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No. 1 Reason to Buy Marijuana Stocks Today

No. 1 Reason to Buy Marijuana Stocks Today

Story Highlights:

  • The “big four” pot companies are expected to grow to $1.7 billion, and then almost double in 2021 to $2.9 billion.
  • This one catalyst — happening next week — is going to take pot stocks from their bottom soaring to the top.
  • The best way to invest in the marijuana sector as it gains momentum is through this ETF.

It’s official: Marijuana stocks are having their Black Friday sale early this year.

By that, I mean it won’t be long before pot stocks move much, much higher. Because right now, the biggest and fastest-growing marijuana companies are valued at just a fraction of what they were several months ago:

  • On March 18, Aurora Cannabis was a $10 billion company. Now it’s worth $3.7 billion.
  • Canopy Growth was worth $18.3 billion on April 29, and now it’s down to $6.6 billion.
  • On March 16, Cronos Group was a $7.3 billion company. Less than eight months later, it’s sitting at $2.7 billion.
  • Finally, who could forget Tilray, which went from $20 per share to $300 just two months after its initial public offering. At its peak, Tilray was valued at $20 billion, but now that’s plummeted to $2.54 billion.

That’s almost $23 billion in value lost between what I call the “big four” pot companies.

With an industry as relevant and controversial as marijuana, everyone wanted to rush in all at once because of its huge potential.

If you look at the growth of the “big four” pot companies, it’s amazing that so much has been wiped out in such a short time.

Over the past year, these companies brought in $520 million in sales. But in 2020, that’s expected to grow to $1.7 billion, and then almost double in 2021 to $2.9 billion.

These dips can be rough, but the good news for us is that it’s created a Black Friday sale in pot stocks. And there’s one catalyst coming next week that I think will push them up through the roof.

Marijuana Gains Momentum — Why to Avoid the Panic Sell-Off

The future for pot stocks looks great.

But most of the articles I see are negative on marijuana, recommending readers sell them because they’re just going to keep falling.

They think demand is not living up to the hype, marijuana is too expensive, sales are below expectations or the companies aren’t profitable as soon as expected.

Of course, I’m looking past the headlines, so I see something else brewing in the marijuana market.

Behind the scenes, companies have been spending money like crazy to meet growing demand and increase production as much as possible.

After all, that’s what companies do when they want to make more money. It’s the simple reason they’re not profitable yet. Over the next couple of years, all of this spending is really expected to pay off.

This chart shows capital expenditures (or “CapEx,” money spent on increasing production) versus sales revenue for the marijuana sector.

marijuana capex vs sales

As you can see, this is expected to be the last year that CapEx goes higher. From here on, production expenses are expected to go down as sales move exponentially higher.

One thing that we look at as a potential momentum-shifter in the market — a catalyst that can send stocks soaring — is earnings season.

This is especially helpful to gauge sentiment on more volatile stocks like marijuana. Sometimes it can change the entire market’s perspective on a stock or even a whole sector.

Let me explain.

The marijuana industry peaked this year on March 19.

Then more than half of the 17 marijuana companies I follow reported earnings within a week’s time.

When the companies didn’t meet growth expectations, a sell-off began. Clearly, expectations had gotten ahead of themselves.

Now, pot stocks have bottomed out. With so many companies reporting earnings next week, it’ll be just the catalyst the sector needs to soar higher.

Marijuana Is Making Its Move Higher … Here’s the 1 ETF Poised for Profits

The best way to invest in the marijuana sector as it gains momentum is through an exchange-traded fund (ETF). This ETF is actually what I use to get a read on the whole sector.

The ETFMG Alternative Harvest ETF (NYSE: MJ) rallied 70% in less than three months leading up to the industry’s peak. So profit-taking was a factor as well.

After almost eight straight months of selling, I believe the upside at this point far outweighs the downside. And simply put, next week is going to be the best chance we’ve seen in a long time for a rebound.

Throughout the week, 11 different marijuana companies (including the “big four” I mentioned earlier) will be reporting their numbers for last quarter.

But more importantly, they’ll be giving their outlook for future growth, which I believe will be much more positive than the market is anticipating.

One big benefit we have when investing in marijuana companies is that they typically move as a group.

So, a great way to invest in this industry is by buying shares of the ETF I mentioned: the ETFMG Alternative Harvest ETF (NYSE: MJ).

This fund has 37 different stocks that all play a part in the marijuana industry.

So, with each share you buy, you’re actually buying a piece of 37 companies at once — for the price of one.


Ian Dyer

Editor, Rapid Profit Trader

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