Steve McDonald: Hi, everybody, I’m Steve McDonald. This is your Market Wake-Up Call.

Our focus today is one of the highest-yielding segments of the stock market in 2018 – and no, it’s not penny stocks and not biotech. It’s none of the usual industries we associate with big returns – it’s pot. As harsh as it for some of us to imagine, especially boomers who grew up when it was a federal offense and people were sent to prison for it, 33 states now have legal medical marijuana and 10 states have legal recreational pot. The industry is literally exploding.

Sales estimates last year were upward of $11.7 billion, but our guest today, Emerging Trends Strategist Matthew Carr, says, “That’s nothing, it’s going to $80 billion annually near term.” Shareholders and key companies have earned 10 to 30 times their money in an industry that is growing so fast nobody can get their arms around it.

TheNew York Times says, “Legal recreational use nationwide in the U.S. is unstoppable. Sixty-five percent of Americans favor its passage.” That’s a lot of stoners, isn’t it?

And if the reports are right – which I think they probably are – President Trump is behind the move for nationwide legalization. That means the pot industry could be supercharged beyond even the biggest stoner’s imagination. This is going to make a lot of people rich. And Matthew Carr, one of the best editors of The Oxford Club and our pot specialist, is here to talk about the companies you have to own to be among the big winners. Welcome, Matthew.

Matthew Carr: Thanks for having me, Steve.

Steve McDonald: It’s my pleasure. So soft drink companies, tobacco companies, medical companies – everybody’s getting into this pot thing, both recreational and medical. Now, you were light-years ahead of the curve last year with amazing picks in the Canadian pot market. Now you’re saying the U.S. is going to dwarf that. How much are we talking about? What kind of numbers?

Matthew Carr: Last year, the total North American market was a little more than $12 billion. And as you already mentioned, the U.S. part was the biggest share of that, more than half, and that’s without federal legalization. That’s the important fact to remember. The Canadian market is projected to be worth more than $22 billion, but the U.S. is 10 times the size of Canada. California alone is larger than Canada and has one of the largest economies in the world. So right now, the current estimate is that the U.S. market hits $80 billion by 2030, but I think it’s going to be much, much larger than that.

Steve McDonald: That’s a lot of pot. I hope they aren’t driving.

I read somewhere that Coca-Cola (NYSE: KO) has already made the move into the pot business. Altria (NYSE: MO), which was created out of the old Philip Morris company, is moving in that direction. What other companies are going to be involved? More importantly, which ones should we own?

Matthew Carr: What’s interesting is the first major investment into cannabis from outside the industry was from alcohol companies. Constellation Brands (NYSE: STZ), which makes Corona beer and Svedka vodka, has been pouring billions into Canopy Growth Corp. (NYSE: CGC). And Canopy just signed a partnership with Martha Stewart.

Steve McDonald: Martha Stewart?

Matthew Carr: Yep, Martha Stewart. She’s good friends with Snoop Dogg, and Canopy Growth already has a partnership with Snoop.

But also, Molson Coors (NYSE: TAP) has teamed up with a company called Hexo (TSE: HEXO). Heineken is producing its own infused beer. And as you mentioned, Altria bought a 45% stake in Corona’s group. And then we have Novartis (NYSE NVS) and Anheuser-Busch InBev (NYSE: BUD), which have partnered with Tilray (Nasdaq: TLRY). So there’s a ton of money pouring into this space from outside the industry. But all of those companies are Canadian companies, so all those pot stocks are Canadian. And most of those partnerships are because edibles and infused beverages will be legalized in Canada this October – that’s why those beverage companies have been racing to get in.

Steve McDonald: Yeah, but I read something the other day that said these infused liquids are terrible – they taste awful.

Matthew Carr: They actually do. If you drink the straight oils, especially CBD, it does taste terrible, but there are companies that are working to cut down on that taste. They have a flavorless sort of extract.

But in terms of those beverage companies, who’s on the outside looking in? So Diageo (NYSE: DEO) is one. Its chairman has mentioned it is watching the sector very closely. It hasn’t announced a deal yet, but I will point out that Aphria’s (NYSE: APHA) new president, Jakob Ripshtein, was the former CFO for Diageo. So right now, everyone in the market is waiting to see who Diageo is going to partner with.

Steve McDonald: Right.

Matthew Carr: Then you have Coca-Cola and Pepsi (Nasdaq: PEP). Now, last year, they both had reported some interest in the industry, but Coke’s CEO, James Quincey, squashed that and said they’re not interested at the moment. And the reason is it’s still illegal at the federal level in the U.S. Coke didn’t want to pay a huge premium just to have access to the Canadian market. But there are still a lot of companies looking to invest in the industry. Then, like I said, the only big move from the tobacco side has been Altria – the rest have been all of those beverage companies.

Steve McDonald: Yeah, right. Give me a ballpark number – how big is this going to be? I mean, the U.S.-Canadian markets combined in 10 years.

Matthew Carr: Well, like I said, last year, the total value was $12 billion, right? By 2030, we’re talking $22 billion for Canada. In the U.S., we’re talking about $80 billion. But I still think that’s super conservative. You have an industry that’s disrupting alcohol, that’s disrupting tobacco, and that’s disrupting pharmaceuticals, supplements and health, so a combined $100 billion North American market is really, really, really easy in my opinion.

Steve McDonald: Right. So, what you’re saying, or what the numbers are saying, is the U.S. has a lot more stoners than Canada. Is that right?

Matthew Carr: Well, the U.S. just has a larger population than Canada. Canada was that first G-7 country to legalize it nationwide. Here in the U.S., it’s a fragmented market at the state level. But look at the fact that the CBD market alone is going to be worth more than $20 billion by 2022.

Steve McDonald: Wow.

Matthew Carr: So there’s explosive growth. You have this moment in time for investors where you have these U.S. stocks that are trading at a value not only compared with their Canadian counterparts but also trading at a discount to their overall value. And investors don’t have to pay $70, $50 or $20 a share for these companies. You can buy them for $10 and some really great companies for less than $5.

Steve McDonald: That’s amazing. I mean, this is still hard for me to get my arms around it – it’s astounding. But the numbers are amazing. And thank you so much for taking the time to be with us.

Matthew Carr: Thank you for having me.

Steve McDonald: It’s my pleasure, and for everybody here at the Market Wake-Up Call, thank you for being a part of us and take a look at the link below. It’s a full report that Matthew has about pot and its the potential. I think you might have to agree with me that the Canadians seem to be having a lot more fun than we are with this stuff.

Thanks again. Take a look at that report folks. The money that’s being made here is just phenomenal. I’ll see you next week.

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