Marijuana Millionaire Portfolio editor Sean Brodrick talked about potential catalysts and threats to the sector in addition to cannabis investing trends
SmallCapPower | October 4, 2019: At the MoneyShow Toronto 2019, Sean Brodrick, editor of Marijuana Millionaire Portfolio, discussed what he believes are the cannabis investing trends for 2019 and beyond. He started off by asserting that a “Green Wave,” or a big marijuana stock bull market, is coming but cannabis stocks are currently in a bear market (near 2018 lows).
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He argues that there has been a seasonality to cannabis stocks (the sector has historically performed best from September to January), so investors would have done well if they bought these stocks when the weather started getting cold in North America.
Potential upcoming cannabis stock catalysts include:
- All major U.S. Democratic Party Presidential candidates are calling for federal cannabis legalization in the United States
- S. states love the tax revenue from cannabis sales
- Cannabis 2.0 (legalization of edibles and oils) is coming to Canada soon
Potential upcoming threats to a cannabis sector rally include:
- Vaping illness crisis is dragging down some cannabis stocks, especially extraction companies
- Self dealing within the industry (management issuing too much stock)
- Governance issues, such as what happened with CannTrust Holdings Inc. (TSX:TRST)
Here are some of Sean Brodrick’s cannabis investing trends for 2019:
- CBD sales from hemp are growing faster than cannabis – Celebrities are touting the health benefits of CBD; laws have changed in the U.S. (CBD moving towards legalization faster than THC). U.S. Senate Majority leader Mitch McConnell wants his home state of Kentucky to become a hemp and CBD powerhouse.
- Commoditization of cannabis – Every company is trying grow cannabis cheaper (race to the bottom in terms of selling price); countries such as Colombia have a major cost advantage. Look for value beyond growing (branding, etc.).
- Intellectual Property – Seed packs; processing marijuana more quickly; making new medicines; software to manage their businesses.
- Microencapsulation (nanotechnology) – Helping the cannabis in beverages take effect quicker. Currently the technology is expensive.
- Federal legalization is coming to the United States – 33 States have already legalized medical cannabis, with 11 having legalized recreational cannabis.
- Multi-State Operators (MSOs) are fighting federal legalization of cannabis in the United States because they have spent a lot of time and money building operations on a state level.
- Biosynthesis – You don’t have to grow THC; it can be made from yeast, but it is not yet economical to do so. Investors should watch for companies that are doing this as it could be a game changer.
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