Pot Stocks on a Roll
Pot stocks had themselves a hell of a week last week.
This one company called New Age Beverage says it is “a healthy functional beverage company and... offers ready to drink (RTD) tea, RTD coffee, kombucha, energy drinks, relaxation drinks, coconut waters, functional waters, and rehydration beverages, as well as functional medical beverages.”
Apparently this is all code for “weed drink,” or should I say, marijuana-infused drinks. It took me a little while to figure all this out. Then I saw the picture of Bob Marley on the can and I started to get suspicious...
Yep, I've always had a keen eye for the obvious (though, I admit, I still don't know what kombucha is).
New Age Beverage opened last Monday at $2.05, a nice 28% gap higher than Friday's close. It closed at $2.30. It hit its high for the week on Thursday at $7.65. All told, if you had managed to buy right at Friday (September 14) close and sell at that Thursday high, you'd have made a cool 375%...
Corbus Pharmaceuticals had a relatively boring week. At least until Thursday, when it jumped from $5.20 a share to $8.35. It finished Thursday at $7.90.
If you've paid any attention to marijuana stocks over the past few months, you probably know about Canopy Growth (NYSE: CGC). It's the big daddy of them all. But it's already had its run, from under $1 a few years ago to over $40 a share.
But the one pot stock that really grabbed the headlines last week was Tilray (NASDAQ: TLRY). Holy moly, what a run!
In September alone, Tilray ran from about $65 a share to right about $300. Last Wednesday, the 19th, it went completely nuts. It opened at $233, immediately dropped $53 to $180, and then made a blistering run to $300. And it wasn't done.
After the Nasdaq briefly halted trading, the stock dropped 50% when it re-opened, down to $150. And THEN it rallied to close at $217.
Seriously, you can't make stuff like this up...
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Cool Story, Bro
You might think a somewhat conservative investor like me would get all grumpy when stocks move like this. You know, get these rambunctious stocks off my lawn.
But I'm not going to do that. And it's because, despite some crazy runs for pot stocks, there is a legitimate reason to own marijuana stocks. As my partner at The Wealth Advisory has written here, the cannabis industry will be worth $50 billion in a few years. Basically zero to $50 billion with 20% CAGR (compound annual growth rate).
Growth like that is no joke. It's why traditional consumer product companies like Corona-maker Constellation Brands (NYSE: STZ) and Coca-Cola (NYSE: KO) are making moves. You think Starbucks won't have an infused coffee on the market to compete with that Marley stuff?
Now, here's the thing. Yes, some of these pot stocks are in a bubble. You can tell because they've tripled in like three days. That's just not normal.
But I will also say that this is not the same as the cryptocurrency bubble we had earlier this year. And for a very simple reason: Cryptocurrency had no basis in reality. Sure, Bitcoin is nifty. But it wasn't being used as a medium of exchange, it wasn't backed by anything, and there's nothing particular that sets Bitcoin apart from the 300 other cryptocurrencies...
Look, internet stocks were a bubble once, too. But there was a real story behind them. Back then, plenty of people said Amazon was a bubble stock. Look at it now...
Pro tip: There will be pot stock winners that emerge from the fray.
Picking the Winners
I currently have a couple pot stocks in the Wealth Advisory portfolio. And it's because of what I just told you. Marijuana is going to be big business, and there will be big winners.
What's more, this isn't the first time I've said this here in Wealth Daily. Which means you might have been positioned for last week's pot stock bonanza. But if you weren't, don't sweat it. The run for pot stocks isn't over.
The Wealth Advisory is a somewhat conservative investment letter. Jason and I don't freak out and try to jump on quick winners. Frankly, neither of has the stomach to see one of our stocks take a $150 plunge like Tilray did last week.
We prefer to take our time, do intensive research, and find the long-term winners we can hold and still get a good night's sleep (along with a good profit). And that's exactly what our #1 pot stock does. (And no, we're not sleeping well because we're stoned.)
It's because we've got a stock that's providing a unique service to cannabis companies. It is literally the only company doing what it does. It has all the business it can handle and is expanding as fast as it can to handle more. It pays a very nice dividend (which is pretty much unheard of in such a new industry), and its business will not be affected by wild market swings like we saw last week.
In other words, it checks all our boxes for a long-term winner. Find out more about it here.
Until next time,
A 21-year veteran of the newsletter business, Briton Ryle is the editor of The Wealth Advisory income stock newsletter, with a focus on top-quality dividend growth stocks and REITs. Briton also manages the Real Income Trader advisory service, where his readers take regular cash payouts using a low-risk covered call option strategy. He also contributes a weekly column to the Wealth Daily e-letter. To learn more about Briton, click here.
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