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RoboStreet – January 31, 2019
Spec Money Is All In On Pot Stocks
For weeks now, I’ve been highlighting the many aspects surrounding the cannabis craze that is starting to now rival the early days of the dot com era. While the numbers of weed-related companies claiming to be the next pot of gold are far fewer than the wave of startups in the late ‘90s that laid claim to being the next hottest Internet company, the story building around the legalization of medicinal and recreational is very real, very big and has the rising support of state governments that see it as a tax revenue windfall to shore up failing budgets.
Granted, there is a growing and more credible case for medicinal applications of cannabis. If real therapies can be brought to market that are truly effective in managing chronic pain, spasms, illnesses, and other diseases, then we will likely embrace the medicinal qualities of the responsible use of cannabis in society. The recreational side is another question that I’ll leave for the experts to discern the good and bad elements of its existence.
Without getting into it too much, the state of Colorado is still trying to sort out the cost/benefit analysis of cannabis in society after it legalized recreational weed-use five years ago. There is no arguing the pot industry is huge and has been a big economic catalyst for Colorado where sales of both medical and recreational pot hit a record $1.51 billion in 2017 with 2018 sales still being tallied. The weed industry generated more economic output than 90% of all other businesses and industries in Colorado, making it a force to be reckoned with.
And remember we’re not talking about day-trading here. I’m looking for 50-100% gains inside of the next 3 months, so my weekly updates are timely enough for you to act.
The downside is fraught with issues that proponents didn’t expect to materialize. Of the big promises set forth by the pro-pot community, it was thought to believe that legalizing pot in Colorado would shift the whole underworld trade structure from the control of criminals to the state, fully supervising and taking regulatory oversight of the market. Nothing could be further from the truth. Enforcement agencies are at war with a black market run wild as arrests for illegal weed farming and imported weed soar. School districts that were to gain from the state’s financial gain from tax revenues claim that legalization of weed has only brought more weed to the schools.
The early takeaway from the highly fluid dialogue is that medicinal cannabis is fine to legalize while recreational use needs some serious guard rails around it. Under this thesis, there are a few pure plays in medicinal marijuana that are capturing the hearts and minds of the investing community. One company that has shot to the top of most watched and traded names is Tilray, Inc. (TLRY), a pioneering company in “extract products to tens of thousands of patients, physicians, hospitals, governments and researchers on five continents”, according to the claims on its website.
These are indeed bold claims that culminated in sales of around $39 million for 2018, with the fourth quarter financials not yet having been released. And yet the stock carries a current market capitalization of $7.2 billion – trading at 220 times sales and 38 times book value. The company is valued at 32% higher than Goodyear Tire & Rubber (GT) – the third largest tire company in the world. So, to say the valuation is extreme is an understatement.
But unlike Goodyear Tire, sales at Tilray are forecast to explode by 258% to $143 million from $39 million. Investors see Tilray and other leading pot stocks as the next Amazon.com or Netflix and why the sky-high valuations are what they are. Tilray was priced at $17 per share back on July 19, 2018, for its IPO, raising $153 million. The stock enjoyed a moonshot rally, trading as high as $300 before coming back to Earth to where it trades in a relatively tight range between $70-$80.
To trade Tilray and other richly valued cannabis stocks banking the whole industry won’t turn into a low-priced commodity takes the power of AI; getting in and out of these volatile stocks to build wealth on the promise, but also know when to cash in on the reality checks. Tradespoon’s RoboInvestor is the service for those seeking to venture into new investing frontiers with a limited history of fundamentals but traded heavily on the concept of another Tesla in the making.
Take a tour of RoboInvestor and sign up to capture the best and most qualified trades your investment capital deserves. There is no substitute for smart people and smart tools. At Tradespoon, we have both and I don’t recommend any stock or ETF unless my hard-earned money is invested alongside yours. That’s a guarantee. Try RoboInvestor and make 2019 a great year for your wealth-building experience.
And remember we’re not talking about day-trading here. I’m looking for 50-100% gains inside of the next 3 months, so my weekly updates are timely enough for you to act.
*Please note: Any specific stocks mentioned on this page are part of our free subscription service. They are not included in any paid Tradespoon subscription services. Vlad Karpel only trades his own personal money in paid subscription services. If you are a paid subscriber, please review your Premium Member Picks, ActiveTrader or MonthlyTrader recommendations. If you are interested in receiving Vlad’s personal picks, please click here.
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