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Jack-in-the-Box (NASDAQ: JACK) is NOT a Valid Play on Cannabis Legalization

Written By Jeff Siegel

Posted September 19, 2016

Last Monday, Cowen & Co. released a report which suggested the legal cannabis market in the U.S. could grow to $50 billion in the next decade.

Good stuff!

I love when the suits on Wall Street come around.

Truth is, they all want a piece of this action. And once Congress gets off its ass and fully legalizes cannabis throughout the United States, the banks will certainly make a made dash to stake their claim.

Until then, however, they pick up every rock they can to find some way to play the cannabis market without actually having to have direct exposure to it.

While I certainly understand this mentality (banks only risk other peoples’ money, not their own), some of the stuff they come up with is a bit much.

The perfect example is Cowen & Co’s recent suggestion on how to play cannabis legalization. Check this out …

“We believe QSRs [quick-service restaurants] are poised to benefit from increased spending on recreational marijuana as one side effect of THC consumption is increased hunger.

“Within quick-service, we note Jack in the Box has the greatest exposure to recreational marijuana use becoming more widely accepted in states that have already legalized use (10 percent of the store base), as well as five states with an upcoming legalized recreational use proposal on state ballots for the November election (52 percent of the store base).”

Investing in Jack in the Box (NASDAQ: JACK) as a way to play the cannabis market is like investing in Coca-Cola during the summer, because in the summer it gets hot and people get thirsty.

This is absurd.

I will admit that while there really are no quality public cannabis plays in U.S. markets, investors searching for exposure in this space can still invest in Canadian cannabis companies on the TSX, the TSX-V, and the CSE.

Sure, it may cost a few bucks more in online brokerage fees, but when you consider the profits we’ve seen in this space, those few extra bucks are irrelevant.

Don’t be a Crumb Chaser

A couple of years ago, while the big investment banks were writing their reports on potential cannabis opportunities, we were investing.

You see, any analyst serious about this space has long known that the Canadian market for cannabis – even before recreational legalization was presented as a realistic possibility – was a potential gold mine.

I won’t get into all the reasons here, but know this …

I, along with about ten other top-notch analysts went on a serious shopping spree a couple of years ago, buying up practically every public cannabis company in Canada that had a license and was actively producing.

Some of those companies included: Canopy Growth Corporation (TSX: CGC0, Aphria, Inc. (TSX-V: APH), and OrganiGram (TSX-V: OGI). The latter, by the way, has been a huge win for me. Check out the action on this thing over the past two years …


While I certainly appreciate the big investment banks helping us further legitimize the industry, their reports and well-publicized analyses on cannabis are of little value to investors looking for a way to profit from the cannabis industry.

I mean, seriously. Jack-in-the-Box?

There’s definitely still some stigma associated with cannabis and investing in cannabis. As well, there’s still a lot of fear that the Fed is going to shut everything down. Mark my words: That is NEVER going to happen.

And quite frankly, if you really want to get in on the ground floor of something that’s undoubtedly going to be one of the greatest investment opportunities of the 21st century, you can’t be a afraid to make a move early. In other words, don’t wait around for the gatekeepers in Wall Street to give you the green light.

The time to act is now, not when the Fed finally relents and the big investment banks unload truck-loads of capital into the space.

By then, guys like me will be walking away with wheelbarrows full of cash while the rest of the herd rushes in to scrape up a few crumbs.

Don’t be a crumb-chaser. Nobody wants to be a crumb-chaser.