Yep, J&J is a Pot Stock, Too
Last week, I wrote to you about the huge price gains pot stocks have been making. You may recall one of them: New Age Beverages (NASDAQ: NBEV). That stock ran from around $2 to over $7 in a week, a quick 375% gain...
Well, New Age Beverages is at it again. It's up ~35%, back over $7. And it's not the only one. Tilray (NASDAQ: TLRY) has a 15% gain going today. Cronos Group (NASDAQ: CRON) is up about 6%...
Now, if you're thinking these pot stocks are showing signs of pure investment mania, well, I hear you. And you're not wrong. There IS a mania going on. But as I've said before, just because it's a mania does not mean it's all a bunch of BS. There is a very good reason for this mania. In fact, there are 50 billion reasons...
Here in the U.S., marijuana-based products are expected to command $50 billion in annual revenue in a few years. Right now, annual marijuana revenue is a fraction of that. So it should be no surprise that investors are getting positioned for the hyper-growth cycle that is coming.
But here's the thing: Right now, it's small companies that no one's ever heard of that are making the big moves. For the most part, these are unproven companies. It's easy to see why you might be concerned about their long-term potential. But don't make the mistake of thinking the whole marijuana sector will remain a niche investment space. Because I'll tell you: the big, powerful consumer product companies are absolutely not just standing by, watching all these unknown companies get first-mover advantages...
They are all quietly moving in. They will be ready when the time comes. I expect New Age Beverages, with its marijuana-infused coffee drinks, has a pretty decent shot at being around when full legalization hits. I also expect that New Age Beverages’ sales will pale in comparison to Starbucks’ (NASDAQ: SBUX).
How to Play an Emerging Product
Of course, all the big boys aren't being secretive about their intentions. Constellation Brands (NYSE: STZ), maker of Corona and Modelo beers and Svedka vodka, has made a couple very high-profile investments in the marijuana sector. But Constellation is not one of my favorite investments.
Because the early research shows that beer sales fall by as much as 25% in states that have legalized recreational marijuana use. So it seems to me that Constellation's investments are something of a hedge to offset potential revenue declines.
Remember former Speaker of the House John Boehner? He's currently sitting on the advisory board of a marijuana company called Acreage Holdings. My colleague Jimmy Mengel just got back to the office from interviewing Libertarian presidential candidate Gary Johnson about the marijuana hedge fund he started...
I just heard from another colleague who's got some insider connections that even stodgy old Johnson & Johnson (NYSE: JNJ) is paving the way to get into the marijuana market.
You see, JNJ has a “life science incubator” in Toronto. It's called JLabs. Its purpose is to provide ready space for biotech researchers to come in and get to work. Last year, it invited a small company that's researching marijuana-based treatments for certain diseases to come to JLabs.
Now, JNJ doesn't make any initial investments in JLabs companies. There's nothing binding. JNJ gets to sit back in wait-and-see mode until one of the companies comes up with something viable...
I can't tell you that this particular marijuana biotech — called Avicanna — will ever bring a product to market. But that's not the point. My point is that a company like Johnson & Johnson isn't messing around. It isn't just having fun inviting some goofy pot company into its operation. JNJ sees what I see and what you should see: The marijuana sector is for real.
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There's a good reason marijuana stocks are running right now. Canada goes full legalization in 16 days. That's right: On October 17, marijuana will be completely legal throughout Canada. To say that big American companies will be watching is an understatement.
Canadian legalization is a milestone. We will finally get some great reliable statistics on sales across an entire country. And I think the early numbers will be wildly bullish. I also think the real rush to legalize marijuana in the U.S. will begin on October 18 (two words: tax revenue).
I expect that over the next few months, we will start getting much more detail about the big boys' strategic plans, what the Starbucks and Coca-Colas of the world are planning. Seems to me it would be a good idea to be ready when that happens...
Now, I don't know about you, but I'm a conservative investor. Sure, I've made a speculative trade or two on these small marijuana companies. But for my investments, I require a greater level of certainty. I wanna know that the company I'm throwing in with for the long term will be there to multiply my money.
And I've got one that I am 100% convinced is a long-term player. It has a unique business plan that provides a mission-critical service to the marijuana sector. It's literally the only company that does this. Business is so good that it has already started paying a dividend.
Think about that for a minute: Marijuana isn't even legal, and this little gem is already making enough to reward its shareholders. I can't wait to see what this stock does over the next couple of years when the marijuana sector is wide open.
This is the no-brainer marijuana stock. Learn 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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