A Note from The Publisher: This video interview between John Persinos and Brad Briggs originally ran in our premium publication, Marijuana Profit Alert.
Among his duties at Investing Daily, John serves as chief investment strategist of Marijuana Profit Alert. Brad is the editorial director of Street Authority.
We’ve published the video in this space, as a courtesy to the loyal readers of Marijuana Investing Daily. The article below is a condensed transcript; Brad’s questions are in bold.
We’re smack dab in the middle of a bear market. Why pot stocks and why now?
Pot stocks have gotten weighed down by the overall bear market, so right now they’re a bargain.
The father of value investing, Benjamin Graham, famously said: “Price is what you pay; value is what you get.”
If you’ve been following marijuana equities, it’s no secret that they’re in a slump. But keep in mind, they’ve been falling in tandem with the broader bear market. Marijuana companies tend to be resistant to inflation and recession, but they’re also prone to getting caught in the downdraft when the financial markets go into a slump.
Some readers have been asking me, is now the time to go bargain hunting for pot stocks? My answer is yes…but with qualifications and caveats. You need to pick the right pot stocks. That’s why I wrote my book, The Wide World of Weed and Psychedelics, which provides the criteria you need to separate the wheat from the chaff.
I hate to bring politics into investing, but sometimes it’s unavoidable. How do electoral politics play into the equation?
When the dust settles after the midterm voting on November 8, we’ll witness the emergence of additional legal markets in the U.S. for marijuana, via ballot initiatives. New state markets could boost U.S. legal cannabis sales to $72 billion by 2030.
In the midterms, voters in South Dakota, Arkansas, Missouri, North Dakota, and Maryland will consider recreational marijuana initiatives. Polls show that these initiatives are all popular with voters.
For investors, the equation is simple: When marijuana legalization occurs, it creates more customers, more sales, more profits…and higher share prices.
Even if they’re personally opposed to marijuana use, shrewd politicians can read the polls. They also can count the tax dollars that marijuana generates. The anti-pot prohibitionists are fighting a losing battle.
What’s more, President Joe Biden in October 2022 announced a pardon for thousands of Americans convicted of “simple possession” of marijuana under federal law. The move addressed policing practices that disproportionately hurt minorities and renewed momentum for decriminalizing weed on the national level.
Normalization proponents, Democrats, liberals, social equity activists, and marijuana investors cheered the pardon. Many Republicans and libertarians also applauded Biden’s move.
And in Congress, several pieces of legislation are pending that would legalize marijuana on the federal level. If any one of them pass, Biden is assured of signing them into law.
An important provision for federal legalization is the Cannabis Administration and Opportunity Act (CAOA), which would federally deschedule cannabis, expunge prior convictions, allow people to petition for resentencing, maintain the authority of states to set their own marijuana policies, and remove collateral consequences like immigration-related penalties for people who’ve been criminalized over the plant.
Another important bill pending in Congress is the Secure and Fair Enforcement (SAFE) Banking Act, which is designed to protect banks that accept marijuana business clients from being penalized by federal regulators.
Can you tell us about some of the ways in which Big Pharma is interested in cannabis, too? Even Big Alcohol and Tobacco are getting in on the action.
You’ve heard of Big Oil, Big Steel, Big Pharma, and so on? Welcome to Big Weed.
Marijuana has evolved into a multi-billion-dollar business. As such, the marijuana industry also has spawned an army of influence peddlers, with politicians walking through the “revolving door” when they leave office to lobby for cannabusiness.
Big Pharma and Big Weed have a love-hate relationship. Pot legalization has been cutting into the sales, profits, market share, and stock prices of giant drugmakers, which is why these cash-rich behemoths have lobbied against lifting cannabis restrictions. However, their efforts at stopping the green rush have met with scant success.
Hence, we’re seeing “Plan B” unfold, whereby Big Pharma resorts to co-opting unstoppable marijuana growth, through mergers and acquisitions (M&A) and other forms of direct investment.
The same applies to food and beverage conglomerates that are buying up companies that make branded marijuana products, including everything from cannabis-infused beer to THC-laced gummy bears. Companies in the consumer foods, health services, and cosmetics industries are increasingly infusing their products with marijuana. Acquiring a small local or regional brand is a fast way to accomplish this goal.
The main motivator behind these marijuana company marriages is the ability to take advantage of economies of scale. Through mergers, marijuana companies can lower costs by eliminating redundant operations and employees, even as they can squeeze better deals out of suppliers and providers by virtue of their size.
What’s more, by purchasing the smaller purveyors, brand name consumer giants with conventional products immediately obtain new marijuana offerings, without having to develop these products from scratch. The smaller fry, in turn, get instant access to a vast, well-established supply and retail infrastructure.
The opportunities for individual investors arise from spotting takeovers in the cannabis industry, before they occur.
What about psychedelics? Aren’t we seeing a lot of investment opportunities in that realm, as well?
A ballot initiative in Colorado on November 8 would decriminalize psilocybin fungi (aka “magic mushrooms”) for those 21 and older and create state-regulated healing centers where patients can experience the psychedelic drug under the auspices of a licensed facilitator.
Nowadays, a lot of mainstream consumers can claim psychedelic experiences. From soccer moms to corporate executives, the growing trend is to imbibe psychedelics to foster wellness and boost creativity. In fact, micro-dosing magic mushrooms and LSD has become a big fad among super-rich Silicon Valley hipsters.
Maybe the world isn’t quite ready for a second Summer of Love. But psilocybin, the active ingredient in magic mushrooms, and LSD are no longer just recreational. Welcome to Psychedelics, Inc.
Big Pharma is busily developing new drug treatments from these psychedelic substances, which remain illegal at the federal level but are increasingly legal within state and local jurisdictions.
A growing body of medical research confirms the efficacy of psychedelics to treat physical and mental ailments. Entrepreneurs, consumers and investors are jumping aboard the psychedelics movement, an emerging trend that’s reminiscent of the mainstreaming of marijuana.
Our readers might be surprised to learn about the sheer variety of choices out there for marijuana investors. Can you tell us about some of the interesting side plays or “picks-and-shovels” opportunities you’ve found?
During the 19th century San Francisco gold rush, the fortune hunter who went on to achieve the greatest fame and wealth wasn’t a gold prospector. It was dry goods proprietor Levi Strauss, inventor of the quintessential American garb.
The point is this: When the era’s gold-crazed prospectors flocked to the West Coast, like Bogie’s grizzled gang in The Treasure of the Sierra Madre, most of them came up with zip, zilch, nada. They went home, flat broke. The people who really made money were the entrepreneurs who supplied the picks and shovels or, in Levi’s case, the blue jeans.
That’s why, during the 21st century marijuana green rush, I especially like the picks-and-shovels plays on the marijuana boom. These companies are infrastructure stocks that can be wildly profitable.
Marijuana investing can be risky, but you can seek greater safety by focusing on the ancillary firms that provide infrastructure services for growing or developing pot, in either the recreational or medicinal segments.
Picks-and-shovels plays can be reliable money-makers, because they provide essential value-added services. What’s more, they usually enjoy a diversified roster of clients in several different industries, which buffers them from the inherent volatility of the marijuana business.
Among marijuana infrastructure companies, some of the more promising firms deploy controlled environment agriculture systems that are designed to use as little land, water and energy as possible. They market themselves as eco-friendly as well as more cost-effective.
These companies have designed vertical farming solutions that use the latest pot growing techniques.
An increasing amount of marijuana is being grown not in soil but in windowless warehouses, aka vertical farms. These futuristic growing environments manipulate light, humidity and temperature to grow cannabis. Added to the mix is nutrient-rich water, via hydroponics.
Hydroponics allows marijuana growers to grow better weed in less space and with less labor. Venture capitalists are excited about this trend and they’re pouring money into hydroponic-enabled vertical farms that grow pot.
PS: The team at Investing Daily urges you to access the archived version of the Town Hall that John Persinos conducted on November 1.
The time to invest in the marijuana industry is now. The many catalysts John just described in the above interview are poised to trigger a tsunami of investment money. To profit, you need to be proactive. On November 1 during his special event, John pinpointed specific investment opportunities. Click here for instant access.
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