The Marijuana Millionaire’s Handbook

I’m not going to beat around the bush…

The Drug Enforcement Agency still lists marijuana as an illegal Schedule 1 drug. That puts it right alongside the most serious illegal substances, like heroin.

And the penalties in the U.S. are steep. A small-time company growing up to 50 plants can land its employees five years in prison and a $250,000 fine. Grow more than 50 plants and it becomes a $1 million fine and 20 years in the slammer.

Some of these companies have entire football fields of marijuana, so imagine the consequences…

Plus, 99% of banks won’t even touch the money that comes from marijuana. They see the massive risk of investing in businesses that are breaking federal law. And that’s understandable. The few that do dabble in marijuana are playing with fire.

And most average investors simply don’t realize that by investing in marijuana stocks… they are funding technically illegal operations.

That’s why – up until today – holding penny pot stocks in your portfolio was like holding a grenade after the pin’s been pulled. Risky. Dangerous. And downright foolish.

But that’s finally about to change. And that has to do with a bill being passed called C-45. I’ll explain all about that in a moment.

Investors, this is the moment. This is the tipping point.

We’re going to see marijuana transformed into a massively exported commodity – a legally exported one.

And expectations are huge…

Arcview Market Research projects a compound annual growth rate of 25% for the next four years! But it’s these next six months when you’re going to be on the edge of your seat every time you check your portfolio.

The gains are going to be exciting…

These companies are the most dynamite stocks in the entire marijuana sector!

For instance… doubling your money? That’s small potatoes. These are the most profit-loaded companies in the entire industry. The details and ticker symbols for just two or three of these could make you a millionaire.

You can scoop up 10 years’ worth of profits in just a matter of months… but forget the United States. There are questions about whether marijuana will ever become legal at the national level. And these concerns are valid and can’t be ignored.

The reality is, the truly fantastic growth stories are everywhere except the U.S… Even better, it’s all completely legal.

How C-45 Killed U.S. POT-ential

In 2001, Canada became only the second country in the world to recognize the medical benefits of marijuana.

And over the last several years, it has introduced laws toward legalizing growing activities. This has been a boon for businesses.

In June 2013, Health Canada laid down the regulatory framework known as Marijuana for Medical Purposes Regulations (MMPR). This was huge, as it replaced government-supplied cannabis with homegrown medical cannabis. In July 2015, Health Canada allowed licensed producers to sell cannabis oils as well as fresh cannabis buds and leaves.

This created whole new markets for medicinal purposes. And companies were quick to capitalize on the opportunity.

And in August 2016, the MMPR was updated to what is known as the Access to Cannabis for Medical Purposes Regulations (ACMPR), which allows patients to grow marijuana at home, detailing the maximum number of plants and requirements regarding registering their production site. And equally as important, it also made it simpler for patients to purchase medical cannabis from licensed producers.

Now, medical marijuana patients in Canada have grown at a rate of 10% per month.

As of year-end, 2017, more than 180,000 patients had enrolled in the ACMPR program. By 2024, Health Canada expects the number of patients using medical marijuana to grow 163% to 450,000.

And the Canadian medical marijuana market will be worth $1.3 billion by then.

But that is just the medical side… the recreational side is about to skyrocket.

On April 23, 2017, the Canadian government proposed legislation C-45, or the Cannabis Act. This bill aims to legalize recreational use of marijuana in Canada. In June 2018, Canada’s Senate approved the bill. The bill now needs only the approval of the House of Commons to make it official.

The bill proposes the continuation of mail-order cannabis… which is essential in our world driven by online commerce (e-commerce) and business done through mobile devices.

CIBC World Markets estimates that the potential recreational cannabis market in Canada could be between CA$5 billion and CA$10 billion per year. And the lower end of that range assumes a price of CA$6.50 per gram and yearly consumption of 770,000 kilograms.

But for investors, this is where everything gets really exciting…

Already, the medical marijuana producers are having trouble keeping up with demand.

When recreational marijuana goes legit, there will be an estimated 4 million to 6 million recreational marijuana users in Canada just over the next few years…

And the potential could be even higher.

The Canadian cannabis market could be worth as much as CA$22.6 billion. That would include a retail market between CA$4.9 billion and CA$8.7 billion. But then, we have all the products and services marijuana growers need – lighting systems, security systems, testing labs, etc. – that have the potential for another CA$13.9 billion.

And if you consider taxes, licensing fees and cannabis-based tourism (like in Amsterdam) the Canadian marijuana market’s potential impact is well beyond that CA$22.6 billion.

The government is already rushing to try and stamp out what’s expected to be a supply shortage. In May 2017, Health Canada streamlined the process for growing applications and made it easier for the 45 existing producers to expand.

Previously, it took millions of dollars and several years to get a license. Now, Health Canada is slashing that time and hoping to open the market to smaller growers.

But there aren’t going to be 14,000 new stores open when July rolls around. It takes anywhere from six months to three years to get a new facility up and running at full speed.

There will be a marijuana shortage in the near term. That’s a fact.

Medical marijuana growers currently produce 80,000 kilograms per year. And funding is in place to increase that to 400,000 to 500,000 kilograms per year.

That means there are a number of growth stories underway in Canada’s marijuana market… all triggered because of recent legislation, primarily C-45.

And I’m going to show you my favorite companies in this market. The ones I believe have the best potential to turn investors into “marijuana millionaires.”

Pick #1: The No. 1 Pot Stock to Own

I’m always asked, “What’s the one company you think investors should own?”

And that’s often a difficult question because all investors’ goals are different. Now, investors want to make money. But they have different time horizons, risk appetites, tax implications to consider and on and on and on.

When you ask me what is the No. 1 company to own in the marijuana industry, in my opinion, you can’t go wrong with Canopy Growth Corp. (NYSE: CGC).

Canopy has more than 1 million square feet of production space. To put that in perspective, that’s a little more than 11 Canadian football fields of weed, or a little more than 17 American football fields.

Think of Canopy as the high-end or premium operator in this space. In the alcohol industry, we’d refer to them as “top-shelf,” like Grey Goose or Ketel One.

At the moment, the company operates under three brands – Tweed, Bedrocan and Spectrum.

Tweed is the marquee product, as the most recognized marijuana production brand in the world. It’s built a large and loyal following.

Bedrocan is Canopy Growth’s medical-grade cannabis. Over decades, the strains of marijuana it uses were developed in Holland. And those are now available in the Canadian market.

A couple years ago, Canopy Growth acquired Mettrum Health for CA$430 million. This gave the company access to about half of Canada’s medical cannabis users.

Mettrum offers an online physician’s portal. This is the leading natural health brand in the Canadian marijuana market. And it offers a unique color-based strength and dosage system for its cannabis oils.

And cannabis oils – sold through Bedrocan and Mettrum – are becoming an increasingly important piece of Canopy Growth’s business. These oils are used to treat aches and pains.

Finally, Spectrum is Canopy’s international arm.

So as you can see, Canopy Growth has built a very serious business. And these three legs enable it to be extremely stable… while experiencing explosive growth.

In the company’s fourth quarter fiscal year 2017 report, revenue grew 191% to CA$14.66 million.

Not only is that incredible year-over-year growth, the sequential quarterly growth was also astounding… Revenue in the fourth quarter was up 50% from the third quarter.

On top of this, the average sale price Canopy Growth saw per gram was CA$8.03. Compared with the fourth quarter of fiscal year 2016, this was an increase of 12.2%. Meanwhile, the cost to produce was CA$2.90 per gram.

So the company can produce at a low level while securing a premium price for its products.

That’s why total revenue for 2017 grew 214%.

In the fourth quarter, oil sales accounted for 22% of all sales. And for the full year, this segment accounted for 15% of total revenue.

Under the ACMPR, Canopy Growth has eight licenses to produce and sell cannabis. It’s allowed to sell 21,100 kilograms of dried cannabis per year and another 9,800 kilograms of cannabis oil.

Currently, it has 500,000 square feet of indoor and greenhouse production. But it has hundreds of thousands of square feet of additional production and processing space that it has yet to tap.

Canopy Growth recently launched a one-stop online shop for multiple cannabis brands. This is called Tweed Main Street.

In October 2016, Canopy Growth Corp partnered with rapper and world-renowned cannabis connoisseur Snoop Dogg to sell “Leafs by Snoop.” This brand provides a few different cannabis strains.

Canopy Growth is the largest player in the market, with a current market cap of only CA$7.5 billion.

Now consider that in the next three years, just in Canada, marijuana sales should reach more than CA$8 billion.

Imagine if it scooped up just a fraction of that… what that’s going to do for its share price.

Canada isn’t the only country legalizing marijuana. Australia, Brazil, Chile, Germany, Israel, Jamaica, Mexico, South Africa and others are looking to legalize medical marijuana or increase access to cannabis treatments.

This is where the growth Canopy is seeing will really take off. Because it’s making itself an international player.

Here’s the deal though… On January 19, 2017, Germany passed legislation that legalized medical cannabis. And this included provisions that medical marijuana treatments be covered by health insurance.

In April 2017, the German government issued requests for proposals for the 10 licenses to produce medical marijuana in the country. Canopy Growth was right there. The company’s Niagara-on-the-Lake 375,000-square-foot greenhouse facility – which currently produces Canopy’s Tweed Farms, Leafs by Snoop and DNA Genetics – received a certificate of “Good Manufacturing Practices” by the German government in June 2017.

Canopy is now operating in Germany under the subsidiary Spektrum Cannabis GmbH, and it’s expecting sales to accelerate rapidly.

And it also established Spectrum Chile SpA for entrance into the Chilean market.

Investors also must understand that Canopy Growth is going to do legal business only in countries where it is federally legal for it to operate.

This means there’s no undue risk for investors.

The company could enter the U.S. market if marijuana is legalized at the national level. But until then, it’s not entering the U.S..

In October 2017, alcohol distributor, Constellation Brands, acquired a 9.9% stake in Canopy. The two are working together to create marijuana-infused beverages to be sold in Canada, as well as internationally. The two will not sell the products in any market where cannabis does not have federal level support… which includes the U.S.

But Canopy doesn’t need the U.S. to achieve huge growth…

The company is the leader in Canada and is at the helm of expansion into Australia, Germany, Brazil and Chile.

I’m projecting revenue to increase more than 200% in the coming quarters for Canopy Growth. I fully expect revenue to grow more than 175% this year and next.

This is the premier stock in the cannabis industry. To me, it’s the must-own. Especially with the revenue growth rates that it’s demonstrating AND the fact that it’s the largest player… that’s a win-win.

If you buy ONLY one weed stock, it absolutely must be this one!

Action to Take: Buy shares of Canopy Growth Corp. (NYSE: CGC) at market. Use a 30% trailing stop to protect yourself. And make sure this position doesn’t account for more than 1% of your portfolio. 

Pick #2: $500 Million in Revenue From the Lowest-Cost Producer

I have another company with more than 1 million square feet of grow space.

Before C-45, revenue was just CA$553,000… In 2017, this shot up to more than CA$20 million.

How can you not be excited by numbers like that?

That’s more than a twentyfold increase in revenue!

But the story for Aphria (NYSE: APHA) just keeps getting better…

It was the first publicly traded medical marijuana producer to report positive cash flow from operations and positive earnings in consecutive quarters.

And in its fiscal year 2017 report, Aphria’s revenue increased 142.4% to CA$20.44 million. I expect revenue to continue to soar higher.

As with Canopy Growth, cannabis oil is very much the key to success. In the fourth quarter, this segment represented 32% of total revenue.

For the fourth quarter, earnings before interest, tax, depreciation and amortization (EBITDA) grew 181% but skyrocketed 962% for the full year! And this marked the seventh consecutive quarter of positive EBITDA.

Aphria announced a CA$137 million expansion to increase its growing square footage 233% from 300,000 square feet to 1 million square feet.

This expansion should be completed in the next few months. And it’s putting itself in line to handle Canada’s upcoming surge in demand.

At the same time, we have something very important taking place… Aphria’s cost to produce cannabis is dropping.

In fact, in the fourth quarter of 2017, the company’s “all-in” costs to produce fell 25% from CA$2.23 per gram in the third quarter to CA$1.67.

Aphria’s cost to produce 1 gram of dried cannabis is even lower, just CA$0.79. That’s nearly half its competitors’ costs.

This makes Aphria one of the lowest-cost producers in the industry.

Across the board, Aphria’s costs are enviably low. For example, the company’s annual electrical costs per square foot are CA$5.50. Those costs are 8% of that of its competitors, which average CA$65 per square foot.

On the fertilizer side, Aphria’s costs are 2% of that of its competitors.

Because of the company’s low costs, it’s leading the charge to establish industry standards for this metric (as they tend to vary from company to company). Aphria includes indirect labor expenses and quality control costs in its all-in calculations and production costs. The company wants that to be standard so there can be a true apples-to-apples comparison.

At the moment, Aphria can produce 30,000 kilograms per year at its Leamington, Ontario facility. By November, it hopes to complete another expansion that would increase production to 100,000 kilograms per year.

At a wholesale rate of CA$5 per gram, that would mean Aphria’s annual revenue could jump to CA$500 million at full production!

Now, even though Aphria is largely focused on the medicinal side, it is investing in recreational brands.

And Aphria is dipping its toes into the U.S. medical marijuana market.

The U.S. medical marijuana market is expected to be $1.1 billion at maturity. And Aphria has a partnership with Chestnut Hill Tree Farm, which holds one of seven licenses granted in Florida to distribute medical marijuana to patients.

Florida represents 14% of the U.S. medical marijuana market. Chestnut Hill plans to ramp up production, introducing automation and various other operational improvements over the next six months. These will largely be born from Aphria’s greenhouse growing intellectual properties, which the company is licensing to Chestnut Hill in exchange for shares of DFMMJ Investment, the managing partner of Chestnut Hill.

Aphria truly has a good thing growing. It is the standard bearer for low-cost producers… and it wants to set the standards for the industry.

At the same time, its revenue has grown from CA$533,000 to more than CA$20 million in just a handful of years. And its revenue could skyrocket more than 2,300% to CA$500 million in the years ahead.

Action to Take: Buy shares of Aphria (NYSE: APHA) at market. Use a 30% trailing stop to protect yourself. And make sure this position doesn’t account for more than 1% of your portfolio. 

Pick #3: A Perfect Penny Stock Poised to Pop?

The third company I’m going to cover in this “Marijuana Millionaire’s Handbook” is also the smallest.

But the potential here is enormous. And it’s focusing on the medical marijuana markets in both Canada and the U.S… Though the company itself doesn’t have a license to distribute cannabis or cannabis oils.

It just provides one of the biggest needs for growers, especially indoor facilities. And it’s why I’ve spent so much time discussing all-in and electricity costs for the medical marijuana producers we’ve covered here so far…

Lighting is a must-have for cannabis producers.

And Future Farm Technologies (CNSX: FFT; OTC: FFRMF) provides just that.

The company develops and distributes Agri-Tech Systems and light-emitting-diode-based lighting solutions for both commercial and residential applications.

These lights can last for more than 50,000 hours. That’s a life span of 7 1/2 years! They require lower maintenance, and companies save small fortunes on their lighting costs.

This is one of those small penny stock opportunities that happen to be in the right place at the right time. Revenue grew 600%… from the third to fourth quarters! That’s sequential growth, not year over year!

Most companies take years to do that… forget a single quarter!

Now, the LED Horticulture Light Module market is forecast to grow from $395 million in 2014 to $1.8 billion by 2021. And expectations are that LEDs for both residential and commercial applications will hit critical mass adoption by 2020.

Future Farm Technologies’ GrowthStar brand of LEDs have been top rated for the past five years. Plus, the company’s “Chips on Board” and “Multiple Chips on Board” technologies reduce power usage by 50%.

And at the Cannabis Cup, Future Farm’s Scorpion grow lights took first place.

It just updated its e-commerce site, LEDCanada, to meet surging demand for grow lights. Remember, Canada also allows some patients to grow their own marijuana at home.

But that’s not all the company is involved in. Because it also provides equipment for the cultivation of cannabis, as well as the extraction of cannabis oil. Future Farm’s extraction equipment can run 20 pounds per hour, with an average oil yield of 10% and the potential to yield 15% to 20%.

And it actually has production and extraction equipment running in California. The first revenue from this will be reported later this year.

Future Farm’s also has 35 acres of potential cannabis growth in Florida.

Beyond marijuana, the company’s controlled environment agriculture technology for indoor farming is being used at Rhode Island’s North Kingstown Farm. This is about capitalizing on the East Coast’s demand for organic produce… as well as the possibility of Rhode Island law allowing urban farms to cultivate medical marijuana.

This stock has the potential to really light up your portfolio. It offers the true upside that only a well-positioned penny stock can.

Action to Take: Buy shares of Future Farm Technologies (CNSX: FFT; OTC: FFRMF). Use a 30% trailing stop to protect yourself. And make sure this position doesn’t account for more than 1% of your portfolio. (CNSX = Canadian Securities Exchange)

Pick #4: Premium Producer on the Verge of 300% Growth

Partnerships and endorsements are often key for a product’s success. They get a brand’s name in front of a large audience and are more convincing than a standard commercial would be.

Marijuana – like alcohol, sports drinks, tennis shoes or whatever else – is no different.

I’ve already mentioned Canopy Growth partnering with one of the world’s most famous cannabis connoisseurs Snoop Dogg. And our next company has partnered with a television show that’s popular in countries around the globe… Canada’s Trailer Park Boys.

The comedy mockumentary series follows trailer park residents in Nova Scotia. After more than 50 episodes and two specials, the series has spawned five feature films and has a global following, with Netflix (Nasdaq: NFLX) helping to fuel its popularity.

OrganiGram Holdings (Nasdaq: OGI) is a medical marijuana producer that has a licensing agreement with Trailer Park Boys and exclusive Canada brand licensing for Colorado’s The Green Solution.

The company got its start as a licensed producer under the ACMPR, and it’s still relatively small in the medical marijuana market in Canada.

Investors shouldn’t make the mistake of ignoring this opportunity though…

In its 2017 fiscal year, revenue increased 26% to CA$7.7 million.

Last quarter, OrganiGram’s cannabis oil sales grew 36%, and its dried cannabis sales increased 38%.

But everything is just starting to pick up speed for the company.

I expect revenue to increase 100% this year. But in 2019, OrganiGram’s sales are going to take off… and I believe we’ll see revenue grow more than 400% from current levels to nearly CA$40 million!

How is that possible?

Because it invested in growth and expanded its production. In August 2016, it purchased property to expand its total production space to more than 240,000 square feet…

This will enable OrganiGram to increase production to 26,000 kilograms per year. Right now, the company’s production is 6,200 kilograms per year, but it should hit 16,000 kilograms by the end of this year.

By this summer, OrganiGram will be running nearly full throttle. Revenue will soar.

Already, the marijuana producer is in a very attractive price environment. Its current cost to produce is CA$1.85 per gram. But its average selling price is CA$8.45 per gram.

It also enjoys low electricity costs of CA$0.0511 per kilowatt-hour (kWh). That’s well below the approximately CA$0.18 per kWh seen in its area.

Plus, it’s in a strategic position as one of only two producers east of Québec. And OrganiGram is the larger of the two.

The company plans to move in on both of Canopy Growth’s and Aphria’s markets… OrganiGram wants to be a leading producer in both the medical and recreational arenas.

Shares of OrganiGram are trading below CA$5 at the moment. But it’s sitting on more than CA$25 million in cash, and revenue will surge to nearly CA$40 million this year when Canada legalizes adult recreational use in Canada.

This company is small right now. But it’s poised to grow rapidly over the next year to become one of the biggest players in the market.

Action to Take: Buy shares of OrganiGram Holdings (Nasdaq: OGI) at market. Use a 30% trailing stop to protect yourself. And make sure this position doesn’t account for more than 1% of your portfolio. 

Pick #5: Canada’s Top-Performing Diversified Industrial

There are companies that are licensed producers under Canada’s ACMPR. And there are companies that invest in them.

Our next company does both…

Cronos Group (Nasdaq: CRON) owns 100% of Peace Naturals, a company licensed to sell medical marijuana and cannabis oils. Peace Naturals owns 95 acres of land in Ontario that are zoned for cannabis production.

At the moment, this can produce 5,000 kilograms per year on 40,000 square feet… but Cronos is undertaking one of the largest expansions in the industry (more on that in a moment).

Cronos also owns 100% of Original BC, another company licensed to sell medical marijuana in Canada. OGBC owns 31 acres zoned for cannabis production in British Columbia, and the company is targeting the recreational marijuana market.

Another ownership interest is a 50% stake in the joint venture Indigenous Roots. The other 50% stake is owned by IndigiCo.

Cronos owns a 21.5% stake in Whistler Medical Marijuana Company and a stake in ABcann, another Ontario-based medical marijuana producer.

It has an international distribution agreement with Pedanios GmbH. This is to supply the company with medical marijuana products for distribution in Switzerland and the broader European Union, with sights set on Germany (just as Canopy has done). Currently, these products are distributed to more than 500 pharmacies.

Plus, Cronus, along with MM Enterprises USA, recently announced a joint venture – called MedMen Canada, Inc. – to develop branded products and open stores across Canada. MedMen is currently the largest cannabis retail chain in California.

On top of this, Cronos Group is invested in Canopy Growth Corp., Evergreen Medicinal Supply, CannMart and Hydropothecary Corporation.

And for Cronos Group, revenue is just starting to soar…

The growth rate here is almost laughable. In 2016, the company reported CA$554,000 in revenue. In 2017, revenues soared 636% to CA$4.1 million. I’m looking for sales to triple this year. And next year – with recreational marijuana legalized in Canada – I fully expect Cronos’ revenue to skyrocket another 100% to more than $24 million!

And that’s because production is really just starting to come online – as is the case with Organigram, Aphria and even Canopy Growth Corp. It’s just that Cronos is still in the early stages.

In May 2017, the company’s Peace Naturals broke ground on the largest indoor facility, a 315,000-square-foot project. When it becomes fully operational by year end, Peace Naturals’ production will increase to 40,000 kilograms per year.

What’s more, across Cronos’s portfolio of assets, it has the ability to build approximately 5 million square feet of facilities… This is just the first expansion. The company is about to experience exponential growth that will take it from CA$4 million in sales to almost CA$25 million.

There aren’t many opportunities for growth like that.

But Cronos Group has a distinction no other cannabis company can claim. It is the first “pure play” marijuana company to be listed on a major U.S. exchange – the Nasdaq. The Nasdaq has rejected marijuana companies in the past,

So, this was a major milestone for the industry, and proves its viability as institutional money floods into Cronos shares. And expect more Canadian cannabis producers to follow suit and file applications with U.S. exchanges.

Action to Take: Buy shares of Cronos Group (Nasdaq: CRON) at market. Use a 30% trailing stop to protect yourself. And make sure this position doesn’t account for more than 1% of your portfolio. 

Picks #6: Diversify With a Pot ETF

The passage of C-45 is one of the biggest opportunities for marijuana companies… in Canada.

It creates two streams – medical and recreational.

And the Canadian cannabis market will surge to more than CA$8 billion over the next several years because of this… Both the medicinal and recreational side are projected to skyrocket.

These are the “first concrete steps,” as Forbes so rightly put it… a sentiment echoed by The New York Times, which said the law will “completely legalize marijuana as a consumer product.”

BUT – and this is important – the authorities will “license and regulate growers.”

And the opportunities are widespread. So for those who didn’t want to cherry-pick or who want as wide an exposure as possible to the potential epic runs we’ll see, I am providing a “basket” of investments.

An exchange-traded fund (ETF), Horizons Marijuana Life Sciences Index ETF (TSX: HMMJ; OTC: HMLSF).

This is the world’s first ETF that offers exposure to North American-listed companies involved in the marijuana industry. And it seeks to replicate the performance of the North American Medical Marijuana Index.

In 2017, the medical marijuana market in North America saw revenue increase 30% to $8.7 billion.

This ETF is more focused on the Canadian market than the U.S. market, but it does offer exposure to a few U.S. companies as well. Below is a list of the top ten holdings as of year-end 2017…

What you’ll also notice is that several of the companies I’ve covered here today are holdings in Horizons Marijuana.

For investors who want the opportunity to invest in almost all the companies discussed here in “The Marijuana Millionaire’s Handbook,” this ETF provides one of the only means to do so in one place.

It’s perfect for those who don’t have a lot of money to spread around or simply don’t want to keep track of so many companies.

Action to Take: Buy Horizons Marijuana Life Sciences Index ETF (TSX: HMMJ; OTC: HMLSF) at market. Use a 30% trailing stop to protect yourself. And make sure this position doesn’t account for more than 1% of your portfolio.