market out there of people who would take drugs if only they were legal? I’ve never met anyone who wanted to take drugs but wouldn’t because it was illegal! If that were the case, there would be very few people encouraged to start, and those who already abuse drugs would be taken out of criminal contact and all the dangers that entails.
The supply could be regulated and taxed, just as marijuana is in many states now. Those states are showing significant increases in local tax takes. And they’re removing the strain on the emergency services from dealing with drugs that are too strong or cut with poisonous substances.
You will never stop people taking drugs. Far better it was within a safe, regulated context, where people could exercise their individual freedom (or stupidity) at will.
– Andrew N.
The War on Drugs is and was a failure. Legalizing drugs will stop the drug lords and the smuggling and murdering. The dirty drug money has corrupted many on both sides of any border. Those that use drugs now illegally will continue; those who do not would more than likely not. All the “war on” wars were phony wars and caused more problems than they solved. Just examine the facts and draw logical conclusions, which is what I believe Mr. Casey is doing.
Take the War on Terror. How do you define a win? When will terror end? I think about the same time our star, the sun, burns itself out. Especially when we drone kill innocent people and call it collateral damage. Kill any of my family that way and you have just created a new terrorist determined to get even: me. If we peel back to the truth far enough, we will be able to just follow the money, as usual. It would be better to focus on drugs that are put into items legally to “hook” users. Nicotine is well known as one of those substances.
– Bernard B.
Do you agree with Andrew N. that it’s better to let people “exercise their individual freedom (or stupidity) at will” within a regulated context? Will legalizing drugs stop drug lords from smuggling and murdering, like Bernard B. says?
Or do you have a different view? Don’t hold back. Tell us what we’re missing at [email protected].
January 15, 2019