The Rise of the Cannabis Conglomerate
Cannabis is still completely illegal in more than a dozen states and heavily regulated in more than a dozen more.
Recreational usage has reached legality in just 10.
Given this wide spectrum of legal status, the layman could be forgiven for assuming that the average grow operation remains much as it always had been: a makeshift affair running on second- and third-hand equipment, manned by ex-convicts and societal dropouts and operating in the grey area of the law where police raids and DEA seizures are still commonplace.
The truth of the matter, however, is that the cannabis industry has evolved far beyond those old stereotypes.
The dreadlocked, glassy-eyed growers, 30-year-old diesel generators, and cash-only transactions have morphed into slick-haired investment bankers, state-of-the-art indoor grow labs, and multimillion-dollar capital raises.
But the most recent evolution of this industry, and, in my mind, the strongest indicator that it's now just a matter of a few years (at the most) before we see deregulation on the federal level, is the evolution of the business model itself.
Transcending the Plant
The cannabis industry is no longer just about weed.
Today's merchandise still includes hemp products, which have been around for millennia but finally achieved federal deregulation after the passage of the 2018 Farm Bill, as well as a spectrum of newer, lesser-known goods that require engineering on a molecular level.
It includes products like CBD oils and drinks, which maintain the therapeutic effects of cannabis while shedding the intoxication; edibles, which keep that intoxicating effect; topical oils and creams; even cannabis-infused wine and beer.
Today, there are literally hundreds of companies in operation around the world that research, develop, and market everything from cannabis soda to medication for the treatment of childhood epilepsy.
As of 2018, the legal marijuana industry brings in more than $10 billion in the U.S. alone and employs more than a quarter-million people.
To achieve such success with a product that the federal government still lists as a Schedule 1 drug, alongside the likes of heroin and cocaine, isn't just amazing but indicative of where things are going.
A Full Legislative 180
The truly last piece of the puzzle won't necessarily involve stranger, funkier products or even FDA-approved cannabis-based medications (the latter has already come to pass with the FDA's green-lighting of GW Pharma's Epidiolex last June).
For the federal government to finally give up this costly, prolonged, largely pointless battle, we will need to see the arrival of the multinational cannabis corporation.
And today, that's happening.
Most cannabis investors are well aware of the major players in this field: the $7.5 billion Tilray Inc. (NASDAQ: TLRY) and the $15.8 billion Canopy Growth Corporation (NYSE: CGC).
Both own and operate thousands of acres of farmland in North America and market a long list of products under multiple brands.
Both trade millions of shares per day on major American exchanges.
And most importantly, both are growing — rapidly.
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The Corporate Vote Has Been Cast
Despite a major industry-wide correction in the second half of last year, Tilray has quadrupled its market cap since going public last July, and Canopy has gained almost 80% in just the last 10 weeks.
It pains me to say this, but it's corporate power and influence that will finally push the feds over the brink before anything else.
That's the way our system works. That's the way it's always worked.
Ironically enough, it was precisely that corporate power and influence that helped to make it illegal in the first place, when newspaper magnate William Randolph Hearst ramrodded the 1937 Marijuana Tax Law to snuff out competing hemp-based paper mills.
Today, the pendulum swings back the other way and is once again pushed along by almighty corporate will.
Tilray and Canopy are today's big names, but, as is often the case, they are not likely to remain there for long.
The Next Generation Is Already Here
Newer, smarter, more enterprising firms are entering the field and taking the multinational corporate model to the next level.
One company in particular, which will celebrate its first birthday next month, may rise above all the rest in the coming years.
It trades for less than a dollar, but its portfolio of assets already reads like the profile of a multibillion-dollar operation.
This company owns U.S. and Italian distribution rights to over 55 cannabis topical products.
It possesses a portfolio of 16 cannabis brands, all of which lease space and facilities to grow and process their product.
The company operates more than 2,900 acres of real estate and numerous high-tech indoor growth facilities.
It has processing and retail distribution deals in place with the state of California, with more on the way.
Last October, the company hired a former Coca-Cola exec to help develop and brand its own cannabis soft drink.
It boasts multiple products, does business in multiple countries, and maintains multiple revenue streams, ranging from real estate leasing to product development and marketing.
This company is, by all measure, already a powerful multinational corporation.
Only thing is, the market hasn't taken notice. Not yet.
Overlooked and Undervalued: Music to an Investor's Ears
But it will, and more than likely before the end of this coming summer, as revenues ramp up.
I've been following this company for a few months now, and the more I do, the more the same thought comes to mind: This may be an inflection point not just for the cannabis industry, but for the legal status of cannabis in its single biggest national market.
Today, shares can be had for less than $0.50. A year from now, it could be five, even 10 times that high.
That's how fast things move in this sector.
Don't let the next year pass you by. Read all about this company, its plans, and its potential today.
Fortune favors the bold,
Coming to us from an already impressive career as an independent trader and private investor, Alex's specialty is in the often misunderstood but highly profitable development-stage microcap sector. Focusing on young, aggressive, innovative biotech and technology firms from the U.S. and Canada, Alex has built a track record most Wall Street hedge funders would envy. Alex contributes his thoughts and insights regularly to Wealth Daily. To learn more about Alex, click here.
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