The 2021 Cannabis Investing Road Map

Make no mistake, cannabis will be legalized in the United States. And I think it will happen sooner rather than later.

The stage is set for the most lucrative chapter in the very young cannabis market’s history…

After all, the U.S. cannabis market is currently worth $61 billion.

To compare, the Canadian cannabis market is worth $2.5 billion.

That means the U.S. market is about 24 times bigger.

Back in 2017, Canada’s cannabis market minted several millionaires when the House of Commons of Canada voted to legalize recreational cannabis. A year later, recreational cannabis was legal from coast to coast.

And remember, those investors made millions on a cannabis market a fraction of the size of what America’s would be if cannabis were legal nationwide. The Canadian market has already created life-changing wealth for a lot of people…

While you can’t buy and use recreational cannabis everywhere in the U.S. yet, medical cannabis is legal in 36 states…

This includes states you might not expect, like Texas, West Virginia and Arkansas.

American cannabis legalization could create 1.5 million new jobs and generate $175.8 billion in tax revenue by 2025.

This year is your chance to become a marijuana millionaire. Especially if you missed the boat on Canada’s cannabis boom.

The five stocks in this report are the companies best positioned to capitalize on the legal American cannabis market.

Going Above the Canopy

The thing that sets cannabis apart from other pharmaceuticals is that it has an enormous recreational market to go along with its medical market. Most companies operate in one sector or the other…

But Canada’s Canopy Growth Corp. (Nasdaq: CGC) maintains a strong position in both the medical and recreational markets.

Located just south of Ottawa, Ontario, Canopy is Canada’s premier end-to-end grower, producer, distributor and seller of cannabis products.

Founded in 2013, Canopy was the first publicly traded cannabis company in North America. It holds a large stable of brands to satisfy every sector of the cannabis market in its native Canada.

It’s in a very good position to move into the United States market with a diverse range of products for every potential customer.

As it stands, Canopy is barred from selling in the U.S. because cannabis is still illegal on the federal level. But it is taking advantage of a loophole of sorts. There’s nothing that prohibits Canadian cannabis companies from acquiring American companies…

Canopy has more than $2 billion in cash, so acquiring smaller American cannabis firms once it’s legal will be child’s play. In fact, it’s already getting a head start through a deal with Acreage Holdings (OTC: ACRHF).

While the dealmaking process was messy, in the end, the two companies formed a partnership, with Canopy holding 70% of Acreage shares. Unlike Canopy, Acreage already has reach in the U.S., which gives Canopy a market of 180 million Americans… And the companies plan to release a new beverage line this summer to sell in both countries.

In Canada, its flagship company is Tweed, which is focused on growing a high-quality product and building a base of loyal customers.

There’s also Spectrum Therapeutics, Canopy’s medical brand, which develops and produces a range of cannabis-based supplements and medicines.

Tweed and Spectrum are Canopy’s bread and butter, but this cannabis giant is nothing if not innovative and willing to try new things.

That’s best evidenced by its BioSteel sports nutrition brand, which produces a range of athletic supplements, as well as its brand Tokyo Smoke, which produces sleek, stylish accessories and its own line of recreational cannabis.

Recently, Canopy released a new brand of cannabis-infused sparkling water called Quatreau. In Canada, you can buy cans of it with CBD and/or THC. The CBD-infused variant, backed by U.S. beverage giant Constellation Brands (NYSE: STZ), is being sold in the U.S. online right now. Soon, it could be found in food stores near you.

Constellation is one of Canopy’s biggest partners and investors. It holds nearly 40% ownership of Canopy and was smart to partner with the growing cannabis juggernaut just over the northern border.

In the latest quarterly report (the third quarter of Canada’s fiscal 2021), Canopy revealed it had continued growing its share in the Canadian recreational cannabis market. Its medical sales around the world are growing by double digits year over year.

And the company is keeping an eye on developments in Washington, D.C. It’s ready to spring into action and flood the market with its THC-infused products as soon as it’s able. Canopy’s CBD products are already here in a big way.

Last year, Canopy partnered with Martha Stewart to create a line of health and wellness products. In just four months on the market, that product line outsold every other CBD brand in the U.S. by 94%. The Martha Stewart product line can be found in more than 580 Vitamin Shoppe and Super Supplements locations worldwide.

It’s no wonder Canopy’s net revenue is up 23% over its 2020 third quarter net revenue. The company is on track to accelerate its growth through the 2020s, and cannabis legalization in the U.S. will definitely help with that. You’ll want to get in before that happens. This jolly green giant from up north is sure to make a strong entry into the U.S. market.

A Trans-Atlantic Powerhouse

Cannabis has many medical uses. Most prominently, it’s used to treat pain with considerably fewer side effects than pharmaceuticals.

Cancer, glaucoma and many other diseases cause people to suffer painfully for months, years or the rest of their lives. Cannabis can help, and a majority of states are waking up to that fact.

As a result, medical cannabis companies, like Boston-based Curaleaf Holdings (OTC: CURLF), have been enjoying fast and stable growth for a few years now.

Curaleaf operates in 23 states with 23 cultivation sites, 101 dispensaries and 30 processing sites. It has more than 200,000 registered patients using its dispensary network. Beyond that, its products can be found in more than 1,800 stores nationwide. In total, the company’s assets are worth more than $2.4 billion.

In just a few short years, Curaleaf has become an industry leader. In terms of revenue, it stands head and shoulders above its competition.

In the third quarter of 2020, it brought in more than $193 million in revenue. That’s $36 million more than the next largest competitor’s revenue in the same quarter. It continued that growth into the fourth quarter, when it brought in more than $233.3 million in revenue.

Annual revenue topped $652.9 million in 2020, which represents a 161% year-over-year change. It more than doubled its revenue from 2019.

In just the decade since it was founded, Curaleaf has developed into a cannabis juggernaut with an addressable population of more than 192 million people. That’s well over half the total American population.

But Curaleaf’s ambitions aren’t limited to medical cannabis or North America.

The company’s Select brand is oriented toward recreational use. It’s already America’s favorite cannabis brand and is available in 17 states. Curaleaf has targeted another five for Select’s next expansion – North Dakota, Missouri, Arkansas, New Jersey and Vermont.

Aside from those states, Curaleaf is aiming to expand across the Atlantic. Europe’s addressable cannabis market is worth more than $758 million, and Curaleaf has already begun expanding into it.

The company has acquired Emmac Life Sciences for $286 million and with it, the largest vertically integrated pan-European footprint of any North American cannabis firm.

Curaleaf now has its own importation, cultivation and distribution capabilities in Germany, France, Portugal, Spain, the U.K., Italy, Malta and Switzerland. With collaboration in mind, it has also developed a partnership with Imperial College London.

This company is setting itself up to dominate not just the North American market but also the European market.

Once cannabis is legalized nationally, Curaleaf is going to accelerate its already impressive growth. You’ll want to get in now before Congress lets this company out of its legal constraints. At just $15 per share, this company is a bargain…

The Next Generation

With every emerging industry, there are plenty of pick-and-shovel plays to diversify your portfolio. The phrase goes back to the gold rush, when companies that sold mining equipment often made more than the prospectors buying from them.

A prime example for the cannabis green rush is GrowGeneration (Nasdaq: GRWG). The Denver-based hydroponics manufacturer and retailer is spreading the technology needed to grow quality cannabis far and wide.

It has 52 retail distribution centers across the United States. They carry grow lights, hydroponics gear, nutrients and soils for both commercial and home growers. It’s the largest hydroponics retailer in the North American market.

And it’s easy to see why…

Cannabis growers develop their plants like vintners develop their grapes. They want the ideal conditions and genetics behind each crop to produce the ideal product.

Hydroponics is popular because the technology gives a grower complete control over which nutrients are going into their plants and allows exact control over how much light plants get and what temperature they’re kept at.

Plants cultivated with hydroponic equipment grow as much as 50% faster and often provide larger yields to boot.

GrowGeneration provides all of that equipment in one place. It even offers delivery direct to farms. As a result, the company has gained a large and loyal customer base.

In 2020, those customers more than doubled GrowGeneration’s 2019 revenue. It brought in $192 million in revenue last year, up 140% over 2019’s $80 million in revenue. The company expects that number to skyrocket to $350 million by the end of this year.

The company also has more than $180 million in cash and cash equivalents and just $278,000 in total debt. It has been using its resources to rapidly expand its business in recent years. In 2020 alone, GrowGeneration opened one new location and acquired 13 more.

Those locations give GrowGeneration a nationwide reach and more than 1 million square feet of retail space for its 435 employees.

GrowGeneration is a cannabis powerhouse in the making that just started its rapid growth. It’s the ultimate pick-and-shovel play for American cannabis legalization. Now is the perfect time to get in, before it becomes a blue chip.

The Scientific Method

 Because it was illegal for so long, we’re just beginning to understand the medical applications of cannabis. And companies such as Chicago’s Cresco Labs (OTC: CRLBF) are pioneering the beneficial potential of pot.

The company operates in nine states and has 15 production facilities, 24 dispensaries and 29 retail licenses. On top of that, more than 830 dispensaries carry Cresco Labs’ more than 5,000 unique products.

Cresco’s “product first” approach has allowed it to grow rapidly. Unlike most of its competition’s products, its products aren’t bound to its dispensaries. So Cresco doesn’t need to spend a boatload of money building out a brick-and-mortar network. Instead, it takes advantage of every one of its competitors’ dispensary networks.

Its management and leadership have extensive knowledge in diverse industries, running large companies ranging from Ford and AbbVie to Amazon, Walgreens, Apple and Pfizer.

They have helped Cresco in developing a wide range of cannabis products across eight brands aimed at every sector of the cannabis market and every budget.

On the health end is the Remedi brand, and on the recreational end is Cresco Reserve with its main brand, Cresco, sitting right in the middle of the pack.

It has a growth rate and balance sheet that most young companies would kill for…

Cresco has managed a 38% compound annual growth rate (CAGR) in quarterly retail revenue since the third quarter of 2019. In the third quarter of 2020 alone, it brought in more than $62.8 million in revenue from its retail locations.

That growth continued into the end of 2020. In the fourth quarter of 2020, it more than doubled its third quarter revenue and brought in $162.3 million. That’s an increase of 158% in just one quarter. In all, Cresco brought in $476.3 million in revenue for the whole of 2020, a 36.9% increase over 2019’s $347.7 million.

As impressive as that growth is, it’s nothing compared with what Cresco will manage once cannabis is legalized federally…

Like every other U.S.-based cannabis firm, Cresco is setting itself up for a major growth spurt when the country finally legalizes cannabis. Now is the time to get in, while Cresco is still trading for bargain prices.

What Happens in Vegas…

They say, “What happens in Vegas… stays in Vegas.” That might be true for parties on the Strip and the money you lose at Caesars Palace, but for Las Vegas-based Planet 13 Holdings (OTC: PLNHF) that statement couldn’t be further from the truth.

This small cannabis firm is going nationwide and then straight to the moon – because it offers the same flashy experience its home city is famous for. It’s an entirely different take on the cannabis industry.

Most dispensaries go for the earthy, hippie aesthetic. Not Planet 13. No, its main dispensary is right at the heart of the Vegas Strip… and it’s as big and flashy as any of the casinos the city is famous for.

The dispensary on the Strip is the destination for cannabis enthusiasts. When you walk through the doors, you’ll be greeted by a sleek, futuristic space with interactive floors and robotic butterflies and floating orbs flying around.

At 112,000 square feet, Planet 13’s Strip location is the world’s largest dispensary. It features 50 different vendors selling everything from cannabis-infused beer to any edibles imaginable to plain old weed.

Planet 13’s products make up only 10% of what gets sold here. It’s like a shopping mall for marijuana. There’s a coffee shop, a bistro and an event venue. And soon there will be a clothing and merch store and a weed museum. Patrons can even play around with “interactive laser graffiti.”

There’s even a customer-facing production line where you can watch the magic happen as Planet 13’s employees make cannabis gummies, chocolate and drinks.

To complete the place’s trendy, modern approach to cannabis, Planet 13 relies primarily on social media and eagerly invites cameras inside. Put simply, it’s about as close to a cannabis-themed amusement park as you can get right now.

In just over one year of operation, Planet 13 has hoovered up a roughly 8% to 10% share of Nevada’s cannabis sales. It’s building momentum quickly. In 2019, it netted more than $63 million in revenue and had more than 1 million visitors to its Vegas Strip SuperStore.

COVID-19 put a slight dent in its growth in the second quarter of 2020, but Planet 13 bounced right back in the third quarter. With restrictions loosening around the country, it should continue its pre-pandemic growth without any issue.

The company’s Nevada sales alone have built up a CAGR of 16.9%. And Planet 13 has plans to expand to Orange County, California, this year. From there, it plans to expand to any major city across the country that can support a major sports team. That means New York, Boston, Dallas, Miami, Chicago, etc.

In five years, Planet 13 wants to have eight or more of its SuperStores nationwide and strategically placed neighborhood stores in several smaller towns and cities nationwide.

Planet 13 is big… It’s flashy… It’s Vegas… It’s another vice you can enjoy in Sin City, and it’s coming to your town sooner than you think. What this company offers, you can’t get from anyone else, and it trades for just $6 per share. You’ll want to buy in now before you miss your rocket to another planet.

Buying Your Stocks Over the Counter

You likely noticed that many of these companies aren’t listed on the New York Stock Exchange or Nasdaq. They’re what’s called “OTC,” or over the counter. It might look a little confusing at first, but it’s really not.

All OTC means is that the stocks are traded through a broker-dealer network rather than a large, centralized securities exchange. Most are great companies that just don’t meet the requirements to be listed on a standard exchange.

In the case of U.S. cannabis producers and retailers, it’s because the product they sell is illegal on the federal level. So the NYSE and Nasdaq, which are subject to federal law, won’t list them.

Don’t take an OTC listing to mean a stock is suspect or shady. Plenty of great companies are listed OTC for one reason or another. Some foreign companies that trade in the U.S. through an American or global depositary receipt are traded OTC. (Volkswagen, Bayer and Nestle are prime examples.)

They’re all large, internationally known blue chips that just don’t meet the stringent requirements of American exchanges.

There’s no reason to fear buying an OTC stock. You may just have to do a little more digging on the company to ensure it’s a sound investment. There is also slightly more risk involved, but there are plenty of risky prospects listed on the NYSE and Nasdaq as well.

OTC stocks include some of the most exciting stocks on the market. They’re often small up-and-coming companies with incredible growth potential, and they sometimes even occupy entirely new markets – cannabis stocks being the prime example.

And if you want to buy OTC stocks without trading fees, there are three online brokers I recommend. Fidelity, Charles Schwab and TradeStation all charge $0 per trade.

The Cannabis Glossary

280E: One of the laws seriously obstructing cannabis business is “26 U.S. Code  280E,” which prohibits any deductions or credits on the taxes of businesses that traffic in what the federal government determines as “controlled substances.” Because of this code, legal cannabis operations cannot currently deduct any of their business expenses. Cannabis business owners end up paying tax rates 70% or higher than non-cannabis business owners.

Adult-use: Adult-use, or recreational use, is a term used by some state legislatures to denote cannabis dispensaries that can sell cannabis to people 21 or older.

Cannabidiol (CBD): A cannabinoid that has numerous potential health benefits. Clinical research on CBD includes conditions ranging from anxiety and cognition to movement disorders and pain.

Cannabinoid: Any of the 100-plus chemical compounds derived from the cannabis plant. The most famous are tetrahydrocannabinol (THC), which is the psychoactive compound, and cannabidiol (CBD).

Cannabinol (CBN): A mildly psychoactive component found in aged cannabis that is commonly used as a sleep aid or sedative.

Cannabis: This plant is three species of flowering herbs. It’s most famous for its psychoactive effects, but the plant also has numerous industrial and medical uses. (Figure 1)

Concentrate: Cannabis concentrate is the product you’re left with when you distill a cannabis plant’s most desirable parts. It contains all the cannabinoids and terpenes and none of the excess plant material.

Dispensary: A licensed distribution location for medical cannabis.

Dried flower: A part of the cannabis plant that has been cured and dried and is ready to smoke.

E-cigarette: An electronic cigarette is a device designed to simulate smoking by vaporizing a liquid containing nicotine, cannabis, etc. (Figure 2)

Edible: Any food, candy, baked good or beverage that contains cannabis so it can be ingested rather than smoked or vaporized.

Endocannabinoid system: A biological system within the human body, it’s made up of neurotransmitters that bind to cannabinoid receptors. Experts are still trying to gain a full understanding of this system. But we already know it plays a role in regulating numerous bodily functions, like sleep, mood, appetite, memory and reproduction.

EVALI: Short for e-cigarette or vaping associated lung injury. It refers to a lung disease that can develop due to unsafely inhaling vitamin E acetate. Symptoms including shortness of breath, cough and chest pain. That first reported case was from August 2019.

Flower: The flowers of a cannabis plant are either male or female. The male flowers are large, bell-shaped clusters, while the female ones are tear-shaped with pistils. The female flowers contain considerably higher concentrations of cannabinoids.

Good manufacturing practices (GMP): This is a holistic approach to quality control that consistently produces high-quality products. It’s is designed reduce risk in the manufacturing process at all stages. It encompasses everything from a hygienic workspace to employee training to the actual materials used.

Hemp: The fiber of the cannabis plant that is extracted from the stem. It contains no psychoactive compounds, but it is a strong material that can be used for rope, fabrics, fiberboard, paper and even bioplastics. It’s as strong as metal in some applications but far lighter. Ford once built a car with body panels made of hemp and other plant-based plastics. It had comparable crash safety to its steel counterparts.

Licensed producer (LP): In the medical end of the cannabis industry, a licensed producer is an individual or company that holds a state or municipal license to grow and produce cannabis. They can also sell live plants and seeds.

MORE Act: The Marijuana Opportunity Reinvestment and Expungement (MORE) Act is proposed legislation that, if passed, will decriminalize cannabis by removing it from the list of controlled substances.

Multistate operator (MSO): Due to federal law, cannabis products produced in one state can’t be transported and sold in another state. Multistate operators are cannabis companies that are licensed producers in more than one state.

SAFE Banking Act: The Secure and Fair Enforcement (SAFE) Banking Act is proposed legislation that, if passed, will prohibit federal banking regulators from penalizing a depository institution for providing services to any legitimate cannabis or hemp-related business. By allowing cannabis businesses access to banking, that will reduce the amount of cash on hand at business locations. It is considered an issue of public safety.

Schedule 1: Schedule 1 drugs are substances that the federal government considers to have no medical applications and a high potential for abuse. Cannabis is still listed as one of them, along with heroin, cocaine and others.

Seed-to-sale: This refers to the cycle beginning with the growth of a cannabis plant and ending with its purchase by a customer. Growers will keep track of their product through each stage of the seed-to-sale process to ensure they remain in compliance with all their state or country’s laws.

STATES Act: The Strengthening the Tenth Amendment Through Entrusting States (STATES) Act is proposed legislation that, if passed, will amend the Controlled Substances Act of 1970 and allow each state to make its own determination about the best legal approach to cannabis within its own borders.

Terpene: Any large group of volatile, unsaturated hydrocarbons found in the essential oils of plants, including cannabis.

Tetrahydrocannabinol (THC): Tetrahydrocannabinol is the main compound cannabis is known for. It’s the psychoactive cannabinoid responsible for inducing euphoria and heightened sensory awareness, among other effects.

Tincture: A solution of a medical substance in an alcoholic solvent. In the case of cannabis, it’s cannabis dissolved into alcohol. It’s a method of consumption that doesn’t require combustion or inhalation.

Topical: A medicine designed to be applied directly to the body, like a medical cream or some forms of anesthetic. There are several cannabis-based topicals designed to be rubbed into the skin.

Vaporizer: Any device that uses heat to vaporize the active molecules in cannabis flower and concentrates for inhalation. Most are handheld, and they come in all shapes and sizes.